Implementation of the EU-restructuring directive in Austria
The COVID-19-related crisis situation has created massive liquidity difficulties for numerous companies. The longer this situation lasts, the more difficult it is to overcome the associated financial and economic challenges of the companies concerned. At the beginning of the COVID-19 pandemic, the Federal Government had already created measures to procure liquidity and ensure the solvency of companies.
At the same time, several special provisions under insolvency law have already been introduced, which have ensured that large insolvencies have not yet occurred. For example, the deadline for the mandatory insolvency application was extended from previously 60 to 120 days due to the reason for the opening of the insolvency proceedings. This deadline extension only applies to those debtors who have entered the economic crisis situation due to the COVID-19 pandemic. The extension of the deadline may only be used for serious, promising restructuring attempts, i.e., there must be a realistic chance to eliminate the reason for opening the insolvency proceedings within the (extended) deadline. This requires a corresponding prognosis which must be evaluated on an ongoing basis. The insolvency application obligation due to insolvency over-indebtedness and the aforementioned deferrals of taxes and social security contributions were re-enacted, now having been recently suspended until 31 March 2021. To date, no further deadline extension has been announced by the legislature.
Parallel to the changes in the law on insolvency law caused by COVID-19, implementation of the EU restructuring directive by Austrian legislation is now imminent. The draft law is still in political voting. However, a timely submission of a ministerial draft and subsequent timely implementation in the Austrian legal system is to be expected. Austrian legislation intends to implement the provisions of the directive within the framework of a restructuring regulation to be newly created. In the future, the latter should grant debtors the possibility to apply for the opening of a judicial, but not public, restructuring procedure upstream of an insolvency, even if there is a “probable insolvency”. According to the current level of information, it can be assumed that the previous reorganisation key figures from the Corporate Reorganisation Act, namely an equity ratio of less than 8% and a fictitious debt repayment period of more than 15 years, will be used for the assessment of the existence of a probable insolvency that jeopardises the existence of the debtor without restructuring.
In the course of the restructuring procedure, the debtor is to be granted largely self-administration via his company and assets. This is under the supervision of a restructuring officer and the insolvency court. For a limited period of time, there should be the possibility of using a moratorium in the form of an enforcement or insolvency block. A restructuring plan should be submitted to the creditors. A minimum ratio to be offered to the creditors with regard to their claims should not be necessary. The introduction of different creditor classes provided for in the directive, which diverge both with regard to the order of their satisfaction and with regard to the respective voting relationships relating to the restructuring plan, is alien to Austrian insolvency law. This should also be regulated in the new law.
Autor: Nina Pichler