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What are the main insolvency procedures applicable to companies in your jurisdiction?
- Restructuring with self-administration
- Restructuring without self-administration
Bankruptcy (Liquidation) – A company or its creditor(s) can petition for bankruptcy of the company on grounds of insolvency or over-indebtedness. The court will appoint an insolvency administrator who is responsible for realising the company’s assets and dividing the proceeds amongst the creditors. On conclusion of the bankruptcy the company is liquidated and removed from the register.
Restructuring with self-administration - A company initiates a restructuring proceeding with self-administration by presenting a restructuring plan to the court along with the application for opening the insolvency proceeding. The plan must provide for repayment of at least 30% of the company’s debts within two years and be approved by the company’s creditors. As well as the restructuring plan, the company must also submit a financial plan setting out how the company will finance its continued trading for the next 90 days. Once the court has approved the restructuring plan, the company’s directors continue to manage the company. Day-to-day business will be conducted by the company’s directors, while more important decisions must be approved by the administrator or the court.
If the company makes the repayments set out in the restructuring plan, the remainder of its debts are written off.
Restructuring without self-administration - Where the restructuring plan provides for the repayment of only 20% to 30% of the company’s debts, a restructuring without self-administration can be opened with the approval of the company’s creditors. The court will appoint an administrator who manages and represents the company in all respects. If the company makes the repayments set out in the restructuring plan, the remainder of its debts are written off. Reorganisation – Reorganisation is a court administered insolvency proceeding that aims to avoid insolvency proceedings by restructuring at an early stage. Reorganisation is rarely used as companies favour restructuring.
Can a company obtain a moratorium whilst it prepares a restructuring plan?
No - Austrian law does not provide for a free-standing restructuring moratorium. A company does not have the protection of a moratorium while formulating or preparing restructuring proceedings.
To what extent do the directors of the company remain in control of its affairs during any of the above procedures?
In a restructuring without self-administration or a liquidation the powers of the directors cease and the administrator takes control of the company. In a restructuring with self-administration, the directors remain in control of the company, although some actions require the approval of the administrator or the court (eg sale of real estate property).
Timeline to commence liquidation
How quickly can a creditor generally commence the liquidation of an insolvent company, assuming an undisputed claim and no opposition from the company?
Between four and six weeks.
Do your courts recognise insolvency proceedings commenced in the courts of another jurisdiction?
Yes - insolvency proceedings commenced in the courts of other EU member states will be automatically recognised under the EC insolvency regulation. Insolvency proceedings commenced in another country can be recognised, if: (a) the centre of the company’s main interest is in that country; and (b) the foreign insolvency proceedings are compatible with Austrian insolvency proceedings, in particular Austrian creditors must be treated equally to creditors domiciled in the country opening the proceedings.
Position of creditors
Forms of security
What are the main forms of security over movable and immovable property?
Security over immoveable property is taken by mortgage.
Security over moveable property is taken by:
Which classes of creditor are given preferential status? Are any classes subordinated?
All debts arising after the commencement of an insolvency procedure have preferential status.
Debts arising before commencement of insolvency proceedings are bankruptcy claims and do not have preferential status. No other classes of creditor are given preferential status.
Sums due to shareholders of the company which can be characterised as a form of equity replacement are subordinated to all other claims.
Treatment of foreign creditors
Are foreign creditors treated equally to domestic creditors?
Termination of contract by reason of insolvency
Are contract terms permitting termination of the contract by reason of insolvency valid?
No (in principle).
Retention of title
Are retention of title clauses effective?
In principle yes, providing that the clause is incorporated into the contract between the parties and the goods in question can be identified. Retention of title can secure all monies due from the company to the supplier and is not limited to sums due under the particular order in question.
Setting aside transactions
Transaction avoidance provisions
What are the main transaction avoidance provisions, and who can challenge transactions?
The insolvency administrator can challenge:
- transactions at an undervalue
- unusual gifts
- security granted in the 60 days prior to the opening of insolvency proceedings
- debts repaid in the 60 days prior to the opening of insolvency proceedings
Position of directors
Risks for directors
What are the risks facing the directors of an insolvent company?
Directors who fail to apply or delay applying for insolvency proceedings in respect of a company that is insolvent (on a cashflow or balance sheet basis) can be held civilly liable for:
- losses caused by their failure or delay
- the costs of opening insolvency proceedings (approx. EUR 4,000)
Directors who are grossly negligent and causes losses to creditors by not applying for insolvency proceedings in a timely manner can be held criminally liable and be imprisoned for up to two years.
A director can also lose his trade licence if he is a registered agent under Austrian Trade Law.