AUSTRIA Trends and Developments Contributed by: Markus Fellner, Florian Kranebitter, Elisabeth Fischer-Schwarz and Florian Henöckl, Fellner Wratzfeld & Partners
special restructuring and reorganisation instruments. At this point, viable alternatives include: • the restructuring trust, which is notably used in the event of a crisis-related lack of free collateral; or • the debt-equity swap, by which liabilities can be converted into shares in a company. In the end, a successful restructuring is largely dependent on the company being immediately aware of the effects and counteracting further negative developments. Depending on the intensity of the cri - sis, negotiations must be held with the stakeholders concerned and a viable restructuring concept must be drawn up at an appropriately early point in time. Insolvency and Restructuring Procedures to Cope With the Latest Crisis Factors In Austria, the following four types of restructuring and insolvency procedures are available for business entities. Reorganisation proceedings with debtor-in- possession The main focus of these proceedings lies in the con - tinuation of the debtor’s business (or parts thereof). The debtor generally retains control over the estate’s assets, subject to certain restrictions, and is only mon - itored by a court-appointed insolvency administrator. Reorganisation proceedings without debtor-in- possession The continuation of the debtor’s business is also the main focus of these proceedings. However, the insol - vency administrator takes control. Liquidation (bankruptcy) proceedings The court-appointed insolvency administrator takes control of the task of selling the estate’s assets at a maximum value, with the proceeds being paid out to the creditors. Preventative restructuring framework In addition to the foregoing three types of insolvency proceedings and following the EU Directive on restruc - turing and insolvency (Directive (EU) 2019/1023), com - panies are able to restructure through a preventative
restructuring framework ( Restrukturierungsverfahren ) under the new Austrian Restructuring Act. The Austrian Restructuring Act In Austria, the Restructuring Act came into force at a comparably late stage ‒ ie, at the end of July 2021 – and there has only been one successfully completed restructuring proceeding to date. Future economic development will show to what extent this restructur - ing tool will be used, or whether it will continue to be applied only in selected individual cases. The aforementioned restructuring proceedings (eg, the preventative restructuring mechanism) should enable debtors to continue their business (or parts thereof) in spite of financial difficulties. The debtor is only monitored by court or, in specific cases, by a court-appointed restructuring administrator. The Restructuring Act is, in principle, applicable to all entrepreneurs (including sole proprietors). Cer - tain exemptions apply ‒ for example, credit institu - tions, insurance companies and the public sector are excluded from the scope of this restructuring regime, pursuant to Section 1 paragraph 1 of the Austrian Banking Act. The restructuring procedure is available to companies in the event of “likelihood of insolvency” (Section 6 of the Austrian Restructuring Act). This is the case if: • insolvency is imminent; or • the equity ratio falls below 8% and the notional debt repayment period exceeds 15 years. The restructuring mechanism must be initiated at the request of the debtor, and is intended to enable the debtor to avert insolvency and ensure the viability of its company ( Sicherstellung der Bestandfähigkeit ). The right to apply for the initiation of restructuring pro - ceedings is only available to the debtor and not to third parties. As with the obligation to file for insolvency in the case of illiquidity or over-indebtedness, the debtor must take restructuring measures (ie, file for restructuring) if there is a likelihood of insolvency. If the entity faces a likelihood of insolvency and the legal representatives
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