The course of insolvency proceedings
Insolvent companies must apply to the court for the opening of insolvency proceedings (insolvency application) no later than 60 days after the occurrence of illiquidity or excessive debt. In insolvency proceedings they are debtors. In order to initiate insolvency proceedings, there must be sufficient assets to cover at least the start-up costs of the insolvency proceedings.
Insolvency proceedings are conducted either as bankruptcy proceedings or as reorganisation proceedings:
- The restructuring proceedings enable the restructuring and subsequent continuation of the company. This requires a restructuring plan. During the proceedings, the debtor or an administrator manages the company. If the restructuring plan is fulfilled, the debtor is released from the remaining debts.
- In bankruptcy proceedings, the company is in any case continued by an administrator. The debtor loses the power of disposal over the assets and is not released from the residual debts. However, it is also possible to submit a restructuring plan in ongoing bankruptcy proceedings.
Former entrepreneurs can also file for private bankruptcy as an over-indebted private person.
Who files the application for insolvency?
No later than 60 days after becoming insolvent or excessively indebted, the following must submit an application for institution of insolvency proceedings:
- Sole proprietors
- The partner with unlimited liability in the case of:
- the managing director in the case of:
- the management board in the case of:
Applications to institute bankruptcy proceedings can also be submitted by any of the creditors. The court may ask them to pay an advance on costs if there are no assets to cover the costs.
The application may be filed in writing or orally before the court.
Assets covering costs
In order to open proceedings, the debtor must have sufficient assets available to cover at least the costs of instituting insolvency proceedings.
Advance on costs
If sufficient assets are not available in a legal entity, following persons have to pay an advance on costs at the request of the court:
- the corporate representatives (maximum 4,000 euro) or
- by shareholders holding more than 50 percent of shares in the company.
Failure to institute bankruptcy proceedings due to there being insufficient assets to cover costs leads to withdrawal of the company's business licence.
Creditors having paid an advance on costs have a right of recourse against any other persons who would have been obliged to pay an advance on costs.
It is also possible to institute such proceedings merely in the event of a risk of Illiquidity. This increases the company's chance of survival.
The debtor has to submit an application for the institution of insolvency proceedings and the adoption of a restructuring plan. The restructuring proceedings are instituted by the court, and their institution publicly announced in the online insolvency register.
In the restructuring plan, the debtor offers to settle at least 20 percent of the debt in two years at the latest. This restructuring plan must be approved by the majority of creditors. This is confirmed by the court. When this confirmation becomes legally effective, the insolvency proceedings are deemed to be closed.
If the debtor subsequently fulfils the restructuring plan, she/he is released from the remaining debts.
There are two sorts of restructuring proceedings:
- In the case of restructuring proceedings with the debtor in possession the court will appoint an administrator. They are responsible for supervising the debtor, who retains the ability to use the company's assets and perform legal transactions.
- In the case of restructuring proceedings with the debtor not in possession a liquidator will be appointed and the debtor may no longer make use of their assets.
Applications to institute bankruptcy proceedings can be submitted
- either by the debtor themselves or
- by any of their creditors. In this case, the opening of restructuring proceedings is also possible as long as the debtor applies for the adoption of a restructuring plan in due time.
If no restructuring plan has been submitted, the court will institute the bankruptcy proceedings and their institution is publicly announced in the online insolvency register. (It is also possible to submit a restructuring plan whilst bankruptcy proceedings are ongoing.)
The court appoints a liquidator, who
- supervises all assets (including office furniture, warehouse inventory etc.),
- administers the bankruptcy estate and realises the assets to satisfy creditors' claims,
- receives the debtor's mail and
- decides whether to recognise or contest the amount of receivables that the creditors have claimed before court.
No later than 90 days after the opening of bankruptcy proceedings, the insolvency court shall decide, after hearing the creditors, whether the business shall be closed or continued.
As soon as the bankruptcy proceedings have been terminated, the debtor can again freely dispose of her/his own assets. However, she/he is not released from the remaining debts.
The insolvency administrator is appointed by the court and
- cannot be either a representative of the debtor or of the creditor
- must be of good standing, reliable and experienced in business
- must have sufficient expertise in business law or business management
- must ensure that the insolvency proceedings are conducted expeditiously.
A legal entity may also be appointed as a insolvency administrator.
A foreign insolvency administrator may also exercise all of the powers in Austria that they have in the state in which the proceedings are opened. They must comply with Austrian law and have no power to take coercive steps or adjudicate legal disputes.
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- Federal Ministry of Justice (→ BMJ)German text
- Court search (→ BMJ)German text
- Insolvency register (→ BMJ)German text
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