Dr Alexander Isola

Alexander Isola

Updates

Employment & Benefits

Are Employment Contracts Transferred in Restructuring Asset Deals?
Austria | 10 October 2007

It is accepted practice that when all of a debtor's assets are sold in an asset deal to an investor which uses them to establish a new company, the debtor's contracts of employment are terminated in the course of the bankruptcy proceedings and do not transfer to the new company. However, a recent ruling by the Vienna Regional Court of Appeals has thrown this position into doubt.

Insolvency & Restructuring

Restructuring plans and their impact on non-participating creditors
Austria | 05 April 2019

Under the Insolvency Act, once a restructuring plan has been confirmed, the debtor is discharged from its debt and is subsequently prevented from paying its creditors their deficiency or repaying other granted benefits. Consequently, any claims that were not registered during the insolvency proceedings – even if they should have been – fall under this restriction and cannot be repaid. That said, exceptions to the rule exist.

Avoidance of overdraft payments due to preferential treatment
Austria | 21 December 2018

The Insolvency Act provides insolvency administrators with an abundance of tools to challenge any actions committed by a debtor during a crucial period prior to the opening of insolvency proceedings. Two recent Supreme Court decisions summarise the existing judicature and further clarify the elements of avoidance due to preferential treatment.

Is Beneficial Ownership Register Act compliance an insolvency administrator's duty?
Austria | 05 October 2018

Before the most recent update to the online FAQ section by the responsible authority, the question of whether Beneficial Ownership Register Act compliance is an insolvency administrator's duty was unclear. Due to the tight timeframes for complying with the act and the range of practical problems arising from it, the question has caused headaches for insolvency law practitioners in Austria.

Liability for payments after company has become insolvent
Austria | 22 June 2018

If a managing director of a company makes payments after a substantive insolvency, they may be liable for damages under the Statute on Limited Liability Companies. Managing a company in a crisis situation requires special diligence and care. In order to avoid unpleasant surprises later on, where possible, the admissibility of envisaged future payments should be checked in advance.

European Commission proposes directive on preventive restructuring frameworks
European Union | 16 March 2018

The European Commission has proposed a directive on preventive restructuring frameworks in order to reduce significant barriers to the free flow of capital caused by differences in member states' restructuring and insolvency frameworks. It aims for all member states to implement key principles for effective preventive restructuring and second-chance frameworks, as well as measures to improve the quality and efficiency of all types of insolvency procedure by reducing their length and associated costs.

New group insolvency law
Austria | 08 December 2017

The Insolvency Code was recently amended in response to the introduction of the EU Insolvency Regulation, creating – for the first time – specific rules for the insolvency of corporate groups in Austria. From a practical standpoint, this approach is welcome, as it may lead to faster and more efficient insolvency proceedings. It remains to be seen how the new rules will affect insolvency practice and whether coordination proceedings according to the EU regulation will be applied in practice.

Protective measures in insolvency proceedings
Austria | 08 September 2017

In some cases of insolvency, it may be necessary to take special measures which affect the debtor or third parties in order to prevent the insolvent assets from diminishing. These cases are governed by Section 78 of the Insolvency Code, which offers the possibility of ordering individual protective measures with regard to the debtor and third parties. In particular, recent case law has extended the scope of application of these protective measures.

New Personal Bankruptcy Law – without minimum payment
Austria | 02 June 2017

One of the Bankruptcy Code's aims is to allow trustworthy debtors the right to be discharged from debts that remain unpaid after insolvency proceedings. However, in practice, low-income debtors cannot always avail of residual debt relief. As such, the government recently introduced an amendment to the personal bankruptcy process in its 2017/2018 Modern Insolvency Law Culture of Failure working programme.

Potential obligation of majority shareholder to file for insolvency
Austria | 17 March 2017

Recent changes to the Insolvency Code have considerably expanded the obligations of shareholders in insolvency situations. For example, a new obligation has been introduced which requires majority shareholders in so-called 'companies without management' to file for insolvency. The language of these new provisions remains vague and provides significant flexibility in interpretation, which inevitably results in a number of legal uncertainties.

Lender's liability in case of borrower's insolvency
Austria | 25 November 2016

Recent case law from the Supreme Court demonstrates once again that lenders can be held liable by creditors of an insolvent borrower under certain conditions. In particular, a lender may be held liable where it has significant influence over the borrower's management. However, only a few cases have met the necessary level of influence. The case at hand shows that total disregard of this risk can have severe consequences for lenders.

Potential liability of chartered accountants for delaying insolvency proceedings
Austria | 12 August 2016

Chartered accountants entrusted with drawing up financial statements must also examine the company's status of overindebtedness in terms of insolvency law if the company's accounts show that it is overloaded with debt. However, in practice, this task is often neglected, as the fact that chartered accountants run the risk of being held liable for damage incurred due to delaying insolvency proceedings is often ignored.

Rescue mergers
Austria | 22 April 2016

A rescue merger may be an effective instrument for the financial restructuring of an undertaking and for securing its survival. However, they involve numerous legal constraints and risks which could lead to a serious encroachment on the legal positions of shareholders, creditors and holders of special rights. It is imperative to observe these constraints and risks strictly in order to avoid any risk of inequality in the treatment of the parties to a rescue merger.

Lessor's lien right in case of lessee's insolvency
Austria | 27 November 2015

In case of a lessee's insolvency, a lessor's lien right is an excellent opportunity to secure and recover at least a portion of outstanding rental payments. However, lessors must act quickly in order to take full advantage of their liens in insolvency proceedings – in particular, rapidly securing a lien can be a considerable advantage for the lessor.

No express withdrawal from purchase of goods contracts under reservation of title
Austria | 26 June 2015

Insolvency lawyers frequently encounter problems in relation to goods that are purchased under a reservation of title and the assertion of resulting rights to separate these goods from the debtor's estate. In particular, the obligation to provide notice of withdrawal from the contract regularly raises issues. A recent Supreme Court case demonstrates that the absence of an express notice of withdrawal can also be problematic.

Liability of de facto managing director for delay in filing for insolvency
Austria | 23 January 2015

If an insolvency petition is filed too late and creditors incur damage because of it, the responsible managing director may be held liable. However, in practice, companies are often actually managed by a different person. In such cases the de facto managing director may be held liable.

Privileged status of LLCs upon formation applies to insolvency
Austria | 03 October 2014

In order to facilitate the formation of LLCs, the Tax Amendment Act 2014 introduced a formation privilege in the Limited Liability Companies Act, which reduces shareholders' risk capital from €35,000 to €10,000 while the privilege applies. This reduction of shareholders' economic risk also applies in insolvency cases. As a result, shareholders need not pay more where insolvency proceedings are opened within the 10-year period.

Retention of title and confusion of goods in insolvency cases
Austria | 25 July 2014

With the sale and delivery of a large quantity of branded goods subject to a larger retail chain's retention of title clause, confusion often arises over which goods were delivered by the seller at an earlier point and have been paid for and which are still unpaid goods. In insolvency cases, the question of the legal fate of the goods sold under a retention of title clause frequently arises.

Granting legal aid to insolvency estates
Austria | 23 May 2014

A Constitutional Court decision has reintroduced the legal entity's rights to legal aid. Legal entities are again entitled to legal aid pursuant to Section 63 if neither the entity nor the beneficiaries are able to raise the funds necessary to conduct the proceedings and if the proposed enforcement or defence of the rights is not made in bad faith.

Tenderer's insolvency in public procurement
Austria | 14 March 2014

The 2010 insolvency law reform in Austria aimed to make the law more suitable for financial restructuring. In particular, tools were introduced for facilitating the continuation of companies. The Federal Procurement Act 2006 does not reflect that intention. Under the act, insolvent economic operators are disqualified on a mandatory basis. However, by including such provisions, the legislature may have exceeded its powers.

Securing rights of apartment buyers following developer insolvency
Austria | 18 October 2013

The Property Developers Contracts Act aims to secure the rights of individuals who intend to buy newly built apartments. The act further aims to protect both the down payments made by buyers and such buyers' rights in the event of a developer's insolvency. In a recent judgment the Supreme Court ruled that the developer's entitlements will transfer to the buyer exactly as they have already been held by the developer.

Supreme Court clarifies application of real estate income tax following insolvency
Austria | 12 July 2013

Following the 2012 introduction of a tax on capital gains realised from the sale of real estate by individuals, one issue remained unclear - the question of who must pay if the property owner is insolvent, the property is sold in connection with the insolvency proceedings and the sale proceeds are transferred to pledgees. A recent Supreme Court decision provides clarification in this regard.

Protecting tenants from eviction in rescue proceedings
Austria | 01 March 2013

For a successful rescue to take place, the business premises must remain available for the continued operation of the company. Consequently, Section 12c of the Insolvency Code protects the debtor from eviction in rescue proceedings. However, the Supreme Court recently confirmed that a landlord may proceed with eviction proceedings if the tenant fails to meet certain obligations.

Court rules on future damage due to event before insolvency proceedings open
Austria | 14 December 2012

A recent judgment of the Supreme Court made clear that future damage of an unknown amount arising from an event that occurred before the opening of insolvency proceedings may be asserted only as a bankruptcy claim in the insolvency proceedings. The estimated amount of damage must be disclosed when the claim is asserted against the bankrupt company.

New taxes on real estate sales: consequences for insolvencies
Austria | 28 September 2012

A new real estate income tax was recently introduced in Austria. When land encumbered by liens is now sold in the course of insolvencies, the question arises as to whether this new tax qualifies as special estate costs. The Supreme Court is yet to clarify the matter; therefore, until this happens, creditors should note that reduced amounts will be attributed to them from the proceeds from the sale of collateral.

Court revokes abolition of free legal aid for insolvency estates without assets
Austria | 13 April 2012

In 2009 the Austrian legislature abolished free legal aid for legal entities, and thus also for insolvency estates without assets, although free legal aid had previously been granted only under very restricted conditions. However, a recent ruling of the Constitutional Court held that the abolition of the entitlement to free legal aid for legal entities (ie, also for insolvency estates) was incompatible with constitutional law.

No determination of insolvency claims in criminal proceedings
Austria | 18 November 2011

The Supreme Court recently clarified its position on whether injured persons could also join criminal proceedings as private parties if the offender has filed for insolvency. It ruled that creditors may join criminal proceedings as private parties in such cases only if the claims result from the prosecuted criminal action, arose after insolvency proceedings were opened and are not affected by the effects of the insolvency proceedings.

Court rules that company pensions are not always safe in case of insolvency
Austria | 12 August 2011

Company pension commitments to employees should be secured in case of the employer's insolvency. If (contrary to legal requirements) such pension securities are not held separately from the employer's other securities, the statutory pledge for securing company pensions cannot fulfil the hedging purpose prescribed by law. Therefore, if the employer acts unlawfully, the security mechanism prescribed by law is to no avail.

Contemplated reform of personal insolvency law
Austria | 08 April 2011

Individuals can free themselves of debts through a so-called 'skimming-off procedure', provided that their assets have already been sold. However, if they cannot settle the required 10% share of their debts, they will not be released from the remaining debts and their situation will remain unchanged after the bankruptcy proceedings have been set aside. A proposed reform should change this.

New rules for secured creditors
Austria | 17 September 2010

The recently enacted Insolvency Amendment Act provides new rules for secured creditors. Since the return of items needed for the operation of an insolvent business could jeopardise the business's continuation, the act provides for mandatory deferrals of claims for separation and recovery of assets not belonging to the bankrupt estate over a period of six months after the initiation of insolvency proceedings.

Insolvency reform: risk of financial restructuring loan avoidance reduced
Austria | 14 May 2010

The Austrian legislature has now adopted the comprehensive insolvency law reform that should have entered into force at the beginning of 2010. The reform project targets the privileged treatment under avoidance law of financial restructuring loans that were granted before the initiation of insolvency proceedings.

Legislature Impedes Assertion of Claims of Bankruptcy Estates Without Assets
Austria | 16 October 2009

When the Budget Accompanying Act 2009 entered into force on July 1 2009, free legal aid - which was already being granted on only a limited basis to legal entities and other structures with the legal capacity to sue and be sued - was abolished. Receivers can no longer enforce in court claims of bankruptcy estates that have no assets, unless a third party advances the money for the litigation costs as a loan.

Insolvency Law Reform
Austria | 19 June 2009

The legislature intends to address the difficult economic environment and the increasing demands on insolvency law by reforming the insolvency legal framework. The first priority objective is the timely initiation of insolvency proceedings and thus improved chances of successful financial restructuring. This should be primarily achieved by amending the procedural laws governing forced composition and bankruptcy proceedings.

Liability of Honorary Bodies of Football Club for Delayed Filing of Bankruptcy Petition
Austria | 27 March 2009

In a recent judgment the Supreme Court ruled on the personal liability of the honorary bodies of an Austrian premier league football club. After the football club had become unable to pay its debts, rather than filing a bankruptcy petition in accordance with their duties, the club's bodies signed new players. The players took legal action against the club's bodies for compensation of their losses.

Restricted Transferability of Life Insurance Policies Ineffective in Bankruptcies
Austria | 03 October 2008

According to case law, restrictions on the transferability of life insurance policies mean that creditors have the right to separate a life insurance policy from a bankruptcy estate, ensuring that their claims are preferentially satisfied if bankruptcy proceedings are initiated against the insured. In a recent judgment the Supreme Court departed from this case law.

Reform of Law on Private Bankruptcies
Austria | 27 June 2008

The federal government’s Working Plan 2008 shows that the Federal Ministry of Justice intends to reform the law on private bankruptcies. A first draft is expected to be submitted in November 2008. The aim of the reform is to grant people with low income facilitated access to a release from residual debts.

Must Insolvent Company Employment Contracts Automatically Transfer to Buyer?
Austria | 04 April 2008

There has been prolonged uncertainty in Austria as to whether the employment contracts of an insolvent company must automatically transfer to a buyer if all of the insolvent company’s assets are sold by a receiver. Is there an exemption if the seller files a bankruptcy petition?

Insolvency Regulations in New Securities Supervision Act
Austria | 21 December 2007

The Austrian Securities Supervision Act recently entered into force. It contains insolvency regulations for investment firms and investment service providers. Only companies that hold a licence under the Securities Supervision Act qualify as investment firms and investment service providers.

Are Employment Contracts Transferred in Restructuring Asset Deals?
Austria | 12 October 2007

It is accepted practice that when all of a debtor's assets are sold in an asset deal to an investor which uses them to establish a new company, the debtor's contracts of employment are terminated in the course of the bankruptcy proceedings and do not transfer to the new company. However, a recent ruling by the Vienna Regional Court of Appeals has thrown this position into doubt.

New Government Considers Further Restructuring Measures
Austria | 27 April 2007

A new coalition government has recently come into power in Austria. The new government's legislative plan includes new measures in respect of the insolvency legislation. Some of these measures would be designed to combat abuse of the insolvency legislation.

Fourth Creditors' Protection Association Admitted
Austria | 02 March 2007

The federal minister of justice has admitted a fourth creditors' protection association, the Österreichische Verband der Vereine Creditreform. Creditors' protection associations are privileged under Austrian bankruptcy law and may take part in pre-bankruptcy proceedings.