Austria’s new restructuring act - an overview

The reduction of the discharge-of-debt period to 3 years was implemented through an amendment to the income levy procedure (“Abschöpfungsverfahren”) in the Insolvency Act (IO). A separate new law (Restructuring Act - ReO) deals with the restructuring procedure. This procedure is conditional upon the probable insolvency of the debtor (imminent insolvency or a fictitious debt repayment period greater than 15 years and own-funds ratio less than 8 %). In the event of an imminent insolvency, corporate debtors can now choose between a reorganisation procedure under the Insolvency Act (IO), or a restructuring procedure under the Restructuring Act (ReO). This can be considered advantageous to the debtor as they do not have to meet the insolvency quota of minimum 20%.

Noteworthy in the new act is the fact that only the debtor is allowed to apply for a restructuring procedure and subsequently to submit a restructuring plan. The debtor is obliged to adhere to this plan if they wish to prevent the official discontinuation of the restructuring procedure. It is compulsory to present a restructuring plan that is not patently unfit for purpose (viability test). The assessment of the debtor's ability to continue as a viable business must include a financial plan (with revenue-expenditure plan and cashflow statement) for the imminent period of the restructuring procedure so that it can be fairly assumed that the debtor will be able to pay the claims accruing during this time. In addition, the national transformation act provides that SMEs can opt not to treat affected parties in separate classes.

It will be interesting to see how extensively entrepreneurs will use this new restructuring procedure going forward.

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