Restructuring
EDITION 18
Contributing Editor
Peter K Newman
Skadden Arps Slate Meagher & Flom LLP
In-Depth: Restructuring (formerly The Restructuring Review) is an insightful guide to help general counsel, government agencies and private practice lawyers understand the prevailing conditions in the global restructuring market. It examines the most signijcant recent legal and commercial developments and provides an overview of the restructuring and insolvency legal framework in each Burisdiction.
Generated: July 16, 2025
The information contained in this report is indicative only. Law usiness Research is not responsible for any actions (or lack thereof) taken as a result of relying on or in any way using information contained in this report and in no event shall be liable for any damages resulting from reliance on or use of this information. Copyright 0665 - 060 Law usiness Research
Austria
Markus Fellner, Florian Henöckl and Elisabeth Fischer-Schwarz
Fellner Wratzfeld & Partner
Summary
INTRODUCTION
YEAR IN REVIEW
LEGAL FRAMEWORK
SIGNIFICANT TRANSACTIONS, KEY DEVELOPMENTS AND MOST ACTIVE INDUSTRIES
INTERNATIONAL
OUTLOOK AND CONCLUSIONS
ENDNOTES
Introduction
In Austria, there are two basic approaches to restructuring and insolvency: (1) restructuring by way of out-of-court restructuring or in reorganisation proceedings (2) and liquidation in an out-of-court liquidation or in bankruptcy proceedings.
Out-of-court restructuring or liquidation is carried out on the basis of the general legal framework provided by Austrian law as well as international standards that have developed in this area (such as the INSOL Principles).[1] For restructuring or bankruptcy proceedings (as sub-forms of insolvency proceedings), the Austrian Insolvency Act provides for special legal regulations. Another option is restructuring in restructuring proceedings under the Austrian Restructuring Act, which is kind of a hybrid form of in-court and out-of-court restructuring.
This current approach to restructuring and insolvency has its origins in Roman law.[2] In the late Middle Ages and modern times, bankruptcy proceedings consisted of various individual proceedings. The Austrian Bankruptcy Act from 1868 was based on French law and was heavily focused on the procedure and the community of creditors. The AnfG 1884 introduced explicit provisions on insolvency avoidance. The Bankruptcy Act, the Composition Act and the Contestation Act simpli9ed the procedure and reduced the number of classes of bankruptcy creditors. Following several reforms, the composition procedure was abolished, the Bankruptcy Act was renamed the Insolvency Act and forced composition was replaced by reorganisation plans.[3]
This historical development also reUects the ongoing (political) efforts to create an increasingly restructuring-friendly insolvency law.
Year in review
Overview of restructuring and insolvency activity
In the past year, there has been a further signi9cant increase in the demand for restructuring and a corresponding rise in the number of insolvency proceedings opened. The 9rst signs of an initial easing of the economic situation following the covid-1H pandemic, the war in /kraine and the war between Israel and Kamas are currently being threatened by an upcoming trade war.
Companies are currently burdened by high energy costs, the shortage of skilled workers and a declining order situation. This particularly affects the retail, construction and accommodationVgastronomy sectors.
The latest analysis by 7S01835 (an Austrian association for the protection of creditors) shows that 22 per cent more companies were affected by insolvency in 2524 compared with the previous year. Preliminary liabilities have increased by DE per cent. The number of employees affected also increased by 2E per cent, while the number of creditors rose by 15 per cent.[4]
Recent legal developments
In 'ecember 2522, the juropean /nion published a proposal for a directive harmonising certain aspects of (material) insolvency law (the proposed directive).
The proposed directive lays down common rules on (1) avoidance actions, (2) the tracing of assets belonging to the insolvency estate, (D) pre-pack proceedings, (4) the duty of directors to submit a request for the opening of insolvency proceedings, (E) simpli9ed winding-up proceedings for micro enterprises, (6) creditors; committees and (3) the drawing up of a key information fact sheet by Member States on certain elements of their national law on insolvency proceedings.[5]
In respect of avoidance actions, legal acts prior to the opening of insolvency proceedings to the detriment of the general body of creditors can be declared void.[6] The proposed directive provides three types of avoidance, namely avoidance due to preferential treatment, avoidance due to lack of or inadequate consideration and avoidance due to legal acts that intentionally disadvantage creditors.
With regard to the obligation of managing directors to 9le for insolvency, the proposed directive stipulates that the management must submit a request for the opening of insolvency proceedings within three months of becoming aware or having reasonably been expected to be aware that the respective legal entity is insolvent.[7]
The implementation of pre-pack proceedings is also part of the proposed directive. Pre-pack proceedings are a special form of sales process. This sales process is divided into two subsequent phases: (1) the preparation phase and (2) the liquidation phase. The preparation phase aims to 9nd an appropriate buyer for the debtor;s business or part thereof before the formal opening of the insolvency proceedings. The liquidation phase aims to approve and execute the sale of the debtor;s business or part thereof and to distribute the proceeds to the creditors shortly after opening the formal insolvency proceedings.[8]
In Austria, the proposed changes have already been largely implemented. The only ma@or innovation is the pre-pack proceedings. The sales process, which is already provided for in Austrian insolvency law and takes place after the formal opening of insolvency proceedings, is basically already well structured. Nevertheless, a sales process that is started before the opening of insolvency proceedings could have the potential to lead to even higher sales proceeds. In Austria, in order to be able to use this restructuring instrument effectively, it will be crucial that the buyer;s liability for debts and the liabilities of the seller are excluded accordingly.[9]
Legal framework
Formal insolvency proceedings in Austria are distinguished between reorganisation proceedings and bankruptcy proceedings. The reorganisation proceedings can be further subdivided into reorganisation proceedings with self-administration and reorganisation proceedings without self-administration.
The following requirements must be met for insolvency proceedings to be opened: (1) an application for the opening of insolvency proceedings (2) cost-covering assets (D) a reason for the opening of insolvency proceedings (illiquidity or over-indebtedness) and (4) an insolvency claim or a claim arising from an equity-substituting performance. In order for the insolvency proceedings to be opened as restructuring proceedings, a reorganisation plan must be submitted.
Insolvency proceedings may be opened only upon application. Bankruptcy proceedings can be initiated by both the debtor and the creditors. Reorganisation proceedings can be initiated only at the request of the debtor.
The prerequisite for all proceedings is that illiquidity or over-indebtedness (as a reason for opening insolvency proceedings only for legal entities with limited liability) has occurred. Illiquidity pursuant to Section 66 of the Insolvency Act occurs if the debtor is not able to pay all its debts as they fall due and is unlikely to be able to obtain the necessary means of payment in the near future (within three months).[10] Over-indebtedness according to Section 63 of the Insolvency Act means that the liabilities must exceed the assets (calculatory over-indebtedness) and a positive going-concern prognosis is not feasible.[11]
The going-concern prognosis serves to assess whether or not the company more likely than not will be able to ful9l its payment obligations in the future.[12]
Section 6H, Paragraph 2 of the Insolvency Act stipulates the debtor;s obligation to 9le for insolvency. According to this Section, an application to open insolvency proceedings must be 9led without undue delay, but at the latest within 65 days of the date on which the conditions for opening insolvency proceedings are met.
The debtor itself does not have to prove that it is insolvent. If the application for bankruptcy proceedings is 9led by a creditor, they have to certify that the debtor is insolvent and that they have an insolvency claim or a claim arising from an equity-substituting performance.
The court has to examine whether there are su cient cost-covering assets to cover the minimum costs of the insolvency proceedings, including, in particular, the insolvency administrator;s fee. If the court;s examination shows that there are insu cient assets to cover the costs, an advance on costs can be paid. If the debtor is a legal entity, the organisational representatives and ma@ority shareholders are obliged to advance on costs. Advances on costs can be reclaimed from the insolvency estate if the costs of the proceedings are covered. If there are not enough assets to cover these costs, the insolvency application has to be dismissed.
Also in reorganisation proceedings, an application to open proceedings is required. Kowever, the key difference is that in this case only the debtor can 9le an application. Reorganisation proceedings are aimed at concluding a reorganisation plan. Therefore, the presentation of such a plan is a mandatory prerequisite. The reorganisation proceedings can take place with or without a debtor-in-possession regime. In order for the debtor to retain possession, it must offer its creditors in the reorganisation plan a minimum quota of D5 per cent to be paid within two years. The application for reorganisation proceedings with the debtor in possession further has to include a detailed disclosure of assets, an up-to-date and complete overview of assets and liabilities listing each item of property and its value and the liabilities with each amount owned (status), a forecast of the anticipated income and expenditure for the coming H5 days and thereby showing the funding of the necessary means with which payments shall be met for carrying on with the business and
for claims against the estate (9nancial plan), a list of all those to be noti9ed (in particular creditors), information on how the sums required to ful9l the reorganisation plan shall be funded, information on the number of employees and on their representative bodies within the corporation and information on the necessary reorganisation measures to ful9l the reorganisation plan especially 9nancing measures. The debtor is provided with an administrator who has monitoring duties. If the requirements for the debtor-in-possession regime no longer apply, the proceedings must be continued as either reorganisation proceedings without a debtor-in-possession regime or bankruptcy proceedings. For reorganisation proceedings without a debtor-in-possession regime, the quota offered must be at least 25 per cent to be paid within two years. In the case of reorganisation proceedings, a lock-up period applies. 'uring this lock-up period, the debtor;s business cannot be realised without the debtor;s consent. Kowever, this period ends if the plan of reorganisation is not accepted by the creditors within H5 days.
With the opening of insolvency proceedings, certain legal effects are associated. All assets sub@ect to execution that belong to the debtor at that time or that the debtor acquires during the insolvency proceedings (insolvency estate) are withdrawn from the debtor;s free disposal. The debtor is, furthermore, sub@ect to certain obligations to provide information and cooperate with the insolvency administrator. Assets that do not belong to the debtor or do not or do not fully belong to the debtor are not affected by the opening of insolvency proceedings. Assets owned by third parties constitute a right to segregation. Assets that are encumbered with security interests, such as liens, in particular, constitute a right to preferential satisfaction in favour of the respective creditor.
In the 9rst phase of the proceedings, the future of the company must be considered. A decision on this is made at the report hearing. The report hearing has to take place no later than H5 days after the opening of the insolvency proceedings.
The creditors must register their insolvency claims. Registered insolvency claims can be acknowledged or contested at the examination hearing. Insolvency claims may be contested by the insolvency administrator or by other creditors whose claims have been acknowledged. Creditors whose claim has been acknowledged are entitled to participate in a reorganisation plan quota or in the distribution of the realisation proceeds. The consequence of a contested claim is that the creditor, if they want to obtain an acknowledgement and participate in distributions, must 9le an action for the lawful existence of their claim.
In reorganisation proceedings, for approval of the reorganisation plan it is necessary that (1) the ma@ority of the insolvency creditors with voting rights present at the reorganisation plan hearing approve the reorganisation plan and that (2) the total sum of the claims of the insolvency creditors approving add up to at least half of the total sum of the claims of the insolvency creditors with voting rights present at the hearing. If the plan is approved by the insolvency creditors, it has to be con9rmed by the insolvency court. The reorganisation proceeedings are terminated once the con9rmation becomes legally binding. The debtor obtains its right of disposal back. Kowever, if the reorganisation attempt is unsuccessful, the proceedings must be continued as bankruptcy proceedings.
In insolvency proceedings (both in reorganisation proceedings and bankruptcy proceedings), the debtor;s entire company or parts thereof can be sold. The sale can be structured either as an asset deal or as a share deal. A ;hive-off vehicle; can be set up for
the purchase. As a result, viable parts of the company can be detached from the previous legal entity and continued.[13]
In bankruptcy proceedings, the insolvency administrator realises the insolvency estate. Realisation takes place either by out-of-court sale or by @udicial auction. The proceeds of the realisation must then be distributed to the creditors. After the distribution, the insolvency proceedings shall be declared terminated. Reorganisation proceedings are always aimed at concluding a reorganisation plan. The reorganisation proceedings are terminated with the legally binding con9rmation of the reorganisation plan. The quotas to be paid as part of the reorganisation plan are generally paid after the insolvency proceedings have already been terminated.
Restructuring proceedings under the ReO presuppose a ;likelihood of insolvency;. An insolvency is likely if the debtor;s continued existence as a going concern would be @eopardised without restructuring, in particular in the event of imminent insolvency, which is assumed if the equity ratio falls below 8 per cent and the notional debt repayment period exceeds 1E years. In principle, the proceedings take place before a possible insolvency. Proceedings under the ReO are not intended for already insolvent debtors. The debtor retains self-administration over its company and does not have to offer a minimum quota. Furthermore, no public announcement is required. In some cases, a restructuring o cer must be appointed to support the debtor. The debtor has to submit a restructuring plan, including, in particular, the proposed restructuring measures and the creditors affected (including classi9cation into creditor classes). The restructuring plan must be voted on at the restructuring plan hearing. The plan is deemed to have been adopted if the ma@ority of the affected creditors and at least 3E per cent of the capital ma@ority of each creditor class vote in favour. The restructuring plan then has to be con9rmed by court.[14]
Alternatively, there is also the option of restructuring in accordance with the Austria Business Reorganisation Act. Kowever, this Act was not adopted in practice and has remained ;dead law;.
A more informal method would be an out-of-court restructuring based on private law agreements. With such a restructuring agreement, either a shareholder-led solution or a lender-led solution can be implemented. In the 9rst variant, restructuring is essentially achieved through 9nancial contributions from the shareholders, whereas the second variant aims primarily at achieving a haircut (discharge of debt), including deferrals and the sale (of parts) of the company. These measures, which provide for the relief of the debtor on the one hand and the reduction of debts through repayment on the other, are regularly combined with special restructuring measures such as a debt-equity swap or a restructuring trust.[15]
Finally, the debt settlement procedure for private individuals should also be mentioned and brieUy explained. In this case, too, an application by the debtor or a creditor is required 9rst. Furthermore, there must be su cient assets to cover the costs, unless the debtor has submitted a precise list of assets and a payment plan. A payment plan does not have to provide for a minimum quota and always presupposes the prior realisation of the debtor;s assets. The payment period is a maximum of three years. In the event that negotiations on a payment plan fail, there is still the option of skimming proceedings.
Signipcant transactions, key develo ments and most active industries
Both in the area of out-of-court restructuring and in-court restructuring have been a large number of transactions. The real estate sector and the industrial sector have run into further massive di culties.
Particularly in out-of-court restructuring, based on the differentiation between lender-led restructuring and shareholder-led restructuring, various new restructuring instruments have been developed, and existing restructuring instruments have proven their worth.
One restructuring instrument that has both proven itself in this context and that continues to bring forth new elements is the debt-equity swap. In the tense relationship between existing owners and potential new owners, a restructuring trust is also constantly gaining popularity as a restructuring instrument.[16]
Kowever, there are currently and will continue to be ma@or distressed transactions in both the real estate and the industrial sectors. In the real estate sector, larger transactions are still rare at present as the real estate market is expected to recover. Therefore, a large number of different stabilisation measures are currently required in this area. In the industrial sector, on the other hand, the 9rst ma@or transactions are already taking place as some companies have to consolidate.
International
In Austria, the jC Insolvency Regulation (the jC Regulation) is an integral part of Austrian insolvency law.
The jC Regulation is applicable if the centre of main interest of the debtor is located in an j/ Member State. The jC Regulation includes proceedings due to the occurrence of material insolvency as well as preliminary proceedings under insolvency law. According to Article 3 of the jC Regulation, the law of the Member State in which insolvency proceedings are opened applies, although special provisions also apply, for example in the case of employment contracts or retention of title. The jC Regulation provides that the opening of insolvency proceedings in one Member State is automatically recognised in all others. This does not occur if the recognition is contrary to the ordre public of the respective Member State. If no territorial or secondary proceedings have been opened in the recognising Member State, the insolvency proceedings have the same effect there as in the country in which they were opened. It should be noted that territorially restricted proceedings can also be conducted. The precondition is that the debtor has a branch in this Member State. A distinction is made in the designation as follows: if no main proceedings are pending, these are referred to as particular proceedings otherwise, they are referred to as secondary proceedings. These proceedings are always conducted in accordance with the national law of the Member State in which the proceedings were opened.
The jC Regulation also provides for a cooperation mechanism for insolvency administrators and insolvency courts for group insolvencies. In any case, this cooperation
mechanism must be questioned, as the insolvency of the Signa Group has shown that it could not be applied effectively due to strong individual interests in the respective insolvency proceedings and that no cooperation mechanism is provided for the creditors, who also have similar interests in central points.
The /nited Nations Commission on International Trade Law (/NCITRAL) Model Law on Cross-Border Insolvency is largely overridden by the jC Regulation, which contains clearer, but also more, regulations.
Outlook and conclusions
The number of restructuring and insolvency cases continues to rise as companies are faced with ever more economic challenges (most recently due to the upcoming tariff war).
A constructive, essentially restructuring-oriented restructuring culture is therefore still required and is to be constantly adapted to the economic circumstances. In this respect, the constant reform efforts are highly welcome, but must always be critically questioned.
Out-of-court restructuring, even in this highly volatile environment, has further proven itself, as it represents an extremely Uexible instrument for restructuring companies.
All in all, Austrian restructuring and insolvency law is well equipped, although lessons should be learnt from recent developments in certain aspects of restructuring and insolvency law, and the respective standards should be constantly adapted to meet new challenges.
Endnotes
1 INSOL International, Statement of Principles for a Global Approach to Multi-Creditor Workouts (2000). Back to section
2 Nunner-Krautgasser, Schuld, Vermögenshaftung und Insolvenz (2007) 206. Back to section
3 Kodek, Insolvenzrecht (2022) Rz 37 ff; Kodek in Koller/Lovrek/Spitzer (Hrsg), Insolvency Act (2022) Section 1 Rz 11 ff. Back to section
4 ' Insolvenzstatistik 2024 final | KSV1870 . Back to section
5 Article 2 proposed directive. Back to section
6 Article 3 proposed directive. Back to section
7 Article 36 proposed directive. Back to section
8 Article 19 proposed directive. Back to section
9 Article 28 proposed directive. Back to section
10 Austrian Supreme Court, 19 January 2011, 3 Ob 99/10w. Back to section
11 Austrian Supreme Court, 3 December 1986, 1 Ob 655/86. Back to section
12 Schumacher in Koller/Lovrek/Spitzer (Hrsg), Insolvency Act (2022) Section 67 Rz 7 ff. Back to section
13 Reisch in Lichtkoppler/Reisch, Handbuch Unternehmenssanierung Rz 3.1 ff. Back to section
14 Fellner/Henöckl, Restructuring Booklet (2023) 3 ff. Back to section
15 Fellner/Henöckl, 'Die außergerichtliche Sanierungstreuhand', ÖBA 2022 (584) 584 ff. Back to section
16 Fellner/Henöckl, 'Die außergerichtliche Sanierungstreuhand', ÖBA 2022 (584) 584. Back to section
Markus Fellner
markus.fellner fwp.at Florian Henöckl Uorian.henoeckl fwp.at
Elisabeth Fischer-Schwarz elisabeth.9scher-schwarz fwp.at
Fellner Wratzfeld & Partner
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