AUSTRIA Law and Practice Contributed by: Markus Fellner, Florian Kranebitter, Elisabeth Fischer-Schwarz and Florian Henöckl, Fellner Wratzfeld & Partners
• The Restructuring Act also provides for a “simpli - fied procedure” tailored to include financial credi - tors only. All in all, Austrian restructuring practice already pro - vided – to a large extent – an out-of-court restruc - turing approach, which inherited some of the corner - stones of the new Restructuring Act. Owing to the fact that the new Restructuring Act has only been effec - tive since July 2021, there is no relevant evidence of the extent to which this new law will be used (either entirely or in a complementary manner) – for exam - ple, with regard to the simplified procedure limited to In an out-of-court restructuring based on the provi - sions of private law, a potential disadvantage ‒ besides the necessity to gain the consent of all the creditors ‒ is the risk of voidance of agreements that were con - cluded at a time when the debtor was already insol - vent, which can diminish the estate. An advantage of out-of-court restructuring is that these proceedings are not registered in the insolvency database. Further - more, out-of-court restructuring is potentially much faster, provided that all the parties participate. In restructuring proceedings, however, the restructur - ing plan is confirmed by the court if it is approved by the required majorities. It is therefore binding for all creditors, including those who voted against the restructuring plan. financial creditors. 3.2 Legal Status 4. Statutory Restructuring, Rehabilitation and Reorganisation Proceedings 4.1 Opening of Statutory Restructuring, Rehabilitation and Reorganisation In principle, legal entities as well as individuals can be subject to insolvency proceedings under the Insolven - cy Act. However, neither reorganisation proceedings with nor reorganisation proceedings without debtor- in-possession apply to credit institutions, insurance companies and pension funds, as there are specific provisions for these entities (under the Banking Act,
the Insurance Company Supervision Act and the Pen - sion Fund Act). The Insolvency Act provides for two kinds of reorgani - sation proceedings, either with or without debtor-in- possession (see 1. Overview of Legal and Regulatory System for Insolvency/Restructuring/Liquidation ). The main focus of these proceedings is the continua - tion of the debtor’s business or parts thereof. In order for the provisions of reorganisation proceedings to be applicable, the debtor must be the one who files for the opening of these proceedings and the debtor must provide a restructuring plan to the court. For proceedings with debtor-in-possession, the manage - ment remains in place and the debtor retains control over the estate’s assets within the scope of ordinary business. Nonetheless, a court-appointed insolvency administrator monitors the debtor and the business situation. Also, specific actions such as the review of claims and the contesting of transactions (avoidance) are reserved for the administrator. Unlike an out-of-court restructuring, in reorganisation proceedings the debtor is protected from the com - mencement of enforcement proceedings and may be granted partial debt relief via a majority decision. However, as with liquidation proceedings, the debtor has the option to use the conclusion of a restructur - ing plan as an opportunity to rehabilitate its business. Where such restructuring plan is agreed upon in the course of liquidation proceedings, the debtor pays the quota agreed, which then leads to a residual debt discharge ( Restschuldbefreiung ). This possibility to rehabilitate plays an important role in practice. The legal representatives of an entity must file for insolvency in a scenario where the entity is “insolvent” according to the meaning in the Insolvency Act. This
criterion is met if the debtor is: • illiquid ( zahlungsunfähig ); or • over-indebted ( überschuldet ).
Although the Insolvency Act does not provide a legal definition for illiquidity and over-indebtedness, legal literature and case law have broadly defined “illiquid - ity” as a situation where the debtor lacks sufficient
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