Austria implemented Directive (EU) 2019/1023 on preventive restructuring frameworks with the Restructuring Regulation, which came into force on July 17, 2021, and introduced (further) judicial proceedings for preventive restructuring. Practice, however, has shown that the reorganization plan in insolvency proceedings and out-of-court restructuring remain the methods of choice in Austria.

The insolvency of the SIGNA Group is the largest ever insolvency in Austria with debts reportedly exceeding EUR14 billion.

Recently, the three largest holding companies of the group started debtor in possession restructuring proceedings which allowed management to continue the day-to-day running of the businesses during insolvency proceedings. Due to an error in the timing of the proceedings, the non-operationally active top holding company (SIGNA Holding) was forced to end self-administration.

The timing problem

Austria implemented the directive on preventive restructuring frameworks more than two years ago, in July 2021. In a first ruling on the proceedings, the Vienna Higher Regional Court has reaffirmed the prerequisites for entering preventive restructuring and clarified the checks to be carried out by the courts at the opening of the proceedings.

Decision

The Court held that:

Background

The impact of the opening of insolvency proceedings on options granted in combined contracts (for example, a lease contract containing a call option for the leased real estate) had been in dispute for a long time.

Decision

The Austrian Supreme Court held that call options granted in lease contracts where the option fee has been paid do not expire with the opening of insolvency proceedings, nor are they subject to the right of the insolvency administrator to terminate the lease contract.

In a recent ruling, the Austrian Supreme Court has defined de facto managing directors and their obligations and liabilities in connection to wrongful trading.

The decision

The key takeaways from the ruling are:

Austria is gearing up to implement the EU Directive on Restructuring and Insolvency (known as the Restructuring Directive). We anticipate that the Restructuring Regulation (ReO) will enter into force on 17 July 2021.

The core element of the Restructuring Directive (and of the implementing law) is the promotion of a new restructuring procedure, to avoid the need for formal insolvency proceedings.

The restructuring proceedings

Background

Under the deposit guarantee scheme, deposits with Austrian banks are generally protected on a bank's insolvency, up to EUR 100,000. This sum may be higher in certain cases, for example, for sums deposited from the sale of a private residential property within 12 months before the insolvency, the guaranteed amount is EUR 500,000.

Austria is moving forward with plans to implement the directive on preventive restructuring frameworks. The draft new law implementing the changes was published in February 2021.

The focus of the draft law is to introduce preventive restructuring proceedings. This will provide a structure for pre-insolvency restructuring to allow for the cram-down of dissenting creditors provided certain conditions are met.

Key points of the current draft

Worum geht es?

Das derzeit in der Begutachtungsphase befindliche Restrukturierungs- und Insolvenz Richtlinie-Umsetzungsgesetz (RIRL-UG) soll, wie auch der Name schon andeutet, die EU-Richtlinie über Restrukturierung und Insolvenz (kurz zumeist nur Restrukturierungsrichtlinie genannt) in Österreich umsetzen.

Kernelement der Restrukturierungsrichtlinie und damit auch des geplanten Umsetzungsgesetzes, das Restrukturierungsordnung (ReO) heißen soll, ist eine dem Insolvenzverfahren vorgelagerte präventive Restrukturierung.

Summary

The regulations governing personal insolvency in Austria will change on 1 November 2017. Whilst generally the regulations remain somewhat the same, some key debtor-friendly amendments have been effected.

The changes primarily concern mandatory quotas as well as the duration of the proceedings.

The following is an outline of the ‘new’ Austrian insolvency proceedings for natural persons.

Phase one – payment schedule