In the last one and a half decade, we have seen substantial changes being introduced to Austrian insolvency law. The 2010 Act on the Amendment of Insolvency Law (IRÄG 2010) put and end to the side-by-side existence of bankruptcy and settlement proceedings, replacing them with a unified procedure that can be conducted as reorganisation proceedings or as a bankruptcy.
The Austrian insolvency law
The reorganisation proceedings created the possibility of either depriving debtors of the own administration of their assets or allowing them to maintain it if certain conditions specifically defined in the law are met. In return, in reorganisation proceedings with own administration conducted under supervision of an administrator, the legislators demand from debtors a qualified content of the reorganisation plan application, i.e. a minimum quota of 30% (in contrast to the 20% required in reorganisation proceedings without own administration) and the presentation of a list of assets, a current and complete state of the assets and debts, a financial plan, and a list of the persons to be informed.
IRÄG 2017 introduced an amendment to the private bankruptcy provisions, which aimed at offering individuals in financial distress the opportunity for a quicker new start, thus enabling them to re-enter working life.
The latter were thus released from the obligation (i) of a previously compulsory attempt of an out-of-court settlement, (ii) of offering payments in case the debtors were not expected to obtain a seizable income in the relevant period or this income only slightly exceeded the unseizable amount; moreover, the ten-year blocking period of a previous absorption procedure was relaxed, i.e. since entry into force of the law, this period only applies when a discharge of residual debt was issued or the absorption procedure was prematurely terminated. The law provided for a reduction from seven to five years, and a ten-percent minimum quota in the absorption procedure previously foreseen in the law was cancelled.
Those were the first steps in an approach aiming to allow financially distressed individuals to timely return to economic normality, which is now consistently further pursued by the implementation of Directive 2019/1023/EU of the European Parliament and of the Council of 20 June 2019 amending Directive 2017/1132/EU through the entry into force of a corresponding Federal Act.
As regards the requirement of the payment schedule quota in the debt settlement proceedings, the Restructuring and Insolvency Directive Implementing Act – RIRUG – determines that such a quota must be offered that corresponds to the debtor's income situation in the following three years, though the payment period may not exceed seven years.
Changes were also introduced in connection with the absorption procedure. In addition to the "absorption plan", which continues to be conducted as a five-year absorption procedure, the legislators created a version shortened to three years, referred to as "repayment schedule", thus accommodating the provisions of the aforementioned directive.
The law provides for increased requirements for the "repayment schedule" as regards the integrity and good conduct of the debtors, and also introduced additional barriers to the introduction as well as additional reasons for the revocation of such a "repayment plan".
Finally, in implementation of the directive, the legislators also created a restructuring procedure for companies which are not yet insolvent but face the threat of permanent illiquidity, something that to some extent completely new in Austrian insolvency law. The Restucturing Code (ReO) defines the conditions under which entrepreneurs can use this restucturing procedure – the following list being far from exhaustive –, and determines the requirements for the restructuring plan and the basic outlines of the creditors' involvement, which - and this is completely new - allow for a division into "creditor classes" and have led to the creation of the position of a restructuring officer.
As a result of the dynamic development of insolvency law in Austria and Europe, this legal area has become elusive and almost impenetrable for the layman concerned.
For decades, our law firm has been providing legal advice and support on insolvency issues to debtors and creditors, and some of our partners are regularly appointed as liquidators in bankruptcy and restructuring procedures. Consistent training and upskilling of our insolvency law experts ensures that our assessments of insolvency issues are always based on the latest teachings and case-law.
Do not hesitate to resort to our firm's top-level expertise if you have any problems or concerns in connection with insolvency law - regardless of your legal status.