AUSTRIA Law and Practice Contributed by: Markus Fellner, Florian Kranebitter, Elisabeth Fischer-Schwarz and Florian Henöckl, Fellner Wratzfeld & Partners
With an assignment of securities, the debtor assigns claims against a third party to the creditor. This type of security requires strict acts of publication (eg, notifica - tion of third-party debtors or annotation in the books). Priority depends on the date on which the publicity requirement is met. In the case of a reservation of title, ownership (in par - ticular, ownership of goods) is not transferred from the creditor to the debtor until the purchase price has been paid in full. If the goods are further processed, joint ownership arises. 2.4 Unsecured Creditors Unsecured creditors can assert their claims against the debtor outside restructuring or insolvency pro - ceedings ‒ in particular, by means of a lawsuit and enforcement proceedings. As long as the debtor is not materially insolvent, the “first come, first served” principle applies. The principle of equal treatment of creditors only applies once material insolvency has occurred. Once insolvency proceedings have been opened, it is no longer possible to satisfy individual insolvency creditors. The insolvency creditors only receive a quota on their claim, which is the same for all creditors with an insolvency claim. 3. Out-of-Court Restructuring 3.1 Out-of-Court Restructuring Process In practice, out-of-court restructurings may be attempted by way of voluntary debt relief (includ - ing subordination), economic reorganisation of the business, or equity injections ‒ all according to the provisions of private law. Creditors might decide to grant debt relief in order to avoid formal insolvency proceedings and the negative effect this might have on the entity’s public image. A prerequisite for such “quiet relief” is that all the creditors affected must be prepared to grant relief. However, each creditor can independently decide whether to initiate enforcement proceedings ( Exekutionsverfahren ) or insolvency pro - ceedings. Therefore, creditors often bind their consent to the consent of the rest of the creditors as a pre- condition for their support.
However, Austrian law did not provide a legal frame - work for out-of-court restructuring proceedings ‒ nor for preliminary mandatory and consensual restruc - turing negotiations ‒ until the implementation of the Restructuring Act. The following are some of the cornerstones of the Restructuring Act. • A company may use the procedures provided by the Restructuring Act (at the request of the debtor only) to enable the debtor to avert insolvency and ensure the viability of its company in the event of “probable insolvency”, which is the case if the existence of the debtor’s company would be at risk without restructuring. This is particularly the case if insolvency is imminent or if the equity ratio falls below 8% and the national debt repayment period exceeds 15 years. The procedure is not available to companies that are illiquid within the meaning of the Insolvency Act. • The core of the restructuring procedure, which is in principle a self-administration procedure, is a restructuring plan ( Sanierungsplan ) that defines classes of “affected creditors”. In order for the restructuring plan to come into effect, the majority of the creditors in each class is required in the first instance – ie, the sum of the claims of the creditors agreeing to the restructuring plan must amount to at least 75% of the total sum of the claims of the creditors included in the restructuring plan – and a cram-down is also possible. In addition, the court has to decide on the confirmation of the restructur - ing plan. • Court approval of a restructuring plan also depends on whether the “creditor interest crite - ria” is met, if so requested by non-consenting creditors. The “creditor interest criteria” basically provides that a non-consenting creditor must not be treated worse than in a (regular) insolvency proceeding. • At the debtor’s request, the court may order a stay of execution proceedings for a period of up to three months (extendable to a maximum of six months) to support negotiations on a restructuring plan.
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