Entrepreneurs may be able to avoid bankruptcy by anticipating difficulties - if they keep a close eye on the financial situation of their business.
Austrian insolvency proceedings are governed by the Insolvency Act (IO).
There are various ways of proceeding if a company becomes insolvent:
An out-of-court settlement is an extra-judicial agreement between the debtor and creditors. It can be viewed as a type of contract under private law. If no settlement is reached in this procedure, the debtor must file for insolvency proceedings no later than 60 days after insolvency has been determined.
The settlement proceedings enable an insolvent company to be restructured and then continued. There are settlement proceedings with and without the debtor’s personal responsibility.
Unlike settlement proceedings, proceedings for bankrupt companies are continued by the liquidator rather than the debtor. Debtors as well as any of their creditors can file for bankruptcy proceedings. Other proceedings can be initiated within the context of bankruptcy proceedings.
A payment plan is an administrative procedure without a minimum repayment amount. A payment plan can either be put forward together with the application for insolvency proceedings or during the course of the bankruptcy proceedings.
The absorption procedure represents a ‘safety net’ for cases in which administration or a payment plan cannot be agreed due to lack of consent by the creditors. Reasons for this may be that creditors view the repayment period as excessive or that the repayment amount offered is too low.
Insolvency remuneration assurance
Insolvency remuneration assurance guarantees the means of subsistence of employees and their dependants should their employer be unable to pay them due to insolvency. It is based on the principle of insurance and is regulated by the Insolvency (Remuneration Assurance) Act (IESG).
Re-establishment after insolvency
The Austrian Trade Regulations Act dictates who is allowed to carry out business activities in Austria. Within the context of bankruptcy and insolvency, the following are examples of circumstances in which permission to carry out business activities would not be granted:
- unpaid liability orders (e.g. fraudulent bankruptcy);
- dismissal of insolvency proceedings due to lack of assets;
- annulment of insolvency proceedings due to lack of assets.
Insolvency may be avoided by carrying out a re-organisation process as set out in the Business Re-organisation Act. A prerequisite for this procedure is that re-organisation is required but insolvency is not imminent.
Re-organisation is required if a company becomes endangered due to negative economic trends and action must be taken in order to ensure that the business can be continued on a sustainable basis.
Entrepreneurs having experienced bankruptcy should not lose confidence in their ability to embark on a new business.
The Austrian Federal Economic Chamber provides its members with comprehensive information about bankruptcy.
Unternehmer in Not (Companies in Distress) provides field reports, information on crisis prevention, liquidity, loans, creditors and a best-practice example among other things.
Useful information for people living and working in Austria is available from HELP, the Austrian government help service or the Business Service Portal USP.
The Carinthian Economic Promotion Fund supports the redevelopment, re-organisation and restructuring requirements of Carinthian companies via the KSG Kärntner Sanierungsgesellschaft mbH (Carinthian Redevelopment Company Ltd.).