Government proposal for the Insolvency Law Amendment 2021

Jul 7, 2021 Benn-Ibler Rechtsanwälte

The Federal Government has submitted the government bill for the Restructuring and Insolvency Directive Implementation Act (Restrukturierungs- und Insolvenz-Richtlinien-Umsetzungsgesetz - RIRUG). Under the amendment, companies should be able to avert insolvency with the help of a pre-insolvency restructuring procedure. In addition, debt relief will be made easier for companies and consumers (although for the latter this will be possible only until 2026).

At the heart of the amendment is the new Restructuring Regulation (Restrukturierungsordnung - ReO). For companies in financial difficulties, but which are fundamentally viable, a preventive restructuring procedure will be created to avert actual insolvency. (Read more here).

Changes have been made in particular to the protection against avoidance. According to the new Sec. 36a of the Insolvency Code (Insolvenzordnung - IO), new financings (= financial support of new or existing creditors for the implementation of the restructuring plan) and interim financings (Sec. 18 (1) ReO) are not voidable due to knowledge of insolvency (Sec. 31 (1) (3) IO). This is only the case, however, if these financings have been approved by the court. Furthermore, transactions approved by the court are not voidable under Sec. 31 IO if they are directly necessary for the negotiation of a restructuring plan (e.g. fees, consultancy costs).

The foreclosure procedure with residual debt discharge is supplemented by a shortened (three instead of five years) foreclosure procedure ("repayment plan procedure") (Sec. 199 IO). The requirements for initiation, however, have been tightened. First, a repayment plan procedure is not allowed if the debtor does not apply for insolvency proceedings within 30 days of the public announcement of the decision of obvious illiquidity (Sec. 49a of the Austrian Execution Code, new version) (Sec. 201(2)(1) IO). There is some relief regarding this point if the debtor is a consumer (Sec. 201 (3) IO). Second, the debtor must not have intentionally or gross negligibly prevented or reduced the payment to insolvency creditors by creating disproportionate liabilities or squandering assets within a period of five, rather than three, years prior to the filing of the petition (Sec. 201(2)(2) IO).

For companies, this procedure shall be possible on a permanent basis. Consumers may apply for the repayment plan procedure until July 16, 2026 at the latest.

The amendment is to enter into force as early as July 17, 2021. 

950 d.B. XXVII. GP - Government Bill