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Restructuring rethought – a ray of hope

In implementation of the European Restructuring Directive, the Austrian legislator has passed a federal law on the restructuring of companies (Restructuring Act – ReO). This law has now been promulgated and comes into effect (retrospectively) on July 17th, 2021.

The Restructuring Act provides for judicial restructuring proceedings, which are essentially open not only to corporations and partnerships but also to individuals operating a business.

Restructuring plan

The core element of the proceedings is a so-called restructuring plan, which contains a wide range of possible restructuring measures, including in particular the deferral and reduction of creditors’ claims. In principle, the restructuring plan has to be submitted when the proceedings are initiated; however, it may also be drawn up during the proceedings with the assistance of a restructuring representative if at least a restructuring concept is presented in the application.

Avoiding bankruptcy

The aim of the proceedings is to avert bankruptcy and to ensure the viability of the company. The initiation of the proceedings requires “probable insolvency”, which is given in particular when

  • insolvency is imminent or
  • the equity ratio (Section 23 URG) falls below 8% and the notional debt repayment period (Section 24 URG) exceeds 15 years.

Despite the threat to the existence of the company, it must be viable, which is why a continuation prognosis is required, which can also be conditional, i.e. dependent on the acceptance and confirmation of the restructuring plan.

Stay of execution

In contrast to judicial insolvency proceedings, the Restructuring Act does not provide for a stay of proceedings; however, upon application by the debtor and if more closely defined conditions are met, the court may order a stay of execution. This stay of execution can apply to all creditors; in that case, it is to be made public in the edict file. This publication can be prevented in such a way that, at the debtor’s request, it is restricted by the court to one or more creditors or classes of creditors, to certain claims or categories of claims, etc. The stay of execution also leads to a suspension of the debtor’s obligation to file for insolvency in the event of over-indebtedness under insolvency law, limits the obligation to file for insolvency in the event of insolvency and also eliminates or at least reduces the liability of the corporate bodies for the delay in filing for insolvency.


In principle, it is possible to conduct the proceedings with the debtor self-administered. As a rule, however, a restructuring representative, whose legal status is similar to that of an insolvency administrator, will be appointed. The restructuring representative’s authority is essentially defined by the court; however, the debtor must retain a minimum degree of self-administration, such as performing legal acts of normal business operations within the meaning of Section 171 (1) IO.


The Restructuring Act provides for a “legal standstill” for essential, yet to be fulfilled contracts which are necessary for the continuation of the daily operations of the company. However, there is no preferred termination of long-term contractual obligations in accordance with the provisions of Sections 21 et seq. of the IO, such as long-term supply contracts, rental or leasing. Furthermore, existing and future claims of current or former employees are excluded from the restructuring proceedings. Consequently, there are also no priority termination options for employment contracts within the meaning of Section 25 IO.

Creditor classes

Based on the requirements of the EU Directive, the draft of the Restructuring Act provides for the mandatory formation of creditor classes, which include in particular

  • creditors with secured claims (especially liens),
  • creditors with unsecured claims and
  • creditors in need of protection, in particular creditors with claims below EUR 10,000.00 (this is intended for “small suppliers”).

Only SMEs (as defined in Section 221 (1) and (1a) UGB) are not required to form creditor classes.

Closing requirements

In order to conclude the restructuring plan

  • a simple (head) majority of the creditors involved in each class and
  • a qualified majority of 75% of the total amount of the claims of the creditors involved are needed.

The court then has to confirm the restructuring plan if the majority of creditors in each creditor class is achieved, provided that more closely defined conditions are met. The interests of the outvoted creditors are protected by the criterion of creditor interest, according to which no outvoted creditor may be placed in a worse position than in the case of liquidation or in the case of the next best alternative scenario in the event of non-confirmation of the restructuring plan (e.g. if a realistic restructuring plan is drawn up in judicial insolvency proceedings).

Cram down

Even if the approval of all creditor classes is not achieved, the plan can be confirmed due to a cross-class cram down. The principle of equal treatment of creditors is complied with insofar as negative creditor classes must either be placed on an equal footing with classes of equal rank or better placed than subordinate classes.

Termination of proceedings

The legally binding confirmation of the restructuring plan results in the termination of the proceedings. Failure of the restructuring proceedings shall result in their termination, which shall occur in particular if

  • insolvency proceedings have been opened against the debtor’s assets
  • the debtor has not submitted a restructuring plan within the time limit set by the court;
  • the debtor withdraws the application for acceptance of a restructuring plan;
  • the creditors reject the restructuring plan and the hearing is not extended, etc.

The confirmation of the restructuring plan may be challenged by means of an appeal, but such appeal has no suspensive effect. Rather, the aim is to avoid the annulment of the confirmation of the restructuring plan and to award the injured creditor compensation for his loss.

“Short procedure for settlement disruptors”

The draft also provides for a simplified restructuring procedure if

  • only financial creditors (mainly banks) are affected creditors,
  • a majority of at least 75% of the creditors of capital in each creditor class have consented, and
  • the debtor and the consenting creditors have signed the restructuring plan, with the declarations of consent being not older than 14 days.

This option is to be applied in particular if the unanimity requirement has failed in an out-of-court settlement because of one or a few creditors (“settlement disruptors”).

European restructuring procedure

The recognition of the restructuring procedure as a European restructuring procedure is only possible if it is published in the edict file. Such a European restructuring procedure can definitely make sense in matters with a significant international dimension.

Limitation of the right to contest

In addition, a limitation of the risk of contestation for interim and new financing is provided.


Basically, the Restructuring Act represents a very successful legal implementation of the relevant EU directive, which is harmoniously integrated into the existing insolvency law in essential points. In our opinion, its success will essentially depend on whether it is possible to successfully conduct the proceedings only with the involvement of the stakeholders, thus not publicly, since comparable “previous proceedings” (such as the pre-insolvency proceedings standardized by the Act Amending Insolvency Law 1982 or the proceedings under the Business Reorganization Act) failed mainly because of the associated publicity. However, given the appropriate advice from an expert, a restriction of publicity to the stakeholders appears realistic. Even though they only take part in the procedure if authorized by a creditor, creditor protection associations will also play a decisive role since they have to pursue the interests of all members according to their statutes.

Our experts Thomas Kurz and Michael Haiböck will be happy to answer your questions on these topics by phone or at akut@hnp.at.


This article is for general information only and does not replace legal advice. Haslinger / Nagele Rechtsanwälte GmbH assumes no liability for the content and correctness of this article.


28. July 2021

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