i Statutory framework and substantive law

The relevant primary legislation is the Austrian Insolvency Code, which provides general rules and thereby builds the framework for the following types of judicial insolvency proceedings for enterprises:

  1. bankruptcy proceedings;
  2. restructuring proceedings with self-administration; and
  3. restructuring proceedings without self-administration.

Other than in other countries (such as Germany), there are no practically relevant preliminary insolvency proceedings in Austria. General rules of the Insolvency Code, such as regarding (among other things) priority of creditors' claims, a statutory moratorium, termination rights or avoidance, apply to all proceedings mentioned before. The main difference between these proceedings is that bankruptcy proceedings primarily aim to liquidate the debtor's assets while restructuring proceedings primarily aim to restructure the debtor's business with support of the majority of creditors. Restructuring proceedings with self-administration are DIP proceedings (i.e., the debtor keeps control of the day-to-day operations).

Special insolvency relevant provisions are in particular also provided by Austrian company law, tax law and employment law, as well as the EU Insolvency Regulation (2015/848) (EIR). In practice, the Austrian Equity Substitution Act, which potentially qualifies loans granted by shareholders as equity (and therefore statutorily subordinated) is also very relevant. The Austrian Business Reorganisation Act provides rules for corporate reorganisation proceedings (which are not insolvency proceedings) in relation to a solvent debtor's business that affect creditors' rights to a lesser degree. In practice, such proceedings are rarely applied.

Priority of creditors' claims

The Insolvency Code does not expressly provide for formal rules on classes or priority of creditors' claims. Structurally, creditors are prioritised as follows:

  1. preferential creditors such as creditors with a right to property regarding assets of the debtor's estate or secured creditors;
  2. estate creditors that can demand full payment out of the debtor's estate because their claims arise after opening of the insolvency proceedings (e.g., trade creditors contracting with the administrator or banks granting financing during proceedings);
  3. unsecured creditors receiving an insolvency quota; and
  4. statutorily or contractually subordinated creditors.

Statutory moratorium

Individual enforcement actions against the debtor are prohibited in all types of insolvency proceedings (i.e., there is a statutory moratorium). Creditors must instead file their claims in the insolvency proceedings and the insolvency administrator has to scrutinise and approve or reject such claims. In case of rejection, the creditor may sue the administrator for approval. This does not, in principle, apply for preferential creditors whose claims are, as a general rule, not affected by the opening of insolvency proceedings.

Termination rights

The opening of insolvency proceedings does not automatically terminate or amend contracts. However, special provisions of the Insolvency Code allow, under certain circumstances, an eased termination by the debtor (in restructuring proceedings with self-administration) and the insolvency administrator (in restructuring proceedings without self-administration and bankruptcy proceedings). On the other hand, contract partners may be prevented from termination to protect the debtor's estate from losing contracts which are essential for business continuation. Ipso facto clauses (i.e., clauses allowing the termination of a contract just because of the opening of insolvency proceedings over the assets of the other party) are void.


Austrian avoidance rules allow the challenge of legal actions and transactions that have taken place within certain clawback periods before the opening of insolvency proceedings. Avoidance actions are exclusively on the insolvency administrator. A successful challenge forces the other part to return received payments or transferred assets to the debtor's estate.

The challenged legal action or transaction must:

  1. have taken place within a certain clawback period before the opening of insolvency proceedings (from six months up to 10 years, depending on the specific avoidance rule);
  2. have been directly or indirectly detrimental to the insolvency estate; and
  3. meet the criteria set by one of the avoidance rules provided in the Insolvency Code (avoidance owing to an intent to discriminate, avoidance owing to squandering of assets, avoidance of transactions with no consideration and analogous transactions, avoidance owing to preferential treatment or avoidance owing to knowledge of insolvency).

Avoidance owing to preferential treatment or knowledge of insolvency (one year respectively, six months' clawback period) are most commonly argued by the insolvency administrator. These two provisions require the debtor's insolvency and shall protect the principle of equal treatment of creditors (par conditio creditorum).

ii Policy

Since a major insolvency law reform in 2010, debtor-friendly restructuring tools have been actively strengthened. The reform aimed to facilitate the restructuring of viable businesses and to prevent liquidation. Nevertheless, as private workouts (silent out-of-court restructurings) are well established and tested in Austrian restructuring practice, large restructuring cases are often handled without court involvement.2 The main challenge in such private workouts are certain rules aiming the protection and equal treatment (i.e., pari passu and par conditio creditorum) of creditors (in particular directors' duty to file for insolvency).

Currently, there are no material reforms envisaged, but existing legislation is regularly evaluated. In response to the EIR, the Austrian legislature has amended the provisions of the Insolvency Code regarding cross-border constellations in an EU and international (i.e., non-EU) context.

Further changes in Austrian insolvency law may be required owing to ongoing harmonisation efforts discussed at an EU level (including a possible EU directive on preventive restructuring frameworks, as proposed by the European Commission in November 2016).3

iii Insolvency procedures

As stated in Section I.i, the corporate insolvency proceedings of the Insolvency Code can be divided into bankruptcy proceedings, restructuring proceedings with self-administration and restructuring proceedings without self-administration.

Bankruptcy proceedings

Bankruptcy proceedings require the debtor's material insolvency (illiquidity or over-indebtedness) and are initiated after application by the debtor or a creditor.

As soon as proceedings are formally opened, an insolvency administrator is appointed by the court. The administrator is called a Masseverwalter and acts as a liquidator who is in charge to administer and sell the debtor's assets. Bankruptcy proceedings cannot be debtor-in-possession proceedings (other than restructuring proceedings). Although bankruptcy proceedings aim to sell the debtor's estate, the priority is on continuing the business to be able to sell it as a whole if this does not jeopardise creditor's interests.

If continuation of the business is not in the interests of the creditors, the insolvency administrator must shut down the business and sell the assets.

The duration of proceedings may vary from several months up to several years, depending on the respective case. The proceedings end by court order after a final distribution of the insolvency quota.

If a debtor wants to prevent his or her assets from being sold, he or she can still file a restructuring plan at any stage of the proceeding and thereby try to restructure the insolvent entity itself.

Restructuring proceedings

Restructuring proceedings with self-administration (these are debtor-in-possession proceedings) and restructuring proceedings without self-administration both aim at the restructuring of the insolvent entity as a going concern.

At the beginning of the proceedings, an administrator is appointed by court which either merely supervises the debtor (i.e., in self-administration, the administrator is then called a Sanierungsverwalter) or manages and represents the business in full (i.e., in proceedings without self-administration, the administrator is then called a Masseverwalter as in bankruptcy proceedings).

The proceedings are only called restructuring proceedings if the debtor already presents a restructuring plan together with the initial application to open insolvency proceedings. The plan must provide for a minimum restructuring quota of 30 per cent in case of proceedings with self-administration and 20 per cent in case of proceedings without self-administration (in each case payable within two years).

The restructuring plan must be:

  1. approved by the creditors' meeting (there is a double-majority requirement, i.e., simple majority of the creditors present in the sanctioning hearing and of the represented capital of claims); and
  2. approved by the insolvency court (the court can only approve the plan if the plan treats unsecured creditors equally (with rare exceptions), does not affect rights of preferential and estate creditors and if the plan is feasible and appropriate in comparison to an alternative liquidation scenario).

Timely quota payment leads to a debt discharge in the amount exceeding the restructuring quota; hence, the discharge can be up to 80 per cent of the unsecured debt.

Restructuring proceedings are debtor driven. Creditors can neither force the debtor to present a restructuring plan nor present a restructuring plan (or counterproposals) themselves (but they can of course vote on the plan).

Restructuring proceedings can in the best case be finished within around three months (especially in case of self-administration as such must be revoked by court if the restructuring plan is not approved by the creditors within 90 days after opening of proceedings).

Ancillary insolvency proceedings

Ancillary insolvency proceedings are mainly relevant within the scope of the EIR. If the centre of main interest (COMI)4 of the debtor is in another EU member state but the debtor has a branch and assets5 in Austria, a secondary insolvency proceeding can be opened in Austria which is limited to the 'Austrian assets'. There are few examples of such proceedings in Austria, but the recent case of NIKI Luftfahrt GmbH6 has shown the various challenges in connection with ancillary proceedings. The duration of ancillary proceedings opened in Austria mainly depends on the complexity of the main proceedings, the cooperation between the competent courts and the appointed administrators, etc. Generally, proceedings in a cross-border context tend to take longer than 'purely' national proceedings.

Outside the scope of the EIR, international jurisdiction is not harmonised and depends on the existence of bilateral treaties. Ancillary proceedings in this context have been rarely relevant so far.

iv Starting proceedings

Bankruptcy proceedings can be commenced by the debtor or creditors (this includes ancillary insolvency proceedings). Restructuring proceedings can only be commenced by the debtor.

General requirement for the opening of insolvency proceedings is the debtor's insolvency (i.e., illiquidity or over-indebtedness). Illiquidity within the meaning of the Insolvency Code means that the debtor cannot pay all debt as it falls due and is not able to acquire the necessary funds to satisfy all of its due debt within a reasonable period of time. Liabilities becoming due in future or not yet payable (e.g., deferred or statutorily subordinated liabilities) do not have to be considered; only matured liabilities are relevant. Over-indebtedness within the meaning of the Insolvency Code means that the debtor's liabilities exceed its assets based on liquidation values and the debtor has a negative forecast on its continued existence (negative Fortbestehensprognose). The duty to file for insolvency for directors is linked to illiquidity and over-indebtedness.

Besides, restructuring proceedings may (there is no duty to do so) already be commenced by the debtor in case of impending illiquidity.

Upon commencement by the debtor, proceedings are usually opened very quickly (i.e., within a few days). If creditors commence proceedings, the court must first assess whether the creditor is formally entitled and whether the debtor is indeed insolvent; this process may take weeks or even months.

Debtors may mainly oppose commencements of a creditor by arguing that the debtor is in fact not insolvent or that the creditor is not formally entitled.

v Control of insolvency proceedings

Austrian insolvency proceedings are mainly controlled by the insolvency court and an appointed administrator who must both primarily seek to protect the creditors' interests. In restructuring proceedings with self-administration, also the debtor can significantly influence proceedings.

Insolvency court

Other than in other countries such as the UK, the insolvency court is involved in all insolvency proceedings from the beginning and involved in, and competent for, all main decisions. The court, among other things, decides on the opening of proceedings, appointment of the administrator and a possible creditors' committee, the sale of the business or relevant assets and the end of the proceedings.

Besides, the court supervises the proceedings as well as actions of the administrator and the debtor.


The administrator is appointed by the court out of a list of potential candidates. In bankruptcy proceedings and restructuring proceedings without self-administration, he or she is called a Masseverwalter; in restructuring proceedings with self-administration, he or she is called a Sanierungsverwalter. Administrators are usually lawyers; in most cases, the individual lawyer and not the law firm is appointed.

Neither the debtor nor creditors can formally influence the court's selection but they may try to put forward proposals.

The Masseverwalter must in particular manage the debtor's estate and inventory, administer and sell the debtor's assets. He or she must meet the objective standards of a professional expert. A breach of the described duties may lead to personal liability. In restructuring proceedings with self-administration, the above tasks are split between the debtor and the supervising Sanierungsverwalter.

Debtor and directors

Before the opening of insolvency proceedings, directors are subject to a strict duty to file. As soon as the debtor becomes illiquid or over-indebted, directors must file for insolvency proceedings without undue delay and not later than 60 days. This 60-day period is considered a maximum period. If there are no directors, the duty to file is with controlling shareholders.

Also within insolvency proceedings the debtor is represented by its directors. The role of the debtor depends on the type of proceedings. In bankruptcy proceedings and restructuring proceedings without self-administration, the debtor and its directors are automatically deprived of power from day one. Still, directors remain formally appointed and must cooperate with the administrator. Further, the debtor is party of the proceedings and can thereby challenge court decisions or try to influence the proceedings by presenting a restructuring plan.

In restructuring proceedings with self-administration, the debtor remains in the driver's seat and the directors can continue running the daily business (supervised by the court appointed administrator).7


Commencement of insolvency proceedings does not affect the corporate structure, which is why shareholders keep their formal ownership rights. Still, they can as a general rule neither instruct the administrator nor participate in court hearings (unless they are also creditors). In restructuring proceedings with self-administration, shareholders may try to instruct the self-administrating directors.

There is no statutory debt-to-equity-swap in Austria (thus, shareholders cannot be forced to sell or transfer their shares).


Creditors cannot actively 'run' the proceedings but have certain rights of control. The creditors' committee (such must, e.g., be appointed by the court in case of the sale of the business and in complex proceedings) must approve certain actions and supervises and supports the administrator.8

Further, creditors have access to the court files, can participate and vote in creditors' meetings and in court hearings. They can, for example, challenge court decisions or contest claims filed by other creditors. The arguably most important right is the right to vote on and approve or reject a proposed restructuring plan.

vi Special regimes

Besides the Insolvency Code, special regimes apply for banks (Act on the Recovery and Resolution of Banks), insurance companies (Act on the Supervision of Insurance Companies) and pension funds (Pension Fund Act). Such institutions can still go into bankruptcy proceedings if tools provided in the special regimes do not work out. Rules on restructuring proceedings do generally not apply for such institutions.

There is no concept of a group insolvency in Austria; each entity must be assessed individually and – if necessary – insolvency proceedings must be opened over the assets of each respective entity; usually also different administrators are appointed. Following the EIR, rules on cooperation within group insolvencies have also been included in the Insolvency Code.

vii Cross-border issues

Implications of the EIR have already been addressed before. Foreign insolvency proceedings are automatically recognised in Austria if they are mentioned in Annex A of the EIR. Outside the scope of the EIR, foreign insolvency proceedings are basically recognised if the COMI is in the respective foreign country and basic principles of such foreign proceedings are comparable to Austrian insolvency law.

Challenges in relation to cross-border insolvency often result from the different interpretation of COMI in different member states (as recently shown in the case of NIKI Luftfahrt GmbH). Besides, matters of cross-border cooperation between courts and insolvency administrators have not been extensively tested yet.

Forum shopping of companies is not a frequent problem in Austria as there is a well-functioning private workout practice.


The Austrian economy is currently in a period of growth (GDP growth of 3 per cent in 2017 and similar outlook for 20189 and steadily decreasing unemployment rates).10 Correspondingly, company insolvencies are at an all-time low.11

In 2017, around 5,100 companies filed for insolvency,12 in the first half-year of 2018 around 2,600 so far.13 This is the lowest rate regarding company insolvencies for 20 years.14 Most insolvencies were opened in Vienna. Insolvencies with total liabilities of more than €100 million are rather rare (the newest insolvencies in this size were the Imperial-Group, the Wozabal Group, SFL Technologies and NIKI Luftfahrt GmbH). The vast majority of company insolvencies relates to small companies with liabilities of less than €2 million (around 95 per cent in the first half of 2018).

Almost two-thirds of insolvencies affect relatively young businesses (established 2010 or later). Most insolvencies affect Austrian limited liability companies (around 40 per cent) or individual businesses (also around 40 per cent). Especially insolvencies over stock corporations or private foundations are very rare.

Affected industry sectors are in particular construction (around 20 per cent of total company insolvencies in the first half-year 2018), corporate services (around 20 per cent), hospitality (around 13 per cent) and traffic (around 8 per cent, traffic mostly because of the insolvency of NIKI Luftfahrt GmbH).

In 2017, around four-fifths of insolvencies were bankruptcy proceedings (primarily aiming on the winding up of the company) and only around one-fifth restructuring proceedings (primarily aiming on the restructuring of the insolvent entity). Still, statistics do neither show how many businesses were restructured in private workouts nor in how many of the bankruptcy proceedings the business was sold as a going concern or a restructuring plan was presented at a later stage.


In 2017 and the first half-year 2018, several large plenary insolvency proceedings determined the press landscape. The following list shows the most interesting examples:15

NIKI Luftfahrt GmbH

The most followed and discussed insolvency case in the past 12 months was NIKI Luftfahrt GmbH (an Austrian GmbH).16 NIKI was an Austria-based airline company with more than 1,000 employees and more than €150 million of liabilities, which formed part of the German Air Berlin group. Following the opening of insolvency proceedings over the assets of Air Berlin in Germany and after a sale of NIKI to Lufthansa failed, NIKI also filed for insolvency in Germany in December 2017. NIKI was registered in the Austrian companies' register and its corporate seat was in Austria. However, NIKI argued that its COMI was in fact in Germany because, among other things, its airline operations were to a large part handled by Air Berlin.

Preliminary insolvency proceedings were opened in Germany and the preliminary German insolvency administrator sold most of NIKI's assets (especially slots) to IAG/Vueling after an exciting bidding process over the Christmas holidays. IAG/Vueling also granted post-commencement financing.

Before closing of this sale, an Austrian creditor challenged the decision of the German insolvency court to open preliminary proceedings in Germany and filed for the opening of main insolvency proceedings in Austria. The creditor argued that the COMI of NIKI was in fact in Austria.

In January 2018, the German court of appeal confirmed the creditor's argumentation and a few days later, main insolvency proceedings were opened in Austria. This was particularly controversial as there was still the possibility of filing an appeal against the decision of the court of appeal in Germany but the Austrian competent judge argued that there was in fact no German proceeding any more. Therefore, he considered himself competent to open main insolvency proceedings in Austria. In order not to jeopardise a possible sale of NIKI's business, parties refrained from starting a complex court dispute but rather found a practical solution. The Austrian main insolvency proceedings therefore remained and the German insolvency proceedings were modified into secondary insolvency proceedings.

The Austrian main insolvency administrator and the German secondary insolvency administrator then started a second bidding process and finally sold most of NIKI's assets to Laudamotion (a new airline established by the Austrian entrepreneur Niki Lauda, the initial founder of NIKI). The insolvency proceedings in Austria and Germany are still pending.

This insolvency especially showed the challenges connected with cross-border insolvencies.


In March 2018, the Wienwert group, a large real estate group with investments in several renown real estate projects, had to file for insolvency (in total 13 separate bankruptcy proceedings).17 The group was mainly financed by bonds issued towards more than 900 (many of them retail) bondholders in the amount of around €35 million. These bondholders may lose all of their investment as the issuance was structured in a way that the bondholders did not receive security on the real estate itself.

According to the media, the public prosecutor's office investigates against part of the (former) founders and management of the group (among others, regarding accounting fraud) especially in relation to the bond issuances. Also, the involved insolvency administrators assess possible compensation claims.

In order to allow a bundled representation of interests of bondholders, the insolvency court appointed trustees who are also part of the appointed creditors' committee.18

Proceedings are still pending.

Imperial Group

The insolvency of the Austrian Imperial group (in total six restructuring proceedings without self-administration opened in autumn 2017) is remarkable because of the large number of creditors (around 25,000 and many of them retail financial investors) and liabilities of more than €100 million.19

Via a complex participation and membership structure, creditors invested in hotel and apartment real estate of Imperial and a holiday club of the Cordial hotel group as part of the Imperial group.

Because of the large number of creditors, the insolvency administrators offered a standard online tool for creditors to file their insolvency claims.

Imperial and Cordial plan to continue their businesses after the restructuring plans in all six proceedings being confirmed by the creditors and sanctioned by court.

Wozabal Group

This insolvency was one of the largest in 2017. Six members of the Wozabal Group filed for insolvency in August 2017 affecting around 800 employees and liabilities of around €114 million.20 Wozabal is one of the largest textile lessors in Austria but fell into financial difficulties because of a too rapid growth and too many investments which could not be repaid in time anymore.

Within the proceedings, Wozabal offered its creditors a restructuring plan with a quota of 20 per cent. The creditors rejected the plan, which is why the administrator sold the business as a going concern to Salesianer Miettex, a competitor (media reports about a purchase price of around €65 million). Significant parts of the business and most of the jobs could be saved.

The bankruptcy proceedings over Wozabal itself are still pending but show that Austrian insolvency law provides for different ways to rescue a business as a going concern.

SFL Technologies

SFL Technologies GmbH is an Austrian technology business focusing on plant, mechanical, façade and steel construction as well as e-mobility, lightning, glass and energy technology.21 SFL's insolvency was triggered by the loss of a key project and affected around 190 employees and around €113 million of liabilities.

Proceedings were opened in November 2017 and terminated in May 2018 after the creditors had agreed to an improved restructuring plan offering a 30 per cent quota in April 2018 (the initial restructuring plan offering a 20 per cent quota was rejected by the creditors in January 2018). Within the proceedings, SFL's business has been restructured and the number of employees was reduced down to around 40.

This insolvency shows how Austrian insolvency law allows the debtor to restructure its business by, for example, shutting down non-profitable parts of the business, taking advantage of eased termination rights, etc. At the same time it shows how creditors can try to force the debtor to improve a proposed plan by rejecting an inappropriate proposal.


Ancillary insolvency proceedings do not play a major role in Austria. The best-known example of a cross-border insolvency with main and ancillary proceedings opened in different member states is the case of NIKI Luftfahrt GmbH.


As the Austrian economy is predicted to remain stable or to continue to grow, it is not expected that the insolvency landscape will change substantially within the next year.

Existing legislation is regularly evaluated but for now, no recent legislative changes are envisaged. The harmonisation efforts discussed at an EU level (proposed directive on preventive restructuring frameworks)22 led to a further dynamic in the respective working groups as it will have to be assessed how to implement such preventive restructuring tools into Austrian law.


1 Gottfried Gassner is attorney at law and partner, and Georg Wabl is attorney at law, at BINDER GRÖSSWANG Attorneys at Law.

2 Because of the confidentiality of such restructurings, no detailed statistics are available.

4 Within the meaning of Article 3(1) EIR.

5 Both within the meaning of Article 3(2) and Article 2 No. 9 and 10 EIR.

6 Both Austrian and German courts considered themselves competent for main insolvency proceedings. Finally, the main insolvency proceedings were opened in Austria and secondary proceedings were opened in Germany (see further details in Section III.i).

7 A current topic under discussion is whether directors in self-administration may be subject to the same liability rules as insolvency administrators.

8 Individual creditors do not have a formal right to become part of the committee.

9 See latest statistics of the Austrian Economic Chambers (Wirtschaftskammer Österreich): http://wko.at/statistik/prognose/prognose.pdf (accessed on 2 August 2018).

10 See latest statistics of the Austrian Public Employment Service (Arbeitsmarktservice Österreich):
www.ams.at/_docs/001_uebersicht_aktuell.pdf (accessed on 2 August 2018).

11 See detailed statistics of Kreditschutzverband 1870 (the largest Austrian association for the protection of creditors) of 2017 and the first half-year of 2018: https://www.ksv.at/sites/default/files/assets/documents/171231_ksv1870_insolvenzstatistik-unternehmen_2017.pdf and https://www.ksv.at/sites/default/files/assets/documents/180630_ksv1870_insolvenzstatistik-unternehmen_hj1-2018.pdf (all accessed on 2 August 2018).

12 Around 2,000 of them were not opened because of a lack of cost-covering assets.

13 Around 1,000 of them were not opened because of a lack of cost-covering assets.

14 At the same time, there is a record rate for private insolvency proceedings in 2018 because of a recent change in legislation.

15 The list does not address out-of-court restructurings that were also partly discussed in media.

18 Austrian law allows this in certain circumstances.

21 In the press, e.g., https://steiermark.orf.at/news/stories/2894324/ (accessed on 2 August 2018).