AUSTRIA Law and Practice Contributed by: Markus Fellner, Florian Kranebitter, Elisabeth Fischer-Schwarz and Florian Henöckl, Fellner Wratzfeld & Partners
4.2 Statutory Restructuring, Rehabilitation and Reorganisation Procedure Insolvency proceedings are to be opened by the insol - vency court at the request of the debtor or a creditor, if the debtor is illiquid or over-indebted. Reorganisa - tion proceedings (pursuant to the Insolvency Act) can already be initiated if there is a danger of illiquidity (for the definition of “illiquidity” and “over-indebtedness”, see 4.1 Opening of Statutory Restructuring, Reha- bilitation and Reorganisation ). Requirements in Application of the Insolvency Act For restructuring proceedings, a restructuring plan by the debtor must be submitted to the court with finan - cial records for the past three years, which show the debtor’s ability to pay 20% of its debt to unsecured creditors within a period of two years. If the debtor can prove that a payment of 30% within a period of two years is feasible, the debtor may additionally apply for debtor-in-possession. The restructuring plan must further provide for full payment of all estate claims ( Masseforderungen ) and evidence of the debtor’s abil - ity to fund the estate claims for a period of 90 days after filing for the commencement of restructuring pro - ceedings. The debtor must provide such restructur - ing plan within 90 days of the opening of insolvency proceedings. In general, the approval of a suggested restructuring plan is subject to a “double majority requirement” of the creditors in the restructuring plan hearing, which is set by the court and made public by way of a formal edict of the court. Not only is it necessary to achieve a majority of those insolvency creditors who are present and entitled to vote (no specific quorum applies), but a majority of approving creditors also has to be reached on the admitted and present aggregate insolvency claims. Fully secured creditors are not entitled to vote. Confirmation If the creditors approve a restructuring plan, the insol - vency court – as a second step – also has to confirm the restructuring plan. A possible reason for the court to deny confirmation would be an infringement of the principle of equal treatment of the creditors by grant - ing preferential treatment to a specific creditor.
cash (including existing credit lines) to meet its current needs and obligations. The Supreme Court of Aus - tria has ruled that illiquidity is to be assumed when the debtor is unable to pay more than 5% of its debt obligations that are due and payable. On the other hand, “over-indebtedness” is when liabilities on the debtor’s balance sheet exceed the debtor’s assets (at liquidation value). However, a company’s substantive over-indebtedness ( materielle Überschuldung ) per se is not sufficient to trigger the obligation to file for the commencement of insolvency proceedings; moreover, it is necessary that the entity does not have a positive “going concern” prognosis (see 7.1 Duties of Direc- tors ). A debtor is obliged to file for insolvency with the com - petent court, without undue delay, once its financial situation meets the statutory criteria for insolvency. This must be no later than 60 days after entering into the status of insolvency. If insolvency is only imminent, either restructuring pro - ceedings under the Insolvency Act or reorganisation proceedings under the new Restructuring Act may be initiated at the debtor’s request. In such a sce - nario, there is a “parallel world” in respect of possible regimes that may be selected by a debtor. Apart from a company’s legal representatives, any creditor is entitled to file for insolvency in the form of liquidation (bankruptcy) proceedings, provided such creditor has a claim (irrespective of its maturity date) against the debtor. Proceedings in the form of reor - ganisation proceedings, however, can only be initiated at the debtor’s initiative. As outlined in 1.2 Types of Insolvency , the Restructur - ing Act provides a new pre-insolvency restructuring regime for Austria. Application The prerequisite for the commencement of restruc - turing proceedings under the Restructuring Act is application by the debtor as well as the “probable insolvency” of the debtor, which must be stated in the application. The application for the initiation of restructuring proceedings must be accompanied by a restructuring plan or, at least, a restructuring concept.
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