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LEXIKON
Equal treatment of creditors in the restructuring plan
The Austrian Insolvency Act (IO) offers debtors the opportunity to discharge their liabilities in court insolvency proceedings by concluding a restructuring plan with residual debt discharge. A restructuring plan can be offered and concluded in both bankruptcy and restructuring proceedings, with or without self-administration. The statutory minimum quota is 20% in restructuring proceedings without self-administration and in bankruptcy proceedings, but 30% in restructuring proceedings with self-administration. In addition, the restructuring plan quota must be paid within a maximum of two years from acceptance of the restructuring plan.
The possibility of restructuring in judicial insolvency proceedings with residual debt discharge exists until the insolvency proceedings are terminated. In their restructuring plan application, debtors must specify the extent to which and the manner in which their creditors are to be satisfied or secured. The debtor’s proposed restructuring plan must clearly indicate what each creditor will receive for their claim and when this is to take place. Creditors must be informed of the amount, type, and timing of the satisfaction replacing the bankruptcy distribution. The reorganization plan also applies to creditors who did not participate in the insolvency proceedings. Therefore, the reorganization plan must apply regardless of the filed and/or recognized insolvency claims.
Furthermore, it is an essential requirement for a restructuring plan that all of the debtor’s creditors are treated equally. This applies not only to the amount of the quota, but also to the timing and manner of satisfaction.
The restructuring plan offered by the debtor is accepted if, on the one hand, the majority of the insolvency creditors present at the restructuring plan meeting and entitled to vote approve the application and, on the other hand, the total amount of the claims of the approving insolvency creditors exceeds half of the total amount of the claims of the insolvency creditors present at the meeting and entitled to vote (“double majority”).
Individual creditors can therefore be outvoted and forced to partially waive their claims. This requires a legal protection mechanism for these creditors, but also for those who do not participate in the proceedings (e.g., due to lack of information). These creditors do not agree to the discharge of residual debt.
The Vienna Higher Regional Court (7 March 2024, 6 R 360/23i, www.ris.bka.gv.at/jus) recently dealt with a case in which the debtor had offered a restructuring plan quota only to creditors with “submitted” claims. The Vienna Higher Regional Court understood this restriction to apply to insolvency creditors with registered claims, which was not permissible due to the lack of equal treatment of those creditors who had not registered, in particular unknown creditors. Furthermore, according to the specific restructuring plan application under review, an insolvency claim was to be satisfied in full. The Vienna Higher Regional Court classified this as inadmissible special treatment. No creditor may be treated better than another. Creditor groups may also only be disadvantaged if they agree to such disadvantage with special majorities (three-quarters majority). With such a majority, special disadvantage is permissible if it is explicitly included in the proposed restructuring plan and is specifically designated as a disadvantageous satisfaction. If this is not the case, there is in any event inadmissible special favoring of the other creditors who are not subordinated. Such inadmissible special favoring leads to the inadmissibility of the reorganization plan application due to the violation of the principle of equal treatment.
Furthermore, a restructuring plan must not only be appropriate in terms of proportional satisfaction (taking into account the statutory minimum quotas), but it must also be feasible. The court-appointed insolvency administrator must assess and evaluate the feasibility of the restructuring plan in his statement prior to the vote so that the creditors can exercise their voting rights accordingly.
In addition, there must be no grounds for inadmissibility within the meaning of section 141 of the Insolvency Code, nor may the restructuring plan application violate mandatory statutory provisions.