WHAT DUTY?
WHAT DOES IT MEAN?
WHEN DOES IT APPLY?
Maintenance of solvency Management of business risks
A financial crisis and situations where insolvency is imminent are not only challenging for a company and its management, but also entail significant liability risks for management in the case of subsequent insolvency proceedings. Payments made after a company has become materially insolvent (i.e. illiquid or overindebted under Austrian insolvency law), but before the 60-day deadline for filing for insolvency has expired, are risky. Which payments are allowed according to the Austrian Supreme Court?
Scope of liability
The Austrian Supreme Court has recently found that insolvency related avoidance claims can be sold. This may open a whole new business segment and will most certainly have a material impact on defendants in avoidance proceedings.
Assignability of insolvency related avoidance claims
Shareholders of Austrian limited liability companies usually want to have influence over whom they are associated with. That's why shareholders often agree on a pre-emptive right (Aufgriffsrecht) to purchase existing shares in certain cases, e.g. in case of insolvency proceedings against a shareholder. However, according to the recent case law of the Regional Court of Linz on limited liability companies, pre-emptive rights to purchase the shares of an insolvent shareholder are invalid and unenforceable.
Know your co-shareholders
Die COVID-19-Pandemie und deren wirtschaftliche Auswirkungen führten bisher zu insgesamt fünf umfassenden COVID-19 Gesetzespaketen. Darunter finden sich ua Änderungen im Insolvenz-, Anfechtungs- und Eigenkapitalersatzrecht, mit denen die wirtschaftlichen Auswirkungen der COVID-19-Pandemie adressiert werden sollen. Ein erster Schritt in die richtige Richtung, weitere insolvenzrechtliche Anpassungen werden aber folgen müssen. Im Folgenden wird ein Überblick über die wesentlichen insolvenzrechtlichen Änderungen gegeben.
Verlängerte Insolvenzantragsfrist
With the fourth law on COVID-19, the Austrian legislator has suspended the obligation of an overindebted debtor to file for insolvency until 30 June 2020, irrespective of the cause of the over-indebtedness. Some other countries in the CEE region have also adopted measures to combat the consequences of COVID-19 as detailed in the following overview:
On 28 June 2017 the Austrian Parliament passed the government's legislative proposal on insolvency law (Insolvenzrechtsänderungsesetz 2017). After lengthy negotiations, the government finally agreed to shorten personal insolvency proceedings to a maximum five years and to abolish the minimum insolvency quota of 10 % under certain conditions. The amendments will be applicable as of 1 November 2017.
Personal bankruptcy in Austria
On 10 July 2017, the Commission announced the public consultation on the development of secondary markets for non-performing loans (NPLs) and distressed assets. Following the commencement of this public consultation, the Council introduced its Action Plan for NPLs.
Following the opening of insolvency proceedings, the insolvency receiver typically tries to enlarge the insolvency estate by asserting voidance claims. Legal acts that occurred within certain suspect periods prior to the opening of insolvency proceedings might be declared void. Creditors may mitigate certain avoidance risks by investigating the debtor's financial situation when conducting legal transactions.
Responsibility to investigate