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CMS Guide on Restructuring 
Possibilities in Europe

Editors: Jan Willem Bouman
Jan Willem Bouman
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We are delighted to present this CMS report which provides an overview of the various restructuring possibilities throughout Europe.

During the CMS Restructuring & Insolvency Associates Training which took place in Cologne 
in April 2013, the different restructuring options in multiple jurisdictions were discussed. 
The outcome of the training and the differences between the jurisdictions were remarkable enough to justify the publishing of a report on this topic.

While the European Commission strives for unity of laws within the European Union, it is clear that there are (and will most probably remain) numerous differences between in-court and 
out-of-court possibilities for restructuring. While these differences may create confusion and uncertainty, they can also create new possibilities. In the brochure that was drawn up after 
last year’s associates training; the ‘CMS Guide to finding COMI’, “forum shopping” was given consideration. This is relevant in this respect as well. Under certain circumstances it is possible 
to choose the national insolvency law that will apply.

This report focuses both on the ‘insolvency proceedings’ as mentioned in the EC Insolvency Regulation(1) (EIR) and on restructuring options that do not have a legal basis. We are proud 
to give you an overview on this matter in 19 jurisdictions!

If you have any questions regarding the issues contained in this report, please contact us. 
A contact list is included at the end of this report.

Jan Willem Bouman

CMS Practice Group for Restructuring & Insolvency
(1) Council Regulation (EC) No. 1346/2000 on insolvency proceedings.
Austria’s insolvency law was fundamentally amended in 2010 by the Austrian Insolvency Amendment Act 
(in German: Insolvenzrechtsänderungsgesetz − IRÄG). Prior to the amendment, two insolvency procedures were regulated under Austrian law, namely the bankruptcy procedure (in German: Konkursverfahren) and the settlement procedure (in German: Ausgleichsverfahren). Both procedures were regulated in separate legal codes.(2) The 2010 amendment unified these separate codes into one code, the Austrian Insolvency Code (in German: Insolvenzordnung – IO).(3)

Therefore, one unified insolvency procedure (in German: Insolvenzverfahren) is contemplated and regulated by the Austrian Insolvency Code. After filing for insolvency, however, the procedure may be continued either as 
a bankruptcy procedure or a restructuring procedure 
(in German: Sanierungsverfahren). Whereas the result 
of a bankruptcy procedure is the sale of the company’s assets and the liquidation of the company, the restructuring procedure aims to ensure the company’s continuance. Austrian lawmakers introduced the business reorganisation procedure (in German: Reorganisationsverfahren) in 1997. The procedure 
is aimed to give companies the possibility to undergo 
a reorganisation procedure before they meet the insolvency prerequisites. However, in practice the reorganisation procedure plays a minor role.
Winding-up proceedings 1. Bankruptcy procedure
The opening of a bankruptcy procedure requires an application by an authorised person, (e.g., the managing director of a limited liability company or a creditor 
of the debtor). Such application must be filed with 
the competent court and is appropriate if: (i) the debtor is unable to pay its debts when due (in German: Zahlungsunfähigkeit); or alternatively (ii) the debtor’s debts exceed its assets (in German: Überschuldung) 
and the business forecast is negative (negative Fortbestehensprognose). The latter insolvency fact (debtor’s debts exceeding its assets) applies only to 
legal entities, estates, and limited partnerships. Additionally, the debtor applying for a bankruptcy procedure must have sufficient financial means (in German: kostendeckendes Vermögen) to cover the expenditures of the insolvency procedure. As of today, EUR 4,000 is being considered sufficient to cover 
such expenditures. If the prerequisites for opening 
the bankruptcy procedure are fulfilled, the court will announce the opening publicly and appoint a liquidator (in German: Masseverwalter).
Restructuring methods
Creditors’ claims are satisfied from the proceeds of 
the sale of the debtor’s insolvency estate (in German: Insolvenzmasse). The sale of the insolvency estate 
may be undertaken by an out-of-court sale (in German: außergerichtliche Veräußerung) or as a court-supported sale (in German: kridamäßige Versteigerung). As the out-of-court sale is generally more promising, such method is preferred in most cases. If the debtor is a legal entity, the distribution of the proceeds to the creditors leads generally to the liquidation of the 
debtor. However, in the course of the bankruptcy procedure, the debtor may apply for a restructuring 
plan (in German: Sanierungsplan). If such restructuring plan is accepted by the creditors’ assembly (in German: Gläubigerversammlung), the sale of the debtor’s 
assets may be forestalled and the debtor may 
continue its operations.
Success rate
The success rate of a certain creditor of having its claims against the debtor settled in the course of an insolvency proceeding depends mostly on the status of such creditor. In a bankruptcy procedure, secured creditors may separate their claims from the outstanding creditors (in German: Aus- und Absonderungsrecht). Typically, 
such creditors: (i) still own the assets which are in the possession of the debtor at the time the bankruptcy procedure is opened; or (ii) have their claims against the debtor secured by, e.g., a pledge. These secured creditors may claim their assets from the debtor or may claim the sale of the pledge. Claims of the outstanding creditors may be satisfied from the proceeds of the insolvency estate. In most cases, the proceeds are not sufficient in order to cover the claims of all creditors. In such case, 
the proceeds are divided among the creditors according to the creditor’s rank. In 2011, the average quota of a creditor amounted to approximately 17%.
Pros and cons
Pros: The bankruptcy procedure is rather fast and may be completed within approximately six months. Further, it gives the insolvency administrator the possibility to continue its business as the liquidation is a last-resort solution. Also, the creditors have the potential to influence the procedure as the creditor assembly 
decides whether the debtor, in case of a legal entity, shall be liquidated or continued.

Cons: If the creditor is not secured, the possibility of being satisfied from the insolvency estate is rather small as the average quota amounts to approximately 17%. Further the success of the procedure depends mostly 
on the liquidator, which is appointed in most cases by the court and is responsible for the execution of the procedure. Hence, the debtor itself has almost no influence on the procedure.
Other proceedings 1. Restructuring procedure
A prerequisite for opening a restructuring procedure is to file a restructuring plan (in German: Sanierungsplan) with the competent court. In case such restructuring plan is accepted by the creditors’ assembly by simple majority, the debtor may continue its business. If the creditors’ assembly does not accept the restructuring plan, the restructuring procedure continues as a bankruptcy procedure.
Restructuring methods
The restructuring plan prescribes the conditions for debtor’s restructuring. The minimum quota is 20%. Such amount must be distributed to the creditors 
within two years from the date of the acceptance of 
the restructuring plan. The restructuring plan must 
set out a schedule for repayment (e.g., equal monthly instalments). By accepting the restructuring plan, the creditors waive their claims against the debtor in excess of the minimum quota of 20%. In the event the debtor fails to comply with the restructuring plan, the total value of the creditors’ claims prior to the restructuring plan is renewed.
Success rate
Since the amendment of Austria’s insolvency law in 2010, the number of restructuring procedures constantly increased. In 2011, every fifth insolvency procedure was executed as a restructuring procedure. However, since such procedure is relatively new, it will take some time in order to better assess the success rate thereof.
Pros and cons
Pros: The significant advantage of the restructuring procedure for the creditors is the higher minimum quota of 20% as compared to the average quota of 17% for bankruptcy proceedings. Additionally, the debtor may continue its business under the condition of compliance with the restructuring plan. In case the restructuring plan sets forth a minimum quota of 30% and if the debtor provides the court with further reassuring information, such as a detailed inventory, reorganisation measures, finance plan, among other things, the debtor may even stay in control over the business operations and therefore, is not fully depended on the liquidator.(4) In such scenario, the liquidator only supervises the procedure instead of executing it.

Cons: The restructuring period of two years may not be extended. This has negative consequences on debtors who manage to recover their business in the course of the restructuring procedure. Before the amendment in 2010, creditors could have demanded a higher quota in such case but also could have granted to the debtor additional time in order to finalize the reconstruction. After the amendment, such extension is not possible any more. Hence, the creditors may demand a higher quota but cannot grant to the debtor additional time for finalization of the restructuring.
2. Debt regulation procedure
The debt regulation procedure (in German: Schuldenregulierungsverfahren) regulates the insolvency of physical persons and sole proprietors. It is more accessible to debtors than bankruptcy or restructuring procedures because the prerequisite of showing sufficient financial means for such proceedings does not have to be fulfilled under certain circumstances. The relief of debt occurs mainly in two ways, namely through (i) the repayment schedule (in German: Zahlungsplan) and (ii) the levy procedure (in German: Abschöpfungsverfahren).
The repayment schedule is a simplified version of the restructuring procedure. The main differences between the repayment schedule and a restructuring plan are that the repayment schedule does not require 
a minimum quota and that the repayment term may amount up to seven years. In case the creditors agree 
on the repayment schedule, the court determines for the debtor a reasonable term to comply with the repayment schedule and to repay the debts. If the debtor fails to comply with the repayment schedule, such schedule will become null and void and the debtor will lose all benefits connected with such repayment schedule.

The levy procedure constitutes the last resort in order to relieve the debtor of its debts. The application for such procedure shall be granted by the court only if the repayment schedule is rejected. After initiation 
of the procedure, the court appoints an escrow agent (in German: Treuhänder) who is responsible for the execution of the procedure and distribution of the assets to the creditors. In the course of the procedure the debtor shall comply with numerous obligations such as obtaining appropriate employment, treating every creditor equally, and omitting new debts, among other things. The court ends the procedure if: (i) three years from the day of the initiation have passed and the creditors have received at least 50% of their claims; 
or (ii) the term of the procedure (maximum seven years) has elapsed and the creditors have received at least 
10% of their claims. The court then announces that the debtor is released from all claims not satisfied in 
the course of the levy procedure.
3. Business reorganisation procedure
The business reorganisation procedure shall give an enterprise in distress the possibility to prematurely prevent insolvency. The prerequisite for such business reorganisation procedure is a certain need for reorganisation (in German: Reorganisationsbedarf). Such need for a reorganization procedure is assumed, inter alia, in case the annual financial statements show an equity ratio of 8% and a debt-settlement period 
(in German: fiktive Schuldentilgungsdauer) of at least 15 years. If the enterprise applies for such reorganisation procedure, the court appoints an auditor who prepares a report analysing whether a reorganisation procedure would effectively prevent the enterprise from insolvency. The Austrian Code on Reorganisation Procedures(5) grants certain incentives to enterprises who apply for such procedure. One such incentive, among others, is the exemption of certain measures (e.g., taking up of reorganisation loans and shareholder loans) from the challenge of the creditors. On the other hand, 
if the enterprise omits such procedure, the respective law proscribes negative consequences, such as the liability of the management of a corporation which did not apply for such procedure. For instance, if the corporation becomes insolvent within two years, the management shall become liable for the debts of the corporation up to an amount of EUR 100,000, unless the management can prove that the insolvency would have occurred regardless of a reorganisation procedure.
In practice, the reorganisation procedure has a minor importance as companies fear the negative publicity which may derive from such procedure and the consequences connected therewith.
(2) Austrian Bankruptcy Act and Austrian Settlement Act (in German: Konkursordnung – KO and Ausgleichsordnung – AO).
(3) Bundesgesetz über das Insolvenzverfahren (Insolvenzordnung – IO) BGBl. I Nr. 29/2010.
(4) Restructuring procedure with self administration (in German: Sanierungsverfahren mit Eigenverwaltung des Schuldners).
(5) Unternehmensreorganisationsgesetz – URG, BGBl. I Nr. 114/1997.


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