The new Restructuring Regulation: a flop or an interesting restructuring alternative?

Even before the new Restructuring Regulation (ReO) came into force (July 17th, 2021), we presented its key points here.

After a period of application of more than a year now, it is appropriate to draw a kind of interim conclusion. It is a fact that – according to our knowledge – no restructuring proceedings have yet been initiated.

So, is this a “stillbirth” or is it a restructuring alternative that will at least be relevant in future practice?

First of all, we would like to point out the main positive aspects of the ReO:

• Wide range of restructuring measures, whereby in legal terms the classic restructuring tools, namely
  • Debt relief
  • Deferral

come into question.

• No minimum quota
• Affected creditors are assigned to creditor classes in which the restructuring plan is voted on separately.
• Upon application, a stay of execution is to be issued, which offers the following advantages in particular:
  • Insolvency protection (no opening of insolvency proceedings)
  • Contract protection (for important contracts with suppliers)
  • Liability protection (for company bodies)
  • No publicity (if the stay of execution was only requested for individual creditors/classes)
• Short procedure in case of “settlement disturbers”
• Restructuring agreement with banks can be enforced against “hold out creditor”
• Cramdown
• Lack of consent of a class of creditors can be replaced by a court confirmation of the restructuring plan.

However, we should also mention some negative aspects from our point of view:

• Not suitable for (partial) sales of companies because, in contrast to judicial insolvency proceedings, there is no exemption from the relevant liability provisions for company purchasers
• Not recommended for planned personnel measures because
  • No insolvency payment protection
  • No privileged termination of employment (even termination claims must be satisfied in full)
• Active restructuring contribution of a shareholder not enforceable or only enforceable in a “roundabout way”/no court-ordered debts equity swap
• Nostay of proceedings

Interim summary:

Irrespective of the negative aspects outlined above, there are case constellations that make the initiation of restructuring proceedings appear expedient. In particular, the possibility of avoiding publicity of the proceedings and the fact that the creditors concerned are not to be offered a minimum quota should be emphasized here. Also, a sensible selection of creditor classes and a well-prepared cramdown can also achieve a restructuring result that is pleasing to all stakeholders. One should therefore not prematurely call the ReO a flop, but rather take a procedure under the Restructuring Regulation into account when considering restructuring!

Disclaimer

If you have any questions on these topics, our experts Thomas Kurz and Michael Haiböck will be happy to answer them 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.

 

17. August 2022

 

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