6. Enforcement

Contributed by: Markus Fellner, Elisabeth Fischer-Schwarz, Veronika Seronova and Mario Burger, Fellner Wratzfeld & Partners

of creditors so that internal distribution could be effected as per the agreed terms (and outside the insolvency proceedings).

6.1 Enforcement of Collateral by Secured Lenders

The enforcement of contractual security rights varies significantly depending on the type of specific securities and any contractual arrangements in place. Although statutory law provides for enforcement of security rights through the courts as a general principle, deviations by way of contractual arrangements between the parties are permissible.

Regarding the most relevant types of security, the following statutory rules and market practice observations apply.

Share Pledges In the case of shares in a GmbH, it is common market practice to agree on out-of-court enforcement, which entails information to the pledgor, a valuation of the shares and subsequent disposal to the best bidder. In principle, the same applies to shares in an AG; however, if these have a market or stock exchange price, they must be sold at such price without public auction.

Mortgages In principle, mortgages must be enforced through court enforcement proceedings, which require a public auction of real property, and the involvement of the court is prone to cause delays with the enforcement procedure. Receivables In the case of receivables, there is no specific enforcement procedure; rather, the pledgee will be entitled to directly claim payment from the debtor.

Guarantees/Suretyship For this type of “personal security”, there is no specific type of enforcement procedure. Rather, depending on the terms and conditions agreed in the relevant security arrangement (eg, “first demand guarantees”), payment may be requested directly from the security provider (guarantor).

Movables It is common market practice that the court enforcement procedure provided for under statutory law is modified to permit out-of-court enforcement. Movable goods may be sold at public auction following notification to the pledgor and a cooling-off period of one month. Disposal without such auction is permissible and, in the case of securities, mandatory if a stock exchange or market price exists (see the above-mentioned information about share pledges).

The same principles would apply to the enforcement of security rights over intellectual property rights.

6.2 Foreign Law and Jurisdiction

Austrian law and conflict of laws rules generally permit the choice of a foreign law as the governing law of a contract, even if that contract is to be enforced in Austria. In terms of market practice, this would frequently apply to loan agreements governed by German or English law.

Restrictions apply, however, to the granting and perfection of security rights, which – depending on the type of security – is governed by Aus-