There are the following different types of restructuring/insolvency proceedings in Austria:
Restructuring proceedings under the Insolvency Act (Sanierungsverfahren)
Restructuring proceedings can take two different forms: with and without self-administration. While in the latter an insolvency administrator handles the proceedings and is, for the duration of the restructuring proceeding, the respective entity’s representative, in a proceeding with self-administration, representation powers generally remain with the managing directors (under the supervision of an administrator, however).
Key to the initiation of a restructuring proceeding is that the insolvent entity files for insolvency itself and (already in this filing) offers the debtors a qualifying restructuring plan. If the proceedings shall be initiated with self-administration, the entity’s filings for insolvency must meet certain qualified standards.
Restructuring proceedings without self-administration (Sanierungsverfahren ohne Eigenverwaltung)
The initiation of restructuring proceedings requires the managing director to file for insolvency and present a restructuring plan (Sanierungsplan). These proceedings may already be opened if the inability to pay debts as they fall due is only imminent and has not yet been reached (drohende Zahlungsunfähigkeit).
With the opening of restructuring proceedings without self-administration the debtor will lose its right to run the company. Instead, an insolvency administrator will be appointed who will administer and represent the insolvency estate. Legal actions undertaken by the debtor after the opening of insolvency proceedings will in principle be invalid and payments made to the debtor instead of the insolvency administrator will not relieve the debtor of its debt.
Creditors have to register their outstanding receivables in the insolvency proceedings and credibly show that those receivables are legally valid. The insolvency administrator will review the claims, create a record, and decide which claims to contest. They will also decide whether the company will continue to operate or be closed.
In the restructuring plan the debtor has to offer to pay at least 20% of all receivables of the creditors within 2 years. The insolvency administrator must review the restructuring plan and the creditors have to agree to the plan (with a double majority of at least 50% by both headcount and value of claims). If they do so and the court confirms the restructuring plan, the insolvency proceedings will be lifted and the debtor will be allowed to run its company again.
If the debtor manages to fulfil the restructuring plan, it will not have to pay the outstanding balance (i.e. the amount exceeding the quota) of the receivables to the creditors. It will be free of its debts. If the debtor fails to fulfil the plan, the creditors or court do not approve it, or the debtor decides to rescind it, bankruptcy proceedings will be initiated and the company will be liquidated, with the proceeds distributed by the insolvency administrator according to the insolvency quota of the creditors.
After the distribution of the quota, the insolvency proceedings will be lifted by a decision of the court. In general, after the end of the insolvency proceedings the company will be fully wound up and can be deleted from the companies register.
Restructuring proceedings with self-administration (Sanierungsverfahren mit Eigenverwaltung)
Restructuring proceedings with self-administration allow the debtor to remain in control of its company. The insolvency mass will therefore not be administered by an insolvency administrator but by the debtor. However, an administrator (with less powers to act) will be appointed by the competent court also in restructuring proceedings with self-administration. Hence, in such proceedings the administrative and managerial powers of the managing directors of the insolvent entity are limited and encompass only typical transactions in the ordinary course of business. Any dealings falling out of this scope, or which are specifically listed as limitations under Section 172 of the Austrian Insolvency Act, require the consent of the appointed administrator. In particular, the following acts are carried out by the administrator:
- potential challenge of acts carried out by the debtor prior to the commencement of the proceeding
- examination and acceptance of claims registered by creditors
- conclusion of transactions such as the sale or lease of the debtor’s whole business, of all movable fixed and current assets or a part thereof necessary for their operation, or of immovable property
- the court may prohibit the debtor from carrying out other legal acts at all or without the consent of the administrator if this is necessary to avoid disadvantages for the creditors.
Moreover, the administrator retains a veto right with respect to any transactions envisaged by the insolvent entity.
In the restructuring plan the debtor has to offer to pay at least 30% of all the receivables of the creditors within 2 years.
The court may revoke the self-administration if for example:
- circumstances arise that lead the court to believe that a continuation of the self-administration will be disadvantageous to creditors (e.g. if the debtor violates obligations to cooperate or provide information, violates restrictions of the self-administration or violates the interests of the creditors at all, the financial plan cannot be adhered to, or the debtor does not fulfil the administrative claims punctually), or
- the reorganisation plan was not accepted by the creditors within 90 days of the commencement of the proceedings.
Bankruptcy proceedings under the Insolvency Act (Konkursverfahren)
Bankruptcy proceedings are similar to restructuring proceedings without self-administration in a way that the opening of such proceedings will have the same effect on the power of the debtor to run its company and undertake legal actions.
So, without the debtor presenting a restructuring plan, the insolvency administrator will review the claims registered by the creditors, create a record and decide which claims to contest. They will also decide whether the company will continue to operate or be closed. The administrator will liquidate the assets of the company and distribute the insolvency mass to the creditors according to their insolvency share. After the insolvency mass has been distributed, the insolvency proceedings will be lifted by a decision of the court. In general, after the end of the insolvency proceedings, the company will be fully wound up and can be deleted from the companies register.