Answer ... (a) Debtor
In Austria, all private individuals and legal entities, as well as partnerships, can become insolvent and be debtors in insolvency proceedings.
Upon the commencement of insolvency proceedings, the debtor’s legal position is significantly restricted. It loses most of its ability to dispose of the insolvency estate. Furthermore, there are restrictions in the area of public law and the debtor’s personal rights are massively affected too (eg, blocking of mail; obligations to provide information and to cooperate with the court; possibility of forced appearance before the court; and even imprisonment).
In reorganisation proceedings with self-administration and, to a certain extent, in debt settlement proceedings, the debtor remains authorised to dispose of the insolvency estate.
(b) Directors of the debtor
Like the debtor’s legal position, the legal position of its directors is also significantly restricted by the commencement of insolvency proceedings. However, a director’s position under corporate law will not expire automatically upon the commencement of insolvency proceedings. In reorganisation proceedings with self-administration, directors remain authorised to dispose over the insolvency estate.
(c) Shareholders of the debtor
Shareholders have no special rights in insolvency proceedings solely on the basis of their corporate status. If a company is liquidated in bankruptcy proceedings, shareholders will receive compensation only in the unlikely event that all other creditors of the company have been fully satisfied. If a company is restructured and continues to exist after the termination of insolvency proceedings, they will retain their position.
If shareholders are also creditors of the company, their claims may be subordinate to other insolvency claims if they result from so-called ‘equity-replacing payments’ by the shareholder to the company while it is in crisis.
(d) Secured creditors
Creditors that have a claim to preferential (‘segregated’) satisfaction from certain assets of the debtor are called ‘secured creditors’.
In general, secured creditors are not affected by insolvency proceedings. Therefore, secured creditors should not file their claims in insolvency proceedings like insolvency creditors. However, secured creditors regularly have a dual position because they are usually also insolvency creditors with their claim covered by the right of preferential satisfaction.
Apart from a few exceptions, secured creditors may also enforce their rights during the insolvency proceedings – vis-à-vis the insolvency administrator – both in and out of court. The enforcement of a security interest depends on the nature of the security and the terms of the security. Certain types of securities can be enforced even without court intervention. Furthermore, there is no stay of civil or enforcement proceedings for those creditors.
If secured assets are sold by the insolvency administrator, the proceeds will primarily be used to satisfy the secured creditors. Secured creditors exclude other creditors from payment from the secured assets up to the value of their claims. The residue from the separate estate after satisfaction of the secured creditors proceeds to the common insolvent estate.
(e) Unsecured creditors
A distinction must be drawn between:
- claims that arise after the commencement of insolvency proceedings (creditors of the insolvency estate); and
- claims that arose prior to the commencement of insolvency proceedings (insolvency creditors).
Insolvency creditors must file their claims with the insolvency court in writing or orally. The application must state:
- the amount of the claim;
- the facts giving rise to the claim;
- a description of the evidence; and
- if applicable, the rank claimed.
Insolvency creditors are also requested to file their claims within a period that usually ends 14 days before the general hearing. However, delayed filing of a claim is also admissible.
Insolvency creditors are paid out of the insolvency estate. They usually only receive a percentage of their claim – the so-called ‘insolvency quota’ – and therefore regularly suffer a partial loss of claim.
(f) Administrator
In Austrian insolvency proceedings, the main role is played by the insolvency administrator. The insolvency administrator’s duties include the following:
- custody and administration of the insolvency estate;
- review of the company’s economic situation;
- investigation of the status of the assets and establishment of an inventory;
- collection and protection of assets;
- identification of liabilities by contesting and acknowledging them in the general hearing;
- review of whether the company can be continued or reopened, and whether a reorganisation plan is in the creditors’ interests;
- continuation of the business until the report hearing;
- representation of the insolvency estate in and out of court;
- exercise of the option with regard to two-sided transactions not yet fully performed and decisions on whether certain permanent obligations should be terminated prematurely;
- enforcement of avoidance claims;
- realisation of the insolvency estate;
- accounting; and
- distribution of the proceeds of the insolvency proceedings.
The insolvency administrator is appointed by the insolvency court. He or she is obliged to carry out his or her duties with the care of a good businessperson. In case of a violation, he or she may be liable towards the insolvency estate or the creditors.
The insolvency administrator will receive a lump-sum remuneration for his or her work, which is regulated by law and will be paid out of the insolvency estate.
(g) Employees
Employment relationships are not affected by the commencement of insolvency proceedings. The insolvency estate becomes the debtor of wages payable since the commencement of insolvency proceedings. In bankruptcy and restructuring proceedings without self-administration, the insolvency administrator exercises the functions of the employer. In reorganisation proceedings with self-administration, the debtor remains functionally the employer, but the reorganisation administrator has certain powers of approval and objection.
However, there is the option of preferential termination. On the one hand, this is intended to make it possible to terminate employment relationships in a cost-effective manner. On the other hand, the legislature wants to ensure that those employees who are needed for the continuation of the company actually remain in the company.
In order to provide sufficient protection for employees of an insolvent employer, the Insolvency Remuneration Fund provides certain benefits to employees in the event of an employer’s insolvency. This fund is largely financed by contributions from all employers.
(h) Pension creditors
No separate role, rights or responsibilities are prescribed. However, there is some precedent that in certain cases, pension claims from a voluntary occupational pension will be paid by the Insolvency Remuneration Fund.
(i) Insolvency officeholder
See (f).
(j) Court
Although the insolvency administrator is the central figure in the insolvency proceedings, the insolvency court has important – especially supervisory and supportive – functions within the proceedings. They include the following:
- verifying the requirements for the commencement of insolvency proceedings and deciding on the commencement of proceedings;
- selecting and appointing the insolvency administrator;
- publishing announcements in the insolvency register;
- organising the notification of the commencement of insolvency proceedings (eg, in the company register, public books and ship and patent registers, as well as in seizure records);
- issuing instructions to and supervising the insolvency administrator;
- approving the closure of the company, certain legal transactions and the release of assets;
- convening and conducting various hearings (eg, report hearings, first creditors’ meeting, audit hearings, reorganisation plan hearing);
- deciding on the remuneration of the insolvency administrator, the execution of the distribution and the termination of the insolvency proceedings;
- examining the admissibility of a reorganisation plan, confirming the reorganisation plan and declaring the invalidity of the reorganisation plan; and
- deciding on the termination of insolvency proceedings.