I INSOLVENCY LAW, POLICY AND PROCEDURE
i Statutory framework and substantive law
Insolvency law in Austria is primarily regulated by the Insolvency Act,2 which came into force in 2010 and provides for three different types of insolvency proceedings for businesses, namely:
- a bankruptcy proceedings;
- b restructuring proceedings where a bankruptcy administrator is appointed (also referred to as restructuring proceedings without debtor-in-possession regime); and
- c restructuring proceedings where the debtor retains the right to self-administration under the supervision of a restructuring administrator.
While bankruptcy proceedings usually lead to a realisation or winding up of the debtor’s estate and the distribution of the proceeds of its assets among its creditors, the aim of restructuring proceedings is to enable the debtor to continue its business and to be discharged from its debts.
With regard to private individuals, special provisions apply; the latter are not dealt with in the following.
Main effects of insolvency proceedings
Generally, once insolvency proceedings have been opened, legal actions or enforcement measures concerning the insolvent estate cannot be initiated or continued against the debtor. An exception to this are legal proceedings that do not affect the debtor’s estate, proceedings relating to claims disputed by the insolvency administrator and legal proceedings resulting from transactions concluded after the commencement of the proceedings.
From the date of the commencement of insolvency proceedings, no new security rights may be established with respect to assets that form part of the insolvent estate.
The commencement of insolvency proceedings does not automatically terminate existing contracts. The insolvency administrator may choose whether to fulfil any current bilateral contracts that were agreed to between the parties but not fully satisfied by both parties prior to the commencement of insolvency proceedings. Special regimes apply to lease and employment contracts.
Contractual agreements that grant a party the right to terminate or to withdraw from a contract in case of the insolvency of the other party are void, excepting contracts for certain financial instruments such as derivative contracts.
Additionally, certain restrictions as regards contractual termination rights exist, if the termination of a contract could endanger the continuation of the debtor’s business. Legal acts and transactions carried out within certain time periods prior to the opening of the insolvency proceedings may be challenged by the insolvency administrator.
Creditor’s claims in insolvency proceedings
Generally, Austrian law distinguishes between secured and unsecured creditors. Secured creditors are creditors holding:
- a claims for segregation of property that are rights of creditors to certain assets in the possession of the debtor in which such creditors have property interests recognised by Austrian law (including assets that are subject to retention of title claims); such rights are in principle not affected by any insolvency proceedings and the creditors can demand the return of such assets; or
- b preferential claims that are security interests (e.g., pledges, mortgages) of the creditor in respect of certain of the debtor’s assets. The secured creditor is entitled to have its claims satisfied out of the proceeds of the respective assets according to the rank of priority of the respective security. The creditor’s claim will only be regarded as part of the insolvency proceedings as far as it is not satisfied out of the secured assets.
Secured creditors may be barred from enforcing their right to a security for a maximum period of six months following the commencement of insolvency proceedings, if such enforcement would jeopardise the continuation of the debtor’s business.
Unsecured creditors’ claims must be filed as insolvency claims in order to take part in the insolvency proceedings. In this context, obligations of the debtor that are not due at the time of commencement of the insolvency proceedings are deemed accelerated and due for the purpose of the proceedings. Secured creditors only take part as insolvency creditors to the extent their claims exceed the value of the secured assets.
Unsecured creditors, whose claims are recognised in principle, receive the same pro rata quota of their insolvency claim. As a class, they are subordinate to administrative expenses, consisting, generally, of the costs of the proceedings (including the remuneration and reimbursement awarded to the creditors’ committee and the special creditors’ associations), the fees of the administrator, and claims for labour, services and goods furnished to the estate post-petition, and the rights of secured creditors to the extent the respective claims are secured by assets subject to security interests.
The two main principles of Austrian insolvency proceedings are (1) to use the debtor’s assets for the uniform and proportionate satisfaction of (unsecured) creditors and (2) to offer the possibility of restructuring to debt-ridden businesses.
To enhance chances of success of restructuring efforts, the Insolvency Act 2010 improves the possibilities and also the process of restructuring. As an example, the continuance of pre-insolvency contractual relationships was identified as being of utmost importance for a successful reorganisation, as their termination might lead to failure of the reorganisation efforts.3 Hence, provisions to safeguard contractual relationships in case of insolvency were introduced,4 including, for example, the possibility for the insolvency administrator to apply for deferral of an eviction regarding the business premises5 or restrictions as regards contractual termination rights of business partners.6
iii Insolvency procedures
In all bankruptcy proceedings, a bankruptcy administrator is appointed by the court in the opening resolution.
One of the administrator’s first tasks is to establish whether the debtor’s business can be carried on. As Austrian insolvency law favours the concept of reorganisation over distribution of the debtor’s assets, only if the continuation of the debtor’s business would increase the loss to creditors, the debtor’s business is closed and its estate liquidated under the supervision of the court, the proceeds being equally distributed to the creditors. Thereafter, the bankruptcy proceedings will be terminated by a court order. However, the termination of the proceedings does not discharge the debtor from the claims of creditors that have not been satisfied in full. Therefore, creditors whose claims have been determined by the bankruptcy administrator or, after being disputed by the administrator, confirmed by a court judgment, may enforce their rights against the debtor with respect to the unsettled portion of their claim for a period of 30 years.7 Since in the case of a corporate debtor, bankruptcy will eventually result in the ultimate dissolution of the company, later recourse to the debtor for payment of outstanding amounts is prevented.
If, on the other hand, it is possible to carry on the debtor’s business, in the course of bankruptcy proceedings the bankrupt debtor may apply for a restructuring scheme.8 In the application the debtor has to submit a proposal for the satisfaction of at least 20 per cent of all insolvency debts within a maximum period of two years and demonstrate its capability to fulfil the proposal.9 After a preliminary examination by the court as to whether to dismiss the application on certain formal grounds,10 the creditors decide (at a creditors’ hearing) whether to accept the offer by both a simple majority of the creditors attending the hearing as well as a simple majority based on the value of their claims.
The quota of 20 per cent is a statutory minimum requirement for a restructuring scheme and needs to be proportionate to the debtor’s actual economic and financial standing. Hence, depending on the circumstances, it may be necessary to offer a proposal with a higher quota or shorter payment period in order for the creditors to accept the proposal. In practice, creditors usually request to be provided with a payment plan, according to which the debtor is obliged to pay the amount in instalments, starting immediately after the acceptance of the proposal and continuing periodically over the said period.
Following the creditors’ acceptance, the court confirms the restructuring scheme in case no grounds for denial exist.11 Once the debtor has fulfilled the restructuring scheme, it is discharged from its further debts. Completed restructuring schemes are also effective against creditors who did not accept the proposal or who did not take part in the insolvency proceedings.
Only the debtor may file for commencement of restructuring proceedings where a bankruptcy administrator is appointed or where the debtor retains the right to self-administration.
In both cases the application needs to include a restructuring proposal, with a minimum quota of 20 per cent of all debts needing to be satisfied within a period of two years in the first and of 30 per cent in the second case. In the course of restructuring proceedings, the debtor’s business may only be liquidated if the debtor’s restructuring proposal has not been accepted by the creditors within 90 days from commencement of proceedings.
In case of restructuring proceedings where a bankruptcy administrator is appointed, the proceedings follow the process for restructuring schemes described above. If the restructuring proposal is not accepted by the creditors, the court will reclassify and continue as bankruptcy proceedings.12
In the case of restructuring proceedings where the debtor retains the right to self-administration, the debtor retains legal capacity to act and control over the business with supervision of the court-appointed restructuring administrator. Certain material actions and transactions require the consent of a restructuring administrator. The right to self-administration may be withdrawn, for example, if such right could lead to a disadvantage for the creditors. In this instance, the restructuring proceedings would be reclassified and continued as restructuring proceedings without a debtor-in-possession regime13 and proceedings would follow the process for restructuring schemes.
iv Starting proceedings
General preconditions for the opening of insolvency proceedings
A precondition for the opening of insolvency (bankruptcy or restructuring) proceedings is that the debtor is illiquid or if the debtor is a corporate entity, either illiquid or over-indebted within the meaning of Austrian insolvency law. In the context of insolvency, illiquidity means that the debtor is unable to pay its debts in due time and is not in a position to acquire the necessary funds to satisfy its due liabilities within a reasonable time period. If a corporate entity’s liabilities exceed its assets and the company has a negative prospect, the company is considered to be over-indebted within the meaning of Austrian insolvency law.
A petition for bankruptcy may be filed either by the debtor itself or a by creditor; however, a petition for the commencement of restructuring proceedings may only be filed by the debtor.
The debtor is under a statutory obligation to file for commencement of insolvency (bankruptcy or restructuring) proceedings without culpable delay but in any case no later than 60 days after becoming illiquid or over-indebted. The 60-day period may be used for attempts to restructure the debts in order to escape insolvency. Nonetheless, the debtor has to file for insolvency proceedings immediately, even though the 60-day period has not expired, if it becomes apparent that the debtor’s endeavours have no prospect of success within the aforementioned period.14
A creditor initiating proceedings usually presents to the court an executory title regarding its claim. Provided that the preconditions for initiating bankruptcy proceedings (illiquidity or over-indebtedness) are fully substantiated, such a title is not necessarily required.15 However, Austrian courts apply rather strict standards for substantiating claims and regularly demand to be presented with, for example, a written out-of-court acceptance of the debt by the debtor or a bill of exchange (or similar). Simple invoices or reminder letters are not considered to be sufficient.16
The court conducts a preliminary examination to assess whether the preconditions for the opening of bankruptcy proceedings and certain formal requirements are met, such as the requirement that the debtor’s estate be sufficient to cover the costs of the bankruptcy proceedings.17 Usually a deposit in the amount of approximately €4,000 is required.18
If these preconditions are fulfilled, the court, along with the decision to open bankruptcy proceedings, appoints a bankruptcy administrator and sets a deadline for the filing of insolvency claims.
The decision to commence proceedings (as well as any further information on the proceedings) will be published in the Austrian insolvency database19 and becomes legally effective on the day following the publication of the respective court order.
The preconditions for initiating bankruptcy proceedings are also applicable when initiating restructuring proceedings, with the exception that the debtor is the only person entitled to file for their commencement. Additionally, restructuring proceedings may already be commenced if insolvency is imminent.20
The debtor may file for restructuring proceedings where a bankruptcy administrator is appointed, for which it needs to attach a (simple) restructuring proposal to its application (minimum proposal of settlement of debts of 20 per cent within two years), or it may file for restructuring proceedings where the debtor retains the right to self-administration. In the latter case, the debtor needs to submit a qualified restructuring proposal fulfilling a number of formal requirements and that, inter alia, needs to propose settlement of at least 30 per cent of the creditors’ claims within two years.
As regards the examination of the application by the court and the opening of the proceedings, see Section I.iv, supra.
Right to appeal
In general, only the debtor and, if applicable, the creditor applying for commencement of bankruptcy proceedings have a right to participate in the bankruptcy opening proceedings. However, professional creditors’ organisations21 may be requested to give their opinion on the debtor’s financial situation in the course of the court’s examination on the existence of sufficient assets to cover the costs of the proceedings.
Court orders opening or denying the opening of insolvency proceedings can be appealed by any party whose rights are adversely affected by the order22 or the professional creditors’ organisations.
Appeals must be filed within a time period of 14 days following the publication of the court order in the insolvency database. An appeal does not, however, suspend the order opening the insolvency proceedings.
v Control of insolvency proceedings
Insolvency proceedings are conducted by the insolvency court, a special unit of the regional court for the judicial district where the debtor has its seat or residence,23 except for insolvency proceedings of private individuals. Such proceedings are handled by the district court.
Although the insolvency court, inter alia, determines whether all requirements for the commencement of insolvency proceedings are met, appoints the insolvency administrator and oversees its activities, including approval of certain decisions,24 contributes to the determination of assets and liabilities, holds hearings and decides on the termination of the proceedings, the insolvency administrator has a far more prominent role in insolvency proceedings.
The term ‘insolvency administrator’ refers to bankruptcy as well as restructuring administrators, whereby a restructuring administrator is only appointed when restructuring proceedings in which the debtor retains the right to self-administration are commenced.
The insolvency administrator has a central oversight and management function in insolvency proceedings. Usually, insolvency administrators are chosen from a list of potential appointees,25 most of these being attorneys in private practice.26
The insolvency administrator’s compensation is regulated by the Insolvency Act and has to be approved by the insolvency court. A relevant factor for the amount of compensation is either the size of the estate or, in case of restructuring proceedings, the amount distributable to the creditors.
When a bankruptcy administrator is appointed, the debtor’s (management’s) authority to represent the insolvent entity and to make any dispositions in respect of the insolvency estate is transferred to the administrator.
The duties of a bankruptcy administrator – in both bankruptcy and restructuring proceedings – are in particular:
- a the assessment of the debtor’s economic standing and the reasons for insolvency;
- b the preparation of an inventory, listing the debtor’s assets and liabilities as at the date of the commencement of the insolvency proceedings;
- c the conduct of all legal disputes concerning a part or all of the debtor’s estate;
- d the examination and determination of all creditor claims and the creation of a list of creditors;
- e the discharge of all statutory duties as the employer of the debtor’s employees;
- f challenging any transactions concluded prior to the commencement of insolvency proceedings; and
- g reporting any matters relating to the debtor’s business to the court.
In case of bankruptcy proceedings, a bankruptcy administrator additionally has to:
- a examine the debtor’s business to establish whether it can be continued or, if applicable, reopened (at least for a limited period of time);27
- b assess whether a restructuring scheme is possible and would be in the common interest of the creditors; and
- c liquidate the debtor’s estate.
In restructuring proceedings where the debtor retains the right to self-administration the role of the administrator is, in general, limited to supervising the debtor and approving extraordinary or vetoing ordinary business transactions, while the debtor retains a limited legal capacity to conduct ordinary business.28 Further, certain actions (e.g., bringing claims in order to challenge transactions and termination of bilateral contracts) are explicitly reserved for the administrator.
Representation of creditors
In insolvency proceedings creditors are represented by the creditors’ assembly and the creditors’ committee.
The creditors’ assembly is composed of all creditors entitled to vote in the proceedings, its primary function being to approve or reject a restructuring proposal. However, it may also petition to replace the insolvency administrator if good cause is shown or to have a creditors’ committee installed.
A creditors’ committee29 is usually installed to assist the insolvency administrator if the debtor’s business is particularly large or the nature of the debtor’s business requires it (i.e., in insolvency proceedings involving large corporate debtors, or where a sale or lease of (part of) the debtor’s business is contemplated). The function of a creditors’ committee is mainly advisory, but certain approval rights exist with respect to the sale or lease of a business or the extrajudicial sale of any other asset of the debtor’s estate.30
vi Special regimes
While, for the most part, the special insolvency provisions applicable to cooperatives take into account their corporate construction, the situation is different for banks, insurances and investment companies because of their high economic value.35
The commencement of restructuring proceedings over the assets of banks, investment companies and insurance companies is excluded (i.e., only bankruptcy proceedings can be commenced). Furthermore, in such bankruptcy proceedings the debtor may not propose a restructuring scheme. Insurance companies, banks and investment companies cannot file for commencement of bankruptcy proceedings themselves but have to notify the Financial Market Authority (FMA) of their insolvency or over-indebtedness instead.
In case of banks and investment companies, the FMA is obliged either to file for commencement of bankruptcy proceedings or, if applicable, for placement under court-supervised management36 for a maximum period of one year.
If an insurance company is insolvent, the FMA is not obliged to file for commencement of bankruptcy proceedings immediately, but primarily has to assess whether it is in the best interest for the insured to avoid bankruptcy proceedings. In such a case, the FMA may forbid the insurance company to effect any payments, especially insurance payouts, or reduce its obligations resulting from life insurance.
vii Cross-border issues
With respect to all EU Member States except for Denmark, Council Regulation (EC) No. 1346/2000 of 29 May 2000 on insolvency proceedings (the Regulation) applies.
With regard to all other countries (i.e., non-EU countries and Denmark), foreign insolvency proceedings are recognised if:
- a the foreign insolvency proceedings are, in principle, comparable to Austrian insolvency proceedings;
- b the centre of interest of the insolvent debtor is located abroad; and
- c the recognition does not result in a violation of Austrian public policy.
If insolvency proceedings have already been commenced in Austria37 or interim measures been taken, Austrian law does not recognise any foreign insolvency proceedings. However, if foreign insolvency proceedings (other than those governed by the Regulation) have already been opened, this does not prevent the commencement of insolvency proceedings in Austria.
A foreign administrator has the same powers in Austria as in its own jurisdiction, but needs to adhere to Austrian law when exercising them.38
Foreign insolvency proceedings enjoying recognition under Austrian law may also be published in the insolvency database, whereby an obligation for publication exists in case the debtor has an establishment in Austria. For publication, the foreign insolvency administrator needs to contact the Commercial Court in Vienna.39
II INSOLVENCY METRICS
After the financial crisis, which led to a reduction in GDP of 1.96 per cent from 2008 to 2009, between 2010 and 2014 the average increase of the GDP was 2.88 per cent per year, with a spike of 4.8 per cent from 2010 to 2011.40 According to the available data for 2015, the increase in GDP was 2.9 per cent, after adjustment for inflation at 1 per cent (real GDP).41 Although the real GDP increase was higher than in 2014, the growth of the Austrian economy is significantly slower than that of the global economy.42
As regards unemployment rate, after a short improvement in the labour market after the financial crisis – in 2009 the annual average unemployment rate was 7.2 per cent and in 2011 6.7 per cent – within the last two years an above average increase took place leading to a yearly average unemployment rate of 9.1 per cent in 2015.43 However, a slight ease in the labour market took place in recent months, leading to a decrease in unemployment levels that becomes apparent when comparing the figures from June 2015 (8.2 per cent) and June 2016 (8.1 per cent).44 The sudden increase in unemployment with a still high unemployment rate is mainly caused by relatively slow economic growth and immigration.45
With the end of the financial crisis, the number of insolvency proceedings with regard to businesses steadily decreased. In 2015 a total of 3,115 insolvency proceedings were commenced, only 100 of which were restructuring proceedings where the debtor retains the right to self-administration and 450 restructuring proceedings where a bankruptcy administrator is appointed. The overall debt for all opened insolvency proceedings amounts approximately to €2.4 billion. Further, 2,035 applications for commencement of insolvency proceedings were dismissed owing to absence of sufficient assets to cover costs.48
The grounds for the decrease in insolvency proceedings are, inter alia, the low interest rates for loans, which make repayment easier for businesses. The low interest rates also led to an increase in expenditures for residential properties of private parties. In 2011 the expenditures of private households as well as the public sector started to stagnate,49 which indicates that the number of insolvency proceedings will increase again.
So far, the developments in 2016 confirm this assumption. When comparing the first six months of 2015 to those of 2016, there has been an increase of 4.7 per cent in the number of insolvency proceedings opened, whereby the number of insolvency applications being dismissed only increased by 1.3 per cent. Debt-wise the increase is higher than 100 per cent (i.e., the overall debt in all insolvency proceedings commenced in the first six months of 2016 is €1.8 billion). However, this does not seem to be a trend towards a significant increase in debt but rather is attributable to three insolvency proceedings with an extraordinary amount of debt.50
Construction, gastronomy and business-related services are the industries most affected by insolvency in the past few years. As regards gastronomy, this effect is mainly caused by the large number of businesses. Construction companies suffer from the aforementioned increase in expenditures for residential properties followed by sudden stagnation of these expenditures. Difficulties for construction companies also result from the trend in public procurement to accept the cheapest rather than the best tender.51
Furthermore, the number of insolvent young entrepreneurs (i.e., entrepreneurs that have been on the market for less than five years), is steadily increasing. While in 2014 young entrepreneurs accounted for one-third of all insolvency cases, in the first six months of 2016, 43 per cent of all insolvent businesses had been established in the five years prior to commencement of proceedings. The main cause for young entrepreneurs becoming insolvent is the multitude of burdens imposed on businesses, for example, excessive bureaucracy, high taxation and high ancillary payments.52
III PLENARY INSOLVENCY PROCEEDINGS
i HANLO group
HANLO-Fertighaus GmbH53 is considered to be one of the pioneer companies offering prefabricated houses on the German-speaking market.54 In 2011, HANLO-Fertighaus GmbH’s founder, Hanno Loidl, sold his shares to Green Building Group GmbH, a holding company operating throughout Europe, whose main shareholder (holding more than 96 per cent of the shares) is HIG Europe-Hanlo Sarl.55
The Austrian Hanlo group further consisted of TUWE GmbH, a 100 per cent subsidiary of HANLO-Fertighaus GmbH; Bau mein Haus GmbH, its shareholders being Green Building Group GmbH holding 99 per cent of the shares and HANLO-Fertighaus GmbH; and HANLO Fertighaus GmbH & Co KG,56 where Bau mein Haus GmbH is the limited and HANLO-Fertighaus GmbH the general partner.
On 5 May 2015 restructuring proceedings where a bankruptcy administrator is appointed were commenced over the assets of HANLO-Fertighaus GmbH. Only six days later, restructuring proceedings where a bankruptcy administrator is appointed were commenced over the assets of Bau mein Haus GmbH and bankruptcy proceedings over the assets of Green Building Group GmbH, TUWE GmbH and HANLO-Fertighaus GmbH & Co KG.57
The HANLO group’s debt amounts to €37.1 million. Show homes make up most of the group’s assets.
The HANLO group considers the cause of its insolvency to be the radical change in the Austrian prefabricated houses market that started two years earlier – essentially, a predatory competition and a decline in order situation as a result of the decreasing willingness of banks to grant credits. Additionally, the companies were engaged in large construction projects where concessions needed to be made. A delay in these projects was caused by severe weather in March 2015 leading to a lack in liquidity.
At the time of commencement of insolvency proceedings, 56 active construction sites existed and 140 more were planned with deposits paid by customers. An asset deal regarding the sale of the construction sites and projects was concluded by the end of May 2015.58 Meanwhile, all businesses have been closed and the restructuring proceedings were reclassified and continued as bankruptcy proceedings. With regard to TUWE GmbH, the bankruptcy administrator notified the court in September 2015 that the assets were not sufficient to pay the priority claims;59 all other proceedings are still pending – their duration is unclear owing to the necessity of liquidating the assets and international shareholdings.
ii FMT group
The FMT group consisted of FMT Industrieholding GmbH as the sole shareholder of FMT Industrieservice GmbH, FERRO-Montagetechnik GmbH, Doubrava Industrieanlagenbau GmbH and Personnel Assistance GmbH. The main field of the group’s business was construction and engineering of energy, paper and special plants.
While liquidity problems were only rumoured, various changes in managing directors indicated problems within the FMT group for some years. Although FMT’s order situation improved, its liquidity became a problem owing to pressure on the market because of prices, a decline in new investments (especially in the energy and power station sector), legacies and deficit in payments. The new regulations and guidelines in the banking sector are viewed as another cause for insolvency as they make it harder to overcome liquidity problems with short-term credits.60
On 24 September 2015 restructuring proceedings where a bankruptcy administrator is appointed were commenced over the assets of FMT Industrieservice GmbH,61 FERRO-Montagetechnik GmbH,62 Doubrava Industrieanlagenbau GmbH63 and Personnel Assistance GmbH,64 which together had more than 500 employees. The total debt of all of these companies adds up to €61.63 million.65
One of FMT’s competitors, the Styrian Christof group acquired the FMT group by purchasing all shares of FMT Industrieholding GmbH in October 2015.66
After the share purchase in all restructuring proceedings, except for one proceeding, restructuring proposals were accepted, whereby the companies paid between 20 per cent and 25 per cent of all debts within a period of, at most, three months. In the case of Personnel Assistance Company GmbH, the business was closed and the restructuring proceedings reclassified as bankruptcy proceedings shortly after the purchase of the holding company.
Zielpunkt GmbH was the third-largest Austrian supermarket chain with 229 chain stores and 2,700 employees when bankruptcy proceedings were commenced on 30 November 2015.67
According to the application for commencement of bankruptcy proceedings, Zielpunkt’s liabilities amounted to €237 million in total (including €38.4 million from deliverables and performance, €33.9 million intercompany liabilities and €9.7 million salaries and wages) and its assents amounted to €33.5 million (including assets subject to rights of separation and segregation).68
As Austria’s supermarket sector is dominated by two main players, smaller companies like Zielpunkt find it difficult to survive as they do not have a unique feature to set them apart. Despite the efforts of various owners to restructure, the company continuously sustained losses. When a drastic decrease in turnover made it obvious to the company’s sole shareholder, Pfeiffer HandelsgmbH,69 that Zielpunkt would continue to suffer losses until at least 2020, the efforts of restructuring were terminated and an application for commencement of bankruptcy proceedings filed.70
Shortly before commencement of the proceedings, Pfeiffer purchased all shares of TREI Austria Real Estate GmbH for assumed €200 million, while filing for commencement of insolvency proceedings over the assets of Zielpunkt with roughly the same amount of debt. The fact that TREI was the landlord of 67 Zielpunkt chain stores provoked suspicions in press commentaries that Pfeiffer deliberately filed for commencement of bankruptcy proceedings over Zielpunkt’s assets to benefit in case the respective stores are sold to competitors.71
In the course of the bankruptcy proceedings, the administrator was able to sell 117 stores to, inter alia, competitors preserving the jobs of approximately 1,200 employees, while 112 stores had to be closed.72 After Zielpunkt’s business was finally closed on 17 February 2016, the shop inventory (e.g., cash registers, shelves) and business cars were sold in an auction at the end of February.
It is estimated that the proceeds of Zielpunkt’s assets will amount to €30 million. Therefore, unsecured creditors will presumably receive a quota of 10 to 20 per cent of their claims.73
Schirnhofer Gesellschaft mbH is part of the Schirnhofer group. Its shareholders are Schirnhofer Familien Unternehmen Holding GmbH (holding 75 per cent of the shares) and Schirnhofer Vermögensverwaltung GmbH (holding 25 per cent). From 1997 to 2014 Schirnhofer ran the deli departments of Zielpunkt as a ‘shop in shop’. From 2014 onwards, Zielpunkt ran the deli department itself, taking over Schirnhofer’s deli department employees. Nonetheless, Zielpunkt was one of Schirnhofer’s main customers, generating 37 per cent of its yearly turnover.
Although Schirnhofer restructured its business for almost two years, when Zielpunkt became insolvent, Schirnhofer’s financial difficulties became insurmountable and it filed for commencement of restructuring proceedings where a bankruptcy administrator is appointed, offering its creditors a quota of 20 per cent. According to the application, Schirnhofer had 270 employees, assets of €10.9 million and debts of €29 million.74
On 1 December 2015, restructuring proceedings were opened. In the course of the proceedings the departments ‘purchasing’, ‘production’, ‘sales-Zielpunkt’ and ‘driving-sales-gastro’ (Fahrverkauf-Gastro) were closed and the restructuring proposal was improved to a quota of 30 per cent payable in two years. In March 2016, the improved restructuring proposal was accepted by the creditors.75
Not long after commencement of restructuring proceedings over Schirnhofers assets, its main shareholder, Schirnhofer Familien Unternehmen Holding GmbH, had to file for commencement of insolvency proceedings. Because Schirnhofer had become insolvent, a bond liability of €1.1 million, due on 30 October 2015, had to be paid in the greater part by the holding company. However, a lack in liquidity to pay this bond liability made commencement of insolvency proceedings inevitable.76 Despite this, with the consent of all creditors, the restructuring proceedings were concluded in spring of 2016.77
v Activ Solar
Activ Solar GmbH was engaged in the production of polycrystalline silicon for the photovoltaic industry as well as the development, funding and implementation of large-scale photovoltaic power stations. It also operated a silicon processing plant in Ukraine (Crimea), where it also had the focus of its business activities. After the annexation of the Crimea in 2013 and the start of the political and economic crises in Ukraine, Activ Solar’s business was disrupted.78
The founders of Activ Solar are the Kljujew brothers. At the time of commencement of insolvency proceedings on 10 February 2016, its main shareholder was a Viennese attorney. Serhij Kljujew is a former politician belonging to Viktor Janukowitsch’s party. When he lost his parliamentary immunity in 2014, the Ukrainian public prosecution authorities launched investigations into both Kljujew brothers in connection with various white-collar crime offences, which included accommodation of loans to Activ Solar. In October 2015, a court in Kiev held Activ Solar liable to repay an amount of €57 million to a Ukrainian bank. Months of settlement negotiations with the respective bank were unsuccessful79 and Activ Solar had to file for commencement of insolvency proceedings, offering its 31 creditors payment of 20 per cent of its debts.
In its application for commencement of restructuring proceedings where a bankruptcy administrator is appointed, Activ Solar stated that its debt amounted to €503.4 million with assets valuing €18.69 million.
The inability to reach an agreement with its largest creditor, Ukreximbank, meant that Activ Solar had to withdraw its restructuring proposal during the court hearing in April 2016. In the course of the hearing the court ordered Activ Solar’s business to be closed. Further, the proceedings were reclassified and continued as bankruptcy proceedings. The claims lodged until this hearing exceeded Activ Solar’s initial statement by €186.6 million. As a result of these developments, the bankruptcy administrator estimates a single-digit quota at the most for the creditors.80
IV ANCILLARY INSOLVENCY PROCEEDINGS
There have been no considerable ancillary insolvency proceedings pending in Austria in the past 12 months.
Low levels of interest facilitated the small number of insolvency proceedings in Austria in recent years; therefore, a sudden increase in interest level will likely lead to a sharp rise in insolvencies.
Currently, the Austrian legislator does not plan to amend the insolvency law. Nonetheless, some creditors and creditors’ organisations81 consider it to be a problem that insolvency proceedings are only commenced when the debtor has sufficient assets to cover costs. In the light of the court’s inability to conduct an in-depth examination of the debtor’s estate in the opening proceedings and to assess the existence of avoidable legal transactions, the evaluation of whether there are sufficient assets to cover costs is primarily done on the basis of information provided by the debtor. Therefore, in many cases, insolvency proceedings are not commenced despite the existence of sufficient assets because of inaccurate information from the debtor.
1 Eva Spiegel is partner and Miriam Gschwandtner is an associate at Wolf Theiss Rechtsanwälte GmbH & Co KG.
2 The Insolvency Act’s original title was Bankruptcy Act (Konkursordnung), Imperial Law Gazette (RGBl) No. 337/1914, latest amendment Federal Law Gazette (BGBl) I No. 29/2010.
3 Explanatory remarks on government bill No. 612 of the attachments to the XXIV legislative session, p. 5 (ErlRV 612 BlgNr. XXIV GP, S 5).
5 Section 12c of the Insolvency Act. Before the amendment of 2010 deferral of an execution for eviction was only possible in case of composition proceedings.
6 Section 25b of the Insolvency Act.
7 Section 61 of the Insolvency Act. In this case enforcement of rights only makes sense, if the debtor within that period of time comes into possession of any assets.
8 Section 114b of the Insolvency Act.
9 Sections 114c and 141 of the Insolvency Act.
10 Section 141 of the Insolvency Act. An application for a restructuring scheme is dismissed, inter alia, in the case of conviction of the debtor – or, in case of a corporate debtor, (one of) its managing directors – by final judgment for a fraudulent bankruptcy offence (Section 156 of the Austrian Criminal Code).
11 Section 152a of the Insolvency Act. A reason for denial of this confirmation is, for example, the non-payment of priority claims or of the bankruptcy administrator’s compensation.
12 Section 168 of the Insolvency Act.
13 Section 170 of the Insolvency Act.
14 See Dellinger, Section 69 of the Insolvency Act marginal No. 16, in Konecny/Schubert, Insolvenzgesetze (Insolvency Laws).
15 Section 70 of the Insolvency Act.
16 See Uebertsroider, Section 70 of the Insolvency Code marginal No. 42 et spp, in Konecny/Schubert Insolvenzgesetze (Insolvency Laws).
17 Section 71 of the Insolvency Act.
18 With this amount the launching costs of the insolvency proceedings, essentially the insolvency administrator’s statutory compensation until the first hearing, ought to be covered.
19 The insolvency database can be accessed via the following website of the Austrian Ministry of Justice: www.edikte.justiz.gv.at.
20 Explanatory remarks on government bill No. 612 of the attachments to the XXIV legislative session, p. 4.
21 Professional creditors’ organisations are, inter alia, Kreditschutzverband 1870 (KSV1870) and Alpenlaendischer Kreditorenverband (AKV).
22 In particular, the bankrupt debtor and any creditors, who either assert their claim in the appeal or have already filed or concurrently file a claim.
23 A regional exception exists for the Viennese judicial district, where a special part of the Commercial Court of Vienna is handling such insolvency cases.
24 The court’s approval is, for example, necessary in case the bankruptcy administrator decides to close, close-up or reopen the business of the debtor or to sell the debtor’s business.
25 The list of potential appointees is posted on the following website of the Federal Ministry of Justice: www.insolvenzverwalter.justiz.gv.at.
26 However, there is no legal requirement for an insolvency administrator to be a member of the Bar.
27 In restructuring proceedings without a debtor-in-possession regime the debtor’s business may only be liquidated if the debtor’s restructuring proposal has not been accepted by the creditors within 90 days from commencement of proceedings.
28 The restructuring administrator also has to approve the termination of any contract being governed by special insolvency regimes, especially Section 21 et ssp. of the Insolvency Act.
29 According to Section 88 of the Insolvency Act, a creditors’ committee has to have between three and seven members.
30 The court may overturn approvals of the creditors’ committee.
31 Section 81 et spp. Austrian Banking Act, Federal Law Gazette I No. 532/1993, latest amendment Federal Law Gazette I No. 98/2014.
32 Section 307 et spp. Austrian Insurance Supervision Act, Federal Law Gazette I No. 34/2015.
33 Section 79 et spp. Austrian Securities Supervision Act, Federal Law Gazette I No. 60/2007, latest amendment Federal Law Gazette I No. 98/2014.
34 Austrian Cooperatives Insolvency Act, Imperial Law Gazette No. 105/1918, latest amendment Federal Law Gazette I No. 58/2010.
35 See Dellinger, Oberhammer and Koller, Insolvency Law, 3rd edition, marginal No. 472, 476.
36 Banks and investment companies are also entitled to file for placement under court-supervised management themselves.
37 An establishment of a debtor in Austria is not required for the commencement of insolvency proceedings; in fact the existence of property is sufficient.
38 In particular, employment law matters, such as the duty to notify the Public Employment Service Austria when dismissing a certain number of employees, need to be considered by the foreign administrator.
39 Current contact information: Justizzentrum Wien Mitte, Marxergasse 1a, 1030 Vienna, Austria; Tel: +43 1 515 28, Fax: +43 1 515 28 576.
40 Statistics Austria, Macroeconomic accounting for the years 1995–2014, p. 26; available (in German) at www.statistik.at/wcm/mvc/publicationsCatalogue/redirectDetailedView?pubId=577§ionId=4020.
41 Statistic Austria, press release No. 11.316-127/16, available (in German) at www.statistik.at/web_de/statistiken/wirtschaft/volkswirtschaftliche_gesamtrechnungen/108436.html. See also Statistics Austria, Macroeconomic accounting for the years 1995-2015, p. 15; available (in German) at www.statistik.at/web_de/services/publikationen/20/index.html?includePage=
42 According to the available figures for 2015, the increase in real GDP of the European Union is 2 per cent and of the Eurozone 1.7 per cent (Statistic Austria, press release No. 11.316-127/16; see footnote 41, supra).
43 Public Employment Service Austria, overview of the employment situation from 1946 onwards, available (in German) at www.ams.at/ueber-ams/medien/arbeitsmarktdaten/berichte-auswertungen.
44 Public Employment Service Austria, monthly employment evaluations for June 2015 and 2016, for availability, see footnote 43, supra.
45 Public Employment Service Austria, yearly employment evaluation for 2015, for availability, see footnote 43, supra.
46 Austrian National Bank, loans in Austria, available (in German) at www.oenb.at/isaweb/report.do?lang=DE&report=801.3.8.
47 Andre Exner, ‘Bank-Austria-Vorstand Hengl erwartet 2016 ein spannendes Anleihenjahr’, Wirtschaftsblatt (27 December 2015), available (in German) at http://wirtschaftsblatt.at/home/nachrichten/newsletter/4886838/BankAustriaVorstand-Hengl-erwartet-2016-ein-spannendes-Anleihenjahr?from=suche.intern.portal.
48 Kreditschutzverband 1870, insolvency statistics for 2015, available (in German) at
49 Kreditschutzverband 1870, insolvency statistics for 2014, available (in German) at www.ksv.at/sites/default/files/assets/documents/ksv1870_insolvenzstatistik-unternehmen_2014.pdf.
50 Kreditschutzverband 1870, insolvency statistics for the first six months of 2016, available (in German) at www.ksv.at/sites/default/files/assets/documents/ksv1870_insolvenzstatistik-unternehmen_1hj_2016_grosse_version.pdf.
51 See footnote 49, supra.
52 Press report ‘Pleiten sind eine Krankheit der Jungen’, Kreditschutzverband 1870 (26 August 2015), available (in German) at www.ksv.at/pressemeldung-pleiten-sind-eine-krankheit-der-jungen.
53 A GmbH (abbreviation for ‘Gesellschaft mit beschränkter Haftung’) is a limited liability company established in accordance with the Austrian Limited Liability Company Act.
54 Press report ‘Großinsolvenz: HANLO-Fertighaus Gesellschaft m.b.H.’, Kreditschutzverband 1870 (5 May 2015), available (in German) at www.ksv.at/insolvenzfaelle/grossinsolvenz-hanlo-fertighaus-gesellschaft-m.b.h.-graz.
55 Press report ‘Fertighausanbieter Hanlo insolvent’, Wiener Zeitung (5 May 2015), available (in German) at www.wienerzeitung.at/dossiers/insolvenzen/750205_Fertighausanbieter-Hanlo-insolvent.html.
56 An Austrian KG is a limited partnership. The GmbH in GmbH & Co KG indicates that, in this case, the general partner of the limited partnership is a limited liability company.
57 Press report ‘Insolvenz: HANLO Firmengruppe von weiteren Insolvenzfällen betroffen’, Kreditschutzverband 1870 (11 May 2015), available (in German) at www.ksv.at/insolvenz-hanlo-firmengruppe-von-weiteren-insolvenzen-betroffen.
58 Press report, ‘Hanlo-Insolvenz: Investor fängt Unternehmen auf’, ORF (22 May 2015), available (in German) at http://steiermark.orf.at/news/stories/2712336/; press report ‘Insolvenz: HANLO Firmengruppe’, Kreditschutzverband 1870 (13 May 2015), available (in German) at www.ksv.at/insolvenzfaelle/insolvenz-hanlo-firmengruppen.
59 Edict 40 S 40/15b, Regional Court Graz; the edict can be found in the Austrian insolvency database (for availability, see footnote 19, supra).
60 Mascher/Brandstätter ‘Angerlehners FMT-Gruppe steht vor der Insolvenz’, Nachrichten.at (21 September 2015), available (in German) at www.nachrichten.at/nachrichten/wirtschaft/Angerlehners-FMT-Gruppe-steht-vor-der-Insolvenz;art15,1977800.
61 Edict 26 S 118/15w, Regional Court Graz; the edict can be found in the Austrian insolvency database (for availability, see footnote 19, supra).
62 Edict 20 S 92/15b, Regional Court Wels; the edict can be found in the Austrian insolvency database (for availability, see footnote 19, supra).
63 Edict 20 S 94/15x, Regional Court Wels; the edict can be found in the Austrian insolvency database (for availability, see footnote 19, supra).
64 Edict 20 S 93/15z, Regional Court Wels; the edict can be found in the Austrian insolvency database (for availability, see footnote 19, supra).
65 Press report ‘Großinsolvenz: Millionenpleite der Firmengruppe FMT’, Kreditschutzverband 1870 (24 September 2015), available (in German) at www.ksv.at/grossinsolvenz-millionenpleite-der-firmengruppe-fmt; press report ‘Großinsolvenz: FMT Industrieservice GmbH, 8402 Werndorf’, Kreditschutzverband 1870 (24 September 2015), available (in German) at www.ksv.at/insolvenz-fmt-industrieservice-gmbh.
66 Press report ‘Grazer Christof-Gruppe übernimmt insolventen Welser Anlagenmonteur’, Wirtschaftsblatt (15 October 2015), available (in German) at http://wirtschaftsblatt.at/home/nachrichten/newsletter/4844753/Grazer-ChristofGruppe-ubernimmt-insolventen-Welser-Anlagenmonteur.
67 Edict 5 S 153/15g, Commercial Court Vienna; the edict can be found in the Austrian insolvency database (for availability, see footnote 19, supra).
68 Press report ‘Großinsolvenz: Einzelhandelskette Zielpunkt, Wien’, Kreditschutzverband 1870 (30 November 2015), available (in German) at www.ksv.at/insolvenz-zielpunkt.
69 Pfeiffer HandelsgmbH became Zielpunkt’s sole shareholder in 2014.
70 Schneid/Hecht, ‘Zielpunkt: Acht Fragen und Antworten zur Pleite’, Die Presse (30 November 2015), available (in German) at http://diepresse.com/home/wirtschaft/economist/4877925/Zielpunkt_Acht-Fragen-und-Antworten-zur-Pleite-.
71 Kid Moechel, ‘Zielpunkt-Pleite: Restlverwertung läuft an’, Kurier (30 November 2015), available (in German) at http://kurier.at/wirtschaft/zielpunkt-pleite-restlverwertung-bei-zielpunkt-laeuft/167.056.320; see also footnote 70, supra.
72 Kid Moechel, ‘Zielpunkt-Gläubiger erhalten 30 Millionen Euro’, Kurier (19 February 2016), available (in German) at http://kurier.at/wirtschaft/konkurs-zielpunkt-kostet-den-insolvenzentgeltfonds-30-millionen-euro/181.803.174.
73 Stefan Pirker, ‘Zielpunkt-Konkursverfahren wird wahrscheinlich noch rund zwei Jahre dauern’, CASH Handelsmagazin (25 February 2016), available (in German) at www.cash.at/archiv/zielpunkt-konkursverfahren-wird-wahrscheinlich-noch-rund-zwei-jahre-dauern/.
74 Andreas Schnauder, ‘Schirnhofer schlittert mit 29 Millionen Euro Schulden in die Pleite’, Der Standard (1 December 2015), available (in German) at http://derstandard.at/2000026726524/Nach-Zielpunkt-Pleite-Schirnhofer-me.
75 Edict 25 S 111/15h, Regional Court Graz; the edict can be found in the Austrian insolvency database (for availability, see footnote 19, supra).
76 Press report ‘Großinsolvenz: Schirnhofer Familien Unternehmen Holding GmbH, 8224 Kaindorf’, Kreditschutzverband 1870 (10 December 2015), available (in German) at www.ksv.at/insolvenz-schirnhofer-familien-unternehmen-holding-gmbh.
77 Edict 25 S 118/15p, Regional Court Graz; the edict can be found in the Austrian insolvency database (for availability, see footnote 19, supra).
78 Press report ‘Grosinsolvenz: ACTIV Solar GmbH, 1010 Wien’, Kreditschutzverband 1870 (10 February 2016), available (in German) at www.ksv.at/insolvenz-activ-solar-gmbh.
79 Press report ‘Megapleite: Activ Solar hat eine halbe Milliarde Euro Schulden’, Wirtschaftsblatt (10 February 2016, available (in German) at http://wirtschaftsblatt.at/home/nachrichten/oesterreich/wien/4922719/Megapleite_Activ-Solar-hat-eine-halbe-Milliarde-Euro-Schulden. See also press report ‘Sonnenuntergang: Insolvente Activ Solar unter Dauerkorruptionsverdacht’, Elektrojournal (11 February 2016), available (in German) at www.elektrojournal.at/elektrojournal/sonnenuntergang-insolvente-activ-solar-unter-dauerkorruptionsverdacht-114717.
80 Press report ‘ACTIVE Solar – die größte Insolvenz 2016’, Wirtschaftsblatt (8 April 2016), available (in German) at wirtschaftsblatt.at/home/nachrichten/oesterreich/wien/4962448/ACTIVE-Solar-die-grosste-Insolvenz-2016. See also edict 6 S 25/16t, Commercial Court Vienna; the edict can be found in the Austrian insolvency database (for availability, see footnote 19, supra).
81 Otto Zotter, ‘Abweisungen: das ungelöste Problem’, focus.ksv 05/2012, available (in German) at www.ksv.at/sites/default/files/assets/documents/forum_0412_focusksv_abweisungen.pdf.