OGH on Securing Administrator Costs in Restructuring Proceedings

Mar 14, 2025 Benn-Ibler Rechtsanwälte

The Austrian Supreme Court (Oberster Gerichtshof, hereinafter OGH) has made it clear that paying or securing the costs of proceedings is a mandatory requirement for confirming a restructuring plan as part of insolvency proceedings. A mere deferral isn’t sufficient.

In the case at hand, the debtor had filed an application for restructuring procedures with self-administration. The court of first instance decided in favour of the debtor’s filing. A restructuring administrator as well as a creditors’ committee were appointed.

During the proceedings, the debtor obtained a debtor-in-possession loan of EUR 25 million with the consent of the creditors’ committee. A restructuring plan was proposed which provided for a recovery rate of 30% for the insolvency creditors within two years. If additional capital became available through the realisation of assets, an additional payment (Superquote¹) would be made. In addition, the debtor was placed under the supervision of an insolvency trustee.

The restructuring plan was accepted by the majority of the creditors. The Republic of Austria as one of the creditors, however, did not accept the restructuring plan and appealed against the decision of the court of first instance, arguing that the costs of the proceedings were not sufficiently covered, in particular the remuneration of the restructuring administrator, amounting to approximately EUR 11 million. It also doubted the viability of the restructuring plan, as the debtor was financially unstable and insolvency proceedings had already been opened against subsidiaries in Germany. The court of appeal agreed with these arguments and ruled that the restructuring plan would not be confirmed.

The OGH has recently confirmed this decision, stating that the restructuring administrator’s remuneration of approximately EUR 11 million was unsecured, especially since the restructuring loan was not suitable as security, as these funds were not earmarked and it could not be ruled out that the money would be used for current liabilities. However, the payment or guarantee of the restructuring administrator's remuneration is a mandatory condition for the confirmation of a restructuring plan under section 152a(1)(1) of the Austrian Insolvency Act (Insolvenzordnung), IO). As the OGH has already ruled in 8 Ob 97/24h, a deferral of the remuneration is not permissible. Therefore, the restructuring plan had a material defect and confirmation of the restructuring plan was to be refused.

OGH 8 Ob 120/24s (5 December 2024)

_{(1) In Austria, the distribution quota is in addition to the creditors of a possible payment plan quota. This is called a “Superquote”. If no quota can be generated for the insolvency creditors, the insolvency proceedings will be terminated by the court for lack of assets.}