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New laws needed to help prevent mass-bankruptcy repeat
Economics

New laws needed to help prevent mass-bankruptcy repeat

2 min. 20.09.2013 From our online archive
Luxembourg's Minister for the Middle Classes Françoise Hetto-Gaasch has commented that the government's scope of action in regards to the bankruptcies of a series of shops in Luxembourg City is limited.

(CS) Luxembourg's Minister for the Middle Classes Françoise Hetto-Gaasch has commented that the government's scope of action in regards to the bankruptcies of a series of shops in Luxembourg City is limited.

At the meeting of a parliamentary commission on Thursday, the minister said that only law reform would enable the state to better track companies building up debt with the state, for example in the shape of outstanding tax or VAT payments.

Currently, due to tax secrecy, even the state only has limited access to information on outstanding payments.

In the context of the bankruptcies of more than a dozen shops in the City centre it had emerged that the companies running the shops had failed to pay social contributions for their employees, as well as falling behind on tax payments.

Financial administration not to blame

While the “Administration de l'Enregistrement” confirmed that there were six months' worth of payments outstanding, it refused claims that it was to blame in the matter, explaining that they had followed the law, which aims to protect the tax payer through tax secrecy.

The financial management administration said that there had been problems with only a few of the businesses, which all belonged to the same holding company, and that in these cases the according measures had been taken, in the shape of admonitions or property seizures.

The administration did not reveal the outstanding amount.

Speaking to Radio DNR on Friday, minister Hetto-Gaasch also spoke out in favour of a new law, which would better protect tenants of commercial properties. Such a law could have prevented small businesses being pushed out in favour of big brands, she said.

Advantages for owners and tenants

If all goes to plan, the Ministry of the Middle Classes will present a bill at the government council next week. Among Hetto-Gaasch's suggestions is to regulate rent increases in case of lease renewal, when a tenant first signs the contract. This would allow for better long-term planning.

Additionally, she wants to provide more flexibility to exit a contract for failing businesses.

Finally, subletting, as well as the so-called “pas-de-porte” would be newly regulated under the law. In France and Belgium, the “pas-de-porte” is a kind of compensation payment, which a tenant has to receive from a new business moving into the property they had previously occupied.

In Luxembourg, however, the “pas-de-porte” is not properly regulated and has been used by companies as financial encouragement for owners to give up on current tenants.

Hetto-Gaasch said that this new law would offer advantages to both owners and tenants. In the meantime efforts continue to resolve the situation in Luxembourg City and find new tenants for the now vacant stores.