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.

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.

In brief

The courts were busy in the second half of 2021 with developments in the space where insolvency law and environmental law overlap.

In Victoria, the Court of Appeal has affirmed the potential for a liquidator to be personally liable, and for there to be a prospective ground to block the disclaimer of contaminated land, where the liquidator has the benefit of a third-party indemnity for environmental exposures.¹

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:

In brief

Australia's borders may be closed, but from the start of the pandemic, Australian courts have continued to grapple with insolvency issues from beyond our shores. Recent cases have expanded the recognition of international insolvency processes in Australia, whilst also highlighting that Australia's own insolvency regimes have application internationally.

Key takeaways

In brief

With the courts about to consider a significant and long standing controversy in the law of unfair preferences, suppliers to financially distressed companies, and liquidators, should be aware that there have been recent significant shifts in the law about getting paid in hard times.

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