A restructuring that appeared viable on paper can collapse within weeks when creditors from multiple jurisdictions pursue conflicting claims under different governing laws. That is precisely the situation an international manufacturing group faced when its Austrian subsidiary encountered severe liquidity pressure – and when every week of delay reduced the window for a negotiated outcome.
Corporate restructuring in Austria is governed by a structured insolvency proceedings regime that allows distressed companies to propose a restructuring plan to creditors while an appointed administrator supervises the process. The debtor must demonstrate a credible path to solvency, and creditor consent at the requisite threshold is required for the plan to bind dissenting creditors. Austria's Insolvenzordnung (insolvency legislation) provides both reorganisation and liquidation tracks, with the reorganisation route preserving the business as a going concern where feasible.
This case study examines how Ferraz & Whitmore approached a multi-creditor restructuring for an anonymised client in Austria. covering the challenge, legal strategy, key milestones, complications encountered, and three lessons transferable to similar cross-border matters.
Client profile and the challenge
The client was a mid-sized manufacturing entity incorporated in Austria, with parent operations in Germany and trade creditors spread across four European countries. The group had entered a period of contracted revenues following the loss of a key supply contract. Working capital had deteriorated over two consecutive quarters.
By the time the matter reached us, the Austrian subsidiary faced simultaneous pressure from a secured lender seeking enforcement of its charge. Unsecured trade creditors threatening formal insolvency proceedings. Additionally, a tax authority claim that carried statutory priority. The combined creditor pool comprised entities governed by Austrian, German, Italian, and Portuguese law – each with different expectations about proof of debt procedures and timelines.
The central legal challenge was clear: Austrian insolvency law treats creditor classes with strict priority rules. Any restructuring plan had to satisfy secured and preferential creditors first, while offering unsecured creditors enough recovery to secure the vote required at the creditors meeting. Failing that threshold, the matter would convert to a liquidation track – destroying residual going-concern value for all parties.
For a detailed overview of the Austrian restructuring regime applicable to these situations, see our insolvency and restructuring services in Austria.
Legal strategy and rationale
The first decision was whether to pursue an out-of-court workout or to file for formal insolvency proceedings with a restructuring plan. An informal workout requires unanimous creditor agreement – unachievable here given the number and diversity of creditors. Formal proceedings were the only viable path.
The strategy had three components. First, we filed promptly to stop individual creditor enforcement actions. Under Austrian insolvency legislation, the opening of formal proceedings triggers an automatic stay. This immediately halted the secured lender's enforcement steps and gave the business breathing space. Second, we worked with the court-appointed administrator to prepare a restructuring plan within the statutory period. The plan proposed a phased repayment schedule for unsecured creditors, full satisfaction of the tax authority claim over an agreed timeline, and a consensual refinancing arrangement with the secured lender. Third, we coordinated proof of debt submissions across all four jurisdictions. translating claims into a format recognisable under Austrian insolvency proceedings. Additionally. Resolving a dispute over whether one Italian creditor's contractual set-off rights survived the stay.
The rationale was straightforward: the going-concern value of the Austrian entity substantially exceeded its liquidation value. A liquidator scenario would have returned materially less to every creditor class. The restructuring plan, by contrast, allowed unsecured creditors to recover a meaningful portion of their claims over 36 months – a better outcome than a distressed asset sale.
Key milestones and complications
The matter progressed through four identifiable phases. In the first two weeks, formal insolvency proceedings were opened and the administrator was appointed. The automatic stay took effect immediately. In weeks three through eight, the administrator reviewed the company's books, and we prepared the restructuring plan documentation. Creditors were notified and given the statutory period to file proof of debt.
The creditors meeting took place in month three. This was the pivotal event. At that meeting, creditors vote on whether to approve the restructuring plan. Austrian insolvency legislation requires approval by a majority of creditors present and a majority by value of claims. We prepared extensively – briefing each major creditor individually beforehand and addressing concerns about the repayment schedule's feasibility.
Two complications arose. The first was a disputed claim from a German supplier who had assigned its receivable to a factoring company. The assignment had not been formally notified to the debtor before proceedings opened. The administrator queried whether the assignee had valid standing to vote at the creditors meeting. This required a rapid legal analysis under both Austrian insolvency legislation and German commercial law, ultimately resolved in favour of the assignee's participation. but the delay required the meeting to be adjourned by ten days.
The second complication was more structural. One creditor – holding a material share of unsecured claims – indicated it would vote against the plan unless the repayment schedule was accelerated. Accommodating that request would have rendered the plan unworkable for cash-flow purposes. We negotiated an alternative: a partial cash payment at plan confirmation in exchange for that creditor's vote, funded by a shareholder injection. This required the parent group's consent and a rapid restructuring of the intra-group funding arrangement. For related considerations on shareholder and creditor conflicts in Austrian entities, see our analysis of corporate disputes in Austria.
The plan was confirmed at the adjourned creditors meeting. The court approved it within the statutory review period. Implementation commenced the following month.
Transferable lessons for cross-border restructurings
Act before enforcement begins. The most valuable tool in Austrian insolvency proceedings – the automatic stay – is only available once formal proceedings open. Companies that delay filing while attempting informal negotiations often find that one creditor moves first to enforce security or attach assets. Once that happens, the window for an orderly restructuring narrows sharply. Filing promptly, even before a complete restructuring plan is drafted, preserves optionality.
Creditor preparation is as important as the plan itself. A restructuring plan that is legally sound can still fail at the creditors meeting if creditors feel uninformed or mistrustful. In multi-creditor situations – particularly where creditors are based in different jurisdictions – the work of explaining the plan, translating proof of debt requirements, and addressing concerns individually before the formal meeting is substantial. Underestimating that effort is among the most common errors in cross-border restructurings. A law firm in Austria with genuine cross-border reach can bridge the gap between the formal process and foreign creditor expectations.
Disputed claims require early resolution. A disputed proof of debt that remains unresolved at the creditors meeting can destabilise the vote. The standing of the voting creditor, the value attributed to its claim, and its classification within creditor classes all affect the outcome. Identifying and resolving claim disputes before the meeting – through the administrator or, where necessary, through contested proceedings – is essential. Engaging a lawyer in Austria with experience in both the procedural and substantive aspects of claim validation accelerates this process considerably.
For context on how analogous restructuring challenges were handled in a different civil law jurisdiction, see our case study on corporate restructuring in Portugal.
To discuss how a restructuring strategy in Austria could apply to your situation, contact us at info@ferrazwhitmore.com.
About Ferraz & Whitmore
Ferraz & Whitmore is an international law firm based in Lisbon, advising business clients across 46 jurisdictions. Our team combines Portuguese civil law expertise with English common law tradition to deliver cross-border legal solutions in corporate restructuring, insolvency proceedings, and multi-creditor workouts. As an international law firm in Austria and across the EU, we advise institutional investors, multinational groups, and in-house legal teams who need results-oriented counsel when a business faces financial distress. Our insolvency and restructuring practice covers both reorganisation and liquidation tracks across civil law systems, supported by direct experience before Austrian courts and EU-wide regulatory bodies. To explore how we can support your restructuring matter, contact us at info@ferrazwhitmore.com.
Disclaimer: This publication is provided for informational purposes only and does not constitute legal advice. The information herein should not be relied upon as a substitute for professional legal counsel tailored to your specific circumstances. Ferraz & Whitmore assumes no liability for actions taken or not taken based on the contents of this material. For advice regarding your particular situation, please contact info@ferrazwhitmore.com.