AGEFI Luxembourg - mai 2025

Mai 2025 13 AGEFI Luxembourg Economie T he GrandDuchy of Luxembourg, a leader in climate and sustainable finance globally, was welcomed as the Global GreenGrowth Institute's (GGGI) upcoming 51st Member State in a ceremony presided byH.E. BanKi-moon, the President of theAssembly and Chair of the Council of GGGI. Luxembourg's membership adds value bybuildingpartnershipswithdeveloping and emerging economies amongGGGI's Member States and highlighting the vital role the financial sector plays for imple- menting climate adaptation and mitiga- tion measures, ensuring sustainable development and economic resilience. The event took place at the MUDAM - The Contemporary Art Museum of Luxembourg and was attended by diplomats and representatives from the development, sustainability and finan- cial sectors from Luxembourg and the neighboring countries. "It's a pleasure towelcome Luxembourg as an upcoming member after seven years of impactful collaboration with GGGI.We look forward to thenext seven years andbeyond for sustainablefinance and green growth around the world," H.E. Ban Ki-moon reflected. Initiatedby theMinistryof Environment, Climate and Biodiversity (MECB) in 2018, as part of Luxembourg's International Climate Finance Strategy (ICF), the first project in this cooperation aimed to improve climate resilience in rural Vanuatu by implementing solar- powered water pumps, training, and developinganational-level climate fund- ing mechanism. Following the initiation of projects in Senegal, Vietnam and Rwanda, in 2023, Luxembourg and GGGI have extended support to Small IslandDeveloping States (SIDS), that are among the most vulnerable to the impacts of climate change. Through the SIDS Climate Action Program (SIDS- CAP), GGGI and Luxembourg are now advancing impactful climate adaptation andmitigation efforts in countries across the Pacific and the Caribbean. "GGGI has been a strategic partner of the Ministry of Environment, Climate and Biodiversitysince2018,buildingrealtrust between institutions and delivering remarkable impact in the field of climate andbiodiversityactionand innovate sus- tainable finance in some of themost vul- nerable countries around the world," addsMinister SergerWilmes. In 2023 the Global Trust Fund on Sustainable Finance Instruments (GTF) was launched. Alongside with the Luxembourg Stock Exchange, theGTF is leveraging capital markets and building country-level capacity for sustainable finance.Thishasresultedinthesuccessful mobilisation of USD2.1 billion in climate finance in its first two years, supporting projectsin18countriesaroundtheworld. Climate action that has been financed by the thematic bonds supported by GTF include, amongst others, wastewater treatment in Cambodia, climate smart agriculture in Uzbekistan, renewable energy inNamibia. Inaddition,followingtheinaugurationof GGGI'sLuxembourgOfficein2023atthe Luxembourg House of Financial Technologies (LHoFT), the local teamhas focused on sustainable finance and car- bon pricing, building connections and partnerships within Luxembourg's dynamic financial ecosystem. "Luxembourg's upcoming membership to the GGGI reflects our strong and con- tinuedcommitmenttoshapingasustain- ableandinclusiveglobalfinancialsystem. Through this strengthened partnership, we aim to deepen our contribution to innovative financial solutions that help unlock investment for climate resilience and green growth, especially in the most climate-vulnerable countries and regions," emphasises Luxembourg's FinanceMinister Gilles Roth. Asaresultofthenewmembership,GGGI looks forward to further cooperation in support of low-carbon and climate- resilient development with the strategic engagement of the Government of the GrandDuchy of Luxembourg. MinistryoftheEnvironment,ClimateandBiodiversity/ MinistryofFinance Luxembourg joins the Global Green Growth Institute's ©SIP/EmmanuelClaude By Fanny DENOEL & Marion DESCHAMPS, Associates, DLA Piper Luxembourg D irective (EU) 2019/2121, known as the “Mobility Directive,” amends Directive (EU) 2017/1132 to harmonize rules on cross- border conversions, mergers and divisions in the EU (Directive). Luxembourg transposed the Direc- tive through the lawdated17Febru- ary 2025 (Transposition Law), which entered into force on 2 March 2025. The law applies to cross-border operations whose draft terms are published from 1 April 2025 onwards. The Directive harmonizes the legal framework among EU member states regarding cross-border operations (such asmergers, demergers and trans- formations) and enhances companies’ freedom of establishment. It also introduces measures to pro- tect creditors, particularly concerning enforcing se- curity interests and insolvency risks. This article discusses the considerations creditors should take into account when a Luxembourg en- tity is involved. Enhanced transparency and creditor protections Under the Transposition Law, Luxembourg compa- nies involved in cross-border operations have to in- formtheir creditors of proposedsafeguards – suchas guarantees ( cautionnements or garanties ) and pledges ( gages ) – included in the common draft terms ( projet commun ) (CDT). They have to provide this informa- tion at least onemonth before the extraordinary gen- eral meeting (EGM) approving the contemplated cross-border operation. Creditors can submit observations at least five busi- ness days before the EGM. If creditors find the pro- posed safeguards inadequate, they can apply for additional protections, provided that their claims arose before the publication of the CDT and are not yet due at the time of the publicationof theCDT. Toseekadditionalsafeguards,creditorsmust(i)notify the companyof their intent to request (additional) se- curity interests, (ii) demonstrate that the proposed safeguards are insufficient and that the operation could jeopardize claim enforcement, and (iii) file a claimwithin three months following the publication of theCDT in the Recueil Électronique des Sociétés etAs- sociations tothepresidentofthedistrictcourtsittingin commercial matters and in summary proceedings ( président de la chambre du tribunal d’arrondissement siégeantenmatièrecommercialecommeenmatièrederéféré ) in thedistrict inwhich the companyhas its registered office.Filingaclaimdoesn’tsuspendthecross-border operation’s implementationor effects. Navigating the impact on the Luxembourg security package Luxembourg’s financial collateral arrangements, governed by the law of 5 August 2005 (Collateral Law), are known for their creditor-friendly features, offering straightforward and effective enforcement mechanisms,makingLuxembourg aprime jurisdic- tionfordebtfinancing.Thisiswhycreditorstypically choose to request aLuxembourg securitypackage to securetheirfinancings.Sowhathappensifoneofthe partiestothesecuritypackageundergoesacross-bor- der operation? The impact of cross-border operations onfinancing arrangements depends on the nature of the pledgedassets and theparties involved.We analyse three types of security, assuming that the lex rei sitae is Luxembourg law. Firstly, regardingpledges over bank accounts, if ac- counts are located in Luxembourg, Luxembourg law applies, regardless of the pledgor or pledgee’s involvement in the cross-border operation. Secondly, with respect to pledges over receivables, cross-border operations involving any partymight not directly affect the governing law of existing re- ceivables. But future claims might be governed by the law of the jurisdiction where a party relocates post-operation. Thirdly, in relation to pledges over shares or units, a distinction needs to be made between the cases where a pledgee, a pledgor or an entity whose shares/units are pledged is part of the cross-border operation. If apledgee is the party involved, the im- pact will be limited as the location of the secured assets will not change. If a Luxembourg pledgor undergoes a cross-border operation,it’scrucialtoreviewthepledgeagreement. These agreements often prohibit transferring obliga- tionswithout the pledgee’s consent. Failure to obtain the pledgee’s consent in respect of the cross-borderoperationcouldbreachthe agreement,potentiallytriggeringliabil- ity and enforcement actions. If a Luxembourg entity whose shares/units are pledged is part of a cross-border operation and relocates toanother jurisdiction, thegoverning law of those shares/units should change. This shift could affect the creation, perfection and enforce- ability of the secured creditor’s right in rem . To mitigate this risk, creditors might exercise voting rights to oppose the cross-border operation. Preserving creditor protections withDouble LuxCo structures A Double LuxCo structure plays a pivotal role in Luxembourgfinancing for several reasons. Byusing a Double LuxCo structure, parties can ensure they maintain the centreofmain interests (COMI) inLux- embourg, ensuring the continued applicability of Luxembourg law, and that security interests remain enforceable. This structure also offers enhancedpro- tection for securedcreditors against insolvency risks. It also acts as a safeguard against hostile attempts to relocate theCOMI to jurisdictionswithmoredebtor- friendly insolvency laws. Luxembourg’sframeworkisadvantageousforcred- itors as the Collateral Law in Luxembourg is de- signed to be bankruptcy remote. This means that security interests established under the Collateral Law– suchas the securitypackage referencedabove – are enforceable even if thedebtor undergoes insol- vencyor reorganizationproceedings. These features make Luxembourg a highly compelling jurisdiction for financing arrangements, offering both robust protectionandflexibility tocreditors.With the trans- positionoftheDirectiveintoLuxembourglaw,acrit- ical question arises: What happens if one of the companies in aDouble LuxCo structure is involved in a cross-border operation? Cross-borderoperationscoulddismantletheDouble LuxCostructure,leavingonlyasingleLuxCoinplace andpotentiallyexposingcreditorstosignificantrisks such as the loss of the Luxembourg’s jurisdictional benefits (ie strong creditor protections and efficient enforcementmechanisms under theCollateral Law) and the shift in the COMI to a less creditor-friendly jurisdiction. Asaresult,thecompanycouldbecomesubjecttofor- eign insolvency proceedings, possibly triggering moratorium on enforcement actions and reducing creditor control over restructuring processes. Cross- borderoperationscouldintroducesomelegaluncer- tainty and procedural complexity, delaying or complicating the enforcement of secured assets if they’removed out of Luxembourg. It’s essential that the documentation governing the DoubleLuxCostructureincludesstrongclausestoad- dress potential cross-border operations, prohibiting the shift of the COMI to a foreign jurisdiction. Exam- ples of such clauses include representations confirm- ing that the COMI is in Luxembourg, undertakings prohibitingtheCOMImigration,orcovenantsinclud- ing reporting requirements. Understanding the recognition of foreign judgments inLuxembourg Another issue to be considered is whether a foreign court refusing a cross-border operation and issuing a judgmentblockingwouldberecognizedandenforce- able inLuxembourg. In the EU, judgments rendered in one member state are generally automatically recognized in the others without the need for a special procedure, in accor- dancewithRegulation (EU)No. 1215/2012. In non-EUcountries, and in the absence of a bilateral or multilateral agreement, an exequatur may be needed.ThisprocedureinvolvesaLuxembourgcourt reviewing and declaring the foreign judgment en- forceablewithin its jurisdiction. Recent case lawhas made a distinction between acts requiring a law enforcement authority and private acts. The Luxembourg court clarified that only en- forcementactionsthatrequiretheofficialinvolvement ofpublicauthoritiesnecessitatepriorexequaturofthe foreigndecision.Inotherwords,suchcoerciveactions can only proceed once the Luxembourg courts have recognized andvalidated the foreigndecision. In contrast, private actions (eg transcription of the re- lease of a pledge or the transfer of shares in a com- pany’s shareholders’ register), even if theycarry legal weight, don’t need prior exequatur. These actions, legallybinding,canbetakendirectlywithouttheneed for court validationof the foreign judgment. Key takeaways for creditors When engaging in financing transactions involving LuxCos, or when a LuxCo involved in a financing participates in a cross-border operation, creditors shouldpay close attention to: - Proactive engagement : Creditors should actively monitorproposedcross-borderoperationsandassess the adequacy of offered safeguards. - Legal recourse : If safeguards are deemed insuffi- cient, creditors have the right to seek additional pro- tections through the appropriate legal channels. - Structural vigilance : Maintaining structures like Double LuxCo can provide enhanced protection against jurisdictional shifts and insolvency risks. - Judgment recognition :Understanding thenuances of foreign judgment recognition in Luxembourg is crucial, especially in cross-border disputes. Cross-borderoperationsentailsomecomplexities,but with the appropriate structuring, both the cross-bor- der operations parties and their creditors can achieve their goals andprotect their positions. EUMobility Directive: Key considerations for creditors in Luxembourg related financings