AUSTRIA Law and Practice Contributed by: Philipp Baubin and Stefan Weber, Weber & Co
“crisis” is ongoing. A debtor is considered to be in “crisis” if it: • is unable to pay its debt ( zahlungsunfähig ) within the meaning of Section 66 of the Aus- trian Insolvency Act ( Insolvenzordnung or IO); • is over-indebted ( überschuldet ) within the meaning of Section 67 of the IO; or • has thin-capitalisation (an equity ratio of less than 8% and a fictional debt redemption period longer than 15 years). 7.2 Claw-Back Risk In the context of acquisition finance in Austria, claw back rules are an important aspect of insol- vency law that directly impact the structuring and risk assessment of LBOs and other acquisi- tion finance transactions. These rules are primar- ily designed to protect the interests of creditors by preventing transactions that unjustly deplete the assets of a company to the detriment of its creditors, particularly in the period leading up to insolvency. Under Austrian insolvency law (primarily governed by the IO, certain transac- tions made prior to the opening of insolvency proceedings may be contested and reversed by the insolvency administrator. These claw back provisions aim to avoid preferential or fraudulent transfers made to the detriment of the debtor’s creditors. Basically, if an agreement is not mutually fulfilled on or before the date insolvency proceedings started, the insolvency administrator can choose to direct performance or non-performance of the agreement. Certain transactions can, within defined periods of time prior to the opening of the insolvency proceedings, be declared void where a success- ful challenge is made by the administrator either by legal challenge or defence under the IA. In
summary, the reasons for voidability are as fol - lows. • Discriminatory intent ( Benachteiligungsabsi - cht ). • Squandering of assets ( Vermögensver- schleuderung ). • Donations ( Schenkung ). • Preferential treatment of creditors ( Begünsti - gungsabsicht ). • Knowledge of insolvency ( Kenntnis der Zahl- ungsunfähigkeit ). In bankruptcy proceedings ( Konkursverfahren ) as well as in reorganisation proceedings with- out a debtor-in-possession ( Sanierungsver- fahren ohne Eigenverwaltung ), only the insol - vency administrator is authorised to represent the debtor. Any disposition by the debtor of the company’s assets after that date is therefore void. In reorganisation proceedings with a debtor-in- possession ( Sanierungsverfahren in Eigenver - waltung ), the debtor is entitled to carry on ordi- nary business activities but needs the approval of the reorganisation administrator for extraor- dinary business activities. Any impermissible divestment of the debtor’s property must be repaid to the insolvency estate. Against this background, one of the most criti- cal issues in connection with claw back rules in acquisition finance transactions is the grant- ing of transaction security by an Austrian target. In order to protect the creditors of the Austrian target, the Austrian guarantor/security provider must receive adequate consideration or ben- efit from the overall transaction. The security may otherwise be qualified as detrimental to its creditors and therefore subject to claw back. The
56
CHAMBERS.COM
Powered by FlippingBook