Sale for a Symbolic Euro in the Context of a Judicial Reorganisation?

Pursuant to the Law of 7 August 2023 on the preservation of businesses and the modernisation of bankruptcy law (the ‘Law of 2023’), the District Court of and in Luxembourg had to rule on an offer to take over contracts (contrats de gardiennage) and the employees assigned to those contracts, which had been concluded between the company undergoing reorganisation and a third-party company (Luxembourg District Court, 8 August 2025).

Reminders on the judicial reorganisation procedure
Purpose of judicial reorganisation

According the terms of Article 12 of the Law of 2023: “The purpose of the judicial reorganisation procedure is to preserve, under the supervision of the judge, the continuity of all or part of the assets or activities of the company.”

The opening of judicial reorganisation proceedings aims:

– either to obtain a stay of proceedings in order to allow the conclusion of an amicable agreement, under the conditions of Article 11;

– or to obtain the agreement of creditors on a reorganisation plan, in accordance with Articles 38 to 54;

– or to allow the transfer by court order, to one or more third parties, of all or part of the assets or activities, in accordance with Articles 55 to 64.

In this case, a judicial representative had been appointed and wished to have a takeover bid for the company in reorganisation approved in accordance with the third case listed in Article 12 above.

In this context, Article 58(4) of the Law of 2023  requires the judicial administrator to draw up one or more concurrent or successive sales plans, setting out his or her due diligence, the terms of the proposed sale and the justification for his or her plans, and attaching a draft deed for each sale. He communicates his plans to the delegated judge and, by means of a request notified to the debtor at least two days before the hearing, he asks the Court for authorisation to proceed with the execution of the proposed sale.

Requirement for prior approval by the labour court in the case of salaried employees

In the context of a transfer of business, when a transfer of business involves employees, the law requires that the competent labour court (that of the place of the registered office or principal place of business of the transferor) approve the transfer agreement before the commercial court authorises the sale.

The approval covers, in particular:

– the list of employees taken over;

– the fate of employment contracts (maintained, transferred, modified);

– working conditions; and

– transferred social security debts.

In this case, a transfer agreement had been signed, including the transfer of 27 employees, and the competent Labour Court approved this agreement. This requirement guarantees the protection of workers’ rights and the legality of the transfer of their contracts.

Role of the judge: reconciling the continuation of the business with the rights of creditors
Article 58 of the Law of 2023 governs transfers made in the context of a judicial reorganisation as follows: “(1) The court-appointed representative shall organise and carry out the transfer ordered by the court through the sale or transfer of the movable or immovable assets necessary or useful for the continuation of all or part of the economic activity of the company, or in the form of a merger in accordance with Title X, Chapter II, of the amended Act of 10 August 1915 on commercial companies.

He shall seek and solicit offers, giving priority to the maintenance of all or part of the company’s activity while taking into account the rights of creditors[…]”

The court must therefore strike a balance between the priority objective of maintaining the activity and preserving the rights of creditors.

The symbolic one-euro sale
In this case, the Court, having recalled its sovereign power of assessment, which remains dependent on the offers received and the particularities of the market, authorised the transfer of two contracts, as well as 27 employees, to a third-party company for the symbolic price of one euro.

The Court carried out, following the example of Belgian Case Law, a cost-benefit analysis by comparing the terms of the only bid received with the financial and social consequences of bankruptcy or liquidation. The Court held that creditors’ interests are only considered to have been infringed upon, if the price offered by the prospective transferee is significantly lower than the value of the assets, considered from a break-up perspective. Thus, the price must be equal to or greater than the realisable value in the event of bankruptcy or liquidation.

The cost-benefit analysis showed that the price was considered legal and justified because:

The profit margins on the contracts were extremely low (between 1.78% and 3.12%), which did not allow for a higher financial offer;
No other buyer submitted a bid, despite a call for tenders extended to the entire sector;
If the transfer had failed, the contracts would have been terminated and the employees laid off, increasing the company’s social liabilities;
The transfer therefore made it possible to avoid redundancies, reduce liabilities and preserve part of the business without harming creditors.
The Court therefore ruled that the symbolic euro value did not constitute a fire sale, given the nature of the assets (service contracts) and the economic context of the market. This important decision illustrates that, in the context of a judicial reorganisation, a company in difficulty can legally sell certain assets, even at a symbolic price, when:

– there are no other viable offers;

– job retention is guaranteed;

– the sale is in the creditors’ interests compared to bankruptcy or liquidation.