AUSTRIA Trends and Developments Contributed by: Markus Fellner, Florian Kranebitter, Elisabeth Fischer-Schwarz and Florian Henöckl, Fellner Wratzfeld & Partners
Now, around three years later, the EU Council has adopted its position (known as a general approach) on the EU Directive and the draft European Parlia - ment Legislative Resolution on the proposal is in place. However, the proposed Directive is not yet implemented. Avoidance actions Articles 4 to 12 of the proposed EU Directive deal with common rules for avoidance actions to protect the value of the insolvency estate for creditors. Prefer - ences under the proposed EU Directive and legal acts favouring a creditor or a group of creditors by way of satisfaction, security or otherwise may be declared void if they were perfected: • within three months prior to the filing of the petition to open insolvency proceedings, if the debtor was unable to pay its due debts; or • after the petition to open insolvency proceedings was filed (Article 6 paragraph 1 of the proposed EU Directive). In the case of so-called congruent coverage (Recital 8), which is where a creditor’s due claim has been sat - isfied or secured in the manner owed, a legal act can only be declared invalid if the creditor knew or should have known that the debtor was unable to pay its due debts or that a petition for the opening of insolvency proceedings had been filed. In the case of related par - ties, the creditor’s knowledge is presumed (Article 6 paragraph 2 of the proposed EU Directive). By and large, the requirements of Article 6 of the pro - posed EU Directive already seem to be covered by Sections 30 and 31 of the Austrian Insolvency Act. Legal acts against no or a manifestly inadequate consideration Pursuant to Article 7 of the proposed EU Directive, legal acts without consideration or with consideration that is manifestly inadequate may be declared invalid if they have been completed within one year prior to the filing of the petition for commencement of insol - vency proceedings or after the filing of the petition. This does not apply to gifts and donations of symbolic value. Again, this provision is likely already sufficiently
covered by domestic law ‒ specifically, by Section 29 of the Austrian Insolvency Act. Legal acts intentionally detrimental to creditors Article 8 paragraph 1 provides for the avoidance of legal acts if: • such acts were performed within a period of four years prior to the filing of the application; and • the other party to the legal act knew or should have known that the debtor intended to cause prejudice to the creditors as a whole. Pursuant to Section 28 paragraph 1 of the Austrian Insolvency Act, legal acts may be challenged: • up to ten years prior to the commencement of insolvency proceedings if the other party knew that the debtor acted with the intention to disadvantage its creditors; or • up to two years prior to the commencement of insolvency proceedings if the other party did not know of this intention, but should have known. The latter point would lead to the requirement to amend Austrian law. Pre-pack proceedings Articles 19 to 35 of the proposed EU Directive contain detailed provisions on a restructuring instrument that does not yet exist in this form in Austria. This instru - ment is based on the assumption that more value can be achieved in liquidation if the company or parts thereof are sold as a going concern than in piece - meal liquidation. The aim is to prepare the sale of the company before the formal opening of the insolvency proceedings and to realise it shortly after the opening. The pre-pack procedure consists of two stages. In the preparation stage, the sale process must be started and implemented under the supervision of a court- appointed supervisor (“monitor”) (Articles 22 to 24 of the proposed EU Directive). Subsequently, in the liquidation stage, the sale is to be implemented after approval by the court (Articles 25 to 29 of the pro - posed EU Directive).
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