The number of bankrupt businesses in Austria fell to its lowest level since 1990 in 2020. There were only around 3,000 company insolvencies, with a drop in the overall number of insolvencies of almost minus 40%. This pattern persisted in 2021, with 1,059 bankruptcies occurring in the first half of the year, a decrease of around 45% from the same period the previous year. This year saw the fewest corporate bankruptcy in more than 40 years. The drop is currently 59% when compared to 2019, the final “normal year” before the COVID-19 pandemic. Additionally, the expected liabilities have decreased by about 78 percent to EUR392 million, falling even more dramatically. Due to the actions, the Austrian government took to address the COVID-19 situation, firm insolvencies decreased despite the severe economic downturn brought on by the pandemic. These included the provision of temporary employment, the provision of fixed cost subsidies, the assumption of obligations, the temporary suspension of the requirement to file for insolvency, and the suspension of tax responsibilities.
Procedures for liquidating a business
There are two primary methods in Austria for liquidating an Austrian company:
- Liquidation via insolvency.
- liquidation of solvents.
Bankruptcy liquidation
The Austrian Insolvency Code governs judicial insolvency proceedings involving businesses. There are various insolvency proceedings available under the legislation, including bankruptcy proceedings and restructuring proceedings with or without self-administration. Any of these procedures must be used with “illiquidity” or “overindebtedness” in mind. All of these “insolvent liquidation processes” are formally opened by court order and started either by the debtor or the creditor. An insolvency administrator, who serves as a liquidator, is chosen by the court. In general, the court is very important in a liquidation process since it controls what the administrator does. Proceedings might go on for months or perhaps years. A benefit of legal action is that a debtor can apply for bankruptcy at any time before or throughout the process.
Liquidation of solvents
A solvent debtor’s voluntary liquidation is governed by corporate law principles in addition to judicial bankruptcy processes. An Austrian legal organization may be dissolved for reasons specified in the law (such as the passage of time or a shareholder resolution) or according to a written agreement. A liquidator, who is typically the CEO, is appointed either voluntarily (by the company’s members) or compulsorily to oversee the process (by the court). The liquidator halts ongoing business operations, collects unpaid invoices, and controls obligations. An Austrian corporation must be liquidated, and the decision to do so must be signed and recorded in the general Commercial Register. The company gets taken from the Register once the liquidation process is complete.
Aspects of procedure
In bankruptcy procedures, either the debtor or a creditor may apply. On the other hand, only the debtor may request the start of restructuring proceedings. Official notice of the initiation of insolvency proceedings, whether bankruptcy or restructuring procedures, is given to the public (with or without self-administration). The official notice includes the debtor’s name, the name of the insolvency administrator, the kind of proceedings being initiated, the location and date of the creditors’ meeting, and the location and date of the examination hearing addressing the registered claims of the creditors. Other public registers, such as the land register and/or the company registration, also make the beginning of insolvency proceedings public.
Financial claims
In contrast to priority claims, unsecured creditors must file insolvency claims with the insolvency court. Their claims must be submitted within the time frame specified in the official notice, which expires 14 days before the examination hearing. Multiple examination sessions are typically provided in more complicated insolvency processes with many creditors. Claims may also be submitted after the filing period has passed, however, in this instance, the relevant creditor will be required to pay an extra cost of roughly EUR 70.
