LIECHTENSTEIN Law and Practice Contributed by: Bernhard Rankl, Nicolai Binkert and Alexander Appel, Schurti Partners Attorneys at Law Ltd
lateral (such as cash, securities, or book-entry secu- rities) provided under a collateral agreement can be realised or applied in line with the netting provisions, without being stayed, unwound, or otherwise impaired by insolvency rules. Liechtenstein law also provides for a claw-back and avoidance regime, under which the insolvency admin- istrator may set aside certain legal acts detrimental to the insolvency estate and to the interests of the debtor’s creditors that were performed within a certain period prior to the opening of the insolvency proceed- ings. 7.2 Waterfall of Payments The Liechtenstein Insolvency Act ( Insolvenzordnung ) provides for a mandatory waterfall of claims as fol- lows: • claims of segregation ( Aussonderungsansprüche – eg, assets in the insolvency estate that are owned by third parties) and claims of separation ( Absonderungsansprüche – eg, creditors that are secured by a pledge or security assignment); • estate claims ( Masseforderung ), such as the costs of the insolvency proceedings itself and contrac- tual arrangement made by the insolvency adminis- trator; and • claims of unsecured creditors. 7.3 Length of Insolvency Process and Recoveries The length of the proceedings depends largely on the complexity of the company’s business and the num- ber of creditors, and can range from one to several years. Insolvency proceedings in Liechtenstein often involve creditors from several different jurisdictions, which further slows down the proceedings. The full value of the company is seldom fully recovered dur- ing insolvency. However, there have been instances where the recovery quota has exceeded 50% of the owed amounts. 7.4 Rescue or Reorganisation Procedures Other Than Insolvency Liechtenstein reformed its insolvency law in 2021 to provide a regime more focused on the survival and restructuring of a company rather than its liquidation.
The Liechtenstein Insolvency Act ( Insolvenzordnung ) distinguishes between two types of proceedings, namely insolvency proceedings ( Insolvenzverfahren ) aiming at the liquidation of the company’s assets and restructuring proceedings ( Sanierungsverfahren ) focusing on the continuation of the company. The latter has two sub-variants, namely restructuring proceed- ings with self-administration ( Sanierungsverfahren mit Eigenverwaltung ) and restructuring proceedings without self-administration ( Sanierungsverfahren ohne Eigenverwaltung ). Restructuring Proceedings With Self- Administration Restructuring proceedings where the debtor retains control of the company, therefore with self-admin- istration, can only be opened and approved where the debtor itself has filed for insolvency. This sub- variant of restructuring proceedings is not available to the debtor if insolvency proceedings have already been opened. In addition to the insolvency petition, the debtor has to submit a restructuring plan ( Sani- erungsplan ). In the restructuring plan, the debtor has to offer to its creditors a minimum quota of 20% to be paid within the next two years. The restructuring plan must then be accepted by the creditors with a double majority – ie, the majority of the votes of the creditors present at the court hearing, which must represent more than 50% of the total amount of the insolvency claims of the creditors present at the hearing. Pro- vided that the debtor complies with the terms of the restructuring plan and meets its payment obligations in full, the residual debt is discharged. If the debtor fails to comply with its duties under the restructuring plan, regular insolvency proceedings are opened. Restructuring Proceedings Without Self- Administration In proceedings without self-administration, the debtor is deprived of its control over the company and the insolvency court appoints a restructuring administra- tion to manage the company’s affairs. Unlike restruc- turing proceedings with self-administration, restruc- turing proceedings without self-administration may also be commenced after insolvency proceedings have already been opened. The debtor has then to submit a restructuring plan offering its creditors a minimum quota of 20% to be paid within the next
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