Austrian Supreme Court confirms availability of avoidance claims in consecutive insolvency proceedings

Background

An Austrian company underwent three insolvency proceedings within a few years. After the third insolvency proceedings were opened, the insolvency administrator filed an avoidance action concerning payments made by the company to a creditor before the second insolvency proceedings were opened.

Under the Austrian Insolvency Code (the Code) claims for avoidance lapse if no avoidance action is filed within a year after the insolvency proceedings are opened. 

The Supreme Court recently considered whether this provision means that transactions are protected from avoidance once subsequent insolvency proceedings have taken place and more than one year has elapsed since their opening.

Decision

The Supreme Court held:

• The one-year period under the Code limits only the ability to assert avoidance claims within the context of a specific insolvency proceeding.
• With each new insolvency proceeding, a separate avoidance right arises for the respective insolvency estate and the one-year period under the Code starts anew. 
• This means that if new insolvency proceedings are opened later, transactions that could have been challenged in earlier proceedings – but were not – may still be avoided, provided:
  
  (i) the limitation period of the specific avoidance ground has not expired
  (ii) the new one-year period under the Code is observed.

Find out more 

To discuss the issues raised in this article in more detail, please contact a member of our Restructuring and Insolvency team.