Continuity of a business in case of insolvency proceedings
Generally, the liquidator checks whether a business can be continued after insolvency proceedings are opened.
Within 90 days after insolvency proceedings are opened, a reporting session must take place in court. No later than at this point, the liquidator reports whether the conditions for the business being closed immediately or for operations to continue have been met.
In the time between the opening of insolvency proceedings and the reporting session, the liquidator will review what chance the business has to continue to operate and the prospects for successful reorganisation. Up to the date of the reporting session, the liquidator must continue the business, unless it is apparent that continuation will lead to an increased losses to insolvency creditors.
The debtor must provide the liquidator with information that includes the following:
- they must prepare a list of creditors
- provide bank details
- provide information about existing contracts and any pending court proceedings
- if the intent is continue, they must make a list of monthly fixed costs.
Furthermore, the debtor must submit a list of assets to the court.
There must also be current annual accounts and updated accounting records. The liquidator must analyse the figures and prepare a prognosis for continuing operation. If the outcome is negative, the liquidator must submit an application for closure.
In general, these rules also apply to entrepreneurs from EU Member States in Austria.
Security deposit for continuation
If the prognosis is negative, the debtor can prevent the company from being closed by filing a security deposit for continuation. The purpose of this is to avoid creditors suffering financial losses from continuation.
Continuation of a business
In the reporting session, the liquidator must report on whether the conditions for closure or continuation are met and whether a reorganisation plan is in the interest of the creditors.
If the conditions for continuation are met, the insolvency court must after hearing the creditors issue a decision regarding continuation. If a reorganisation plan is also under consideration because it is in the interest of the creditors and is feasible, the debtor can apply for a deadline for submission of a reorganisation plan.
If, during the reporting session, the debtor submits an application for the granting of a deadline for submission of a reorganisation plan, the business cannot be wound up within this period of no more than 14 days. If the debtor then applies for a reorganisation plan within these 14 days, the business will be continued. If the reorganisation plan is not accepted within 90 days or it is not in the interest of the creditors, the business is closed and wound up.
Section 114a of the Insolvenzordnung (IO)
Continuance of a business after opening of insolvency proceedings (→ WKO)
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