Austria continues to experience a wave of significant insolvencies, stretching court resources and prompting comparisons to past recessions. Recent legal frameworks have introduced new possibilities for restructuring, though so far with limited uptake. Taylor Wessing Counsel & Head of Insolvency Andreas Howadt examines both the immediate pressures – rising liabilities, high-profile failures, and logistical strains – and the evolving legal environment looking ahead to 2025.
Surging Insolvencies and Historical Parallels
Austria’s courts are facing considerable stress due to a large uptick in major insolvencies, many with significantly high liabilities. A trend that, according to Howadt, began in 2023 and continued in 2024. “Since the end of 2023, which came to a dramatic conclusion with the Signa insolvency, Austria has been struggling with a wave of major insolvencies with ever-increasing liabilities. A look at the insolvency statistics makes this clear – compared to 2022, the total number of insolvencies in 2024 rose by around 38%, while the (estimated) amount of liabilities of insolvent companies increased by more than 750%,” he reports. “The trend toward ever-higher peak liabilities in insolvency proceedings increased dramatically again in 2024, especially as the sixth-largest insolvency in terms of liabilities in 2023 would only have made it to 20th place in 2024.”
These large-scale insolvencies present the Austrian insolvency courts with logistical challenges if anything “simply due to the number of creditors participating in those proceedings. As a consequence, specific rules have been set up for proceedings – e.g., separate case numbers just for claims filed by creditors, ‘reminding’ creditors of the limited room at the courthouse, or asking only one person per creditor to participate in the court hearings,” Howadt explains.
Furthermore, a glance back at the 2006 recession suggests that traditional solutions may not suffice for today’s structural cost pressures. “The current wave of insolvencies is largely driven by structural issues such as rising energy and commodity prices and higher personnel costs,” Howadt reasons. “So far, no answer seems to have been found to this and isolated measures, which offered solutions during the crisis after 2006, will not lead to any lasting easing of the current situation. Overall, the situation now appears to be much more difficult, especially as the effects of major insolvencies along the supply chain will pose enormous challenges for entrepreneurs in addition to the generally difficult situation in the near future.”
Recent proceedings, particularly those involving the Signa Group, hint at a more proactive stance by the Austrian state, according to Howadt. “The insolvency of the Signa Group, which was heralded at the end of 2023, and particularly the failure of the restructuring plan for the most important Signa companies, was certainly the most drastic development in 2024. Considering that this failure was essentially due to an appeal by the Republic of Austria – which no longer had any claims against those Signa entities at the time – it appears that the Austrian state will intervene more forcefully than in the past in sensitive insolvency proceedings if it deems it necessary,” he posits.
Legal Framework and the Road Ahead
Although Austria’s insolvency regime is long-established, new “pre-insolvency” restructuring procedures have yet to make a strong impact. “The Austrian regime for insolvency proceedings has long been robust and well thought out,” Howadt explains. “Probably the biggest change in recent years was the introduction of ‘pre-insolvency’ restructuring proceedings in 2021. So far, however, the ‘European restructuring proceedings’ in particular, do not seem to have met with much enthusiasm. Since the introduction of this type of procedure, only one procedure has been opened.” So far, then, the system remains dominated by the traditional insolvency process, while the newer framework stands underutilized.
As Austria faces both high liabilities and a spread of major insolvencies, the outlook remains uncertain. “For 2025 at least, the signs are clear that the high insolvency pressure will continue, although it is to be hoped that the number of particularly large insolvency proceedings – if only due to the structure of the Austrian economy – will at least not increase any further,” Howadt says in conclusion. Though regulators and courts have adapted to administrative measures, the underlying macroeconomic and structural pressures persist. Whether these will moderate – or continue unabated – is likely to define Austria’s insolvency landscape in the year ahead.
This article was originally published in Issue 12.2 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.
