Insolvency estate financing in self-administration: financial plan, consent and control

Under § 169 IO, self-administration requires a restructuring plan offering insolvency creditors at least 30% of their claims, payable within no more than two years from acceptance of the restructuring plan. The debtor must also provide, among other things, a precise list of assets, a complete statement of assets and liabilities, and a financial plan.

The financial plan must compare expected income and expenditure for the following 90 days. It must show how funds for continuing the business and paying estate liabilities will be raised and used. A planned insolvency estate loan should therefore appear in the economic presentation with its amount, availability, purpose and timing.

§ 169 Abs. 1 Z 2 lit. c IO also requires information on the reorganisation measures needed, in particular financing measures. Financing is therefore part of the restructuring logic. It stands alongside the restructuring plan and cannot replace its fulfilment.

After the proceedings open, actual liquidity must be compared continuously with the financial plan. A loan may be committed in tranches, subject to conditions or restricted to specific payments. For self-administration, the relevant figure is therefore liquidity that is available and legally usable, not only the nominal loan amount.

In 8 Ob 120/24s, the restructuring administrator reported an insolvency estate loan that could be drawn in tranches. Use of the funds was assigned to a joint decision by the debtor company board and the restructuring administrator. The decision shows why drawdown, monitoring and access must be regulated precisely in the individual proceedings.

A financing commitment answers the payment of an estate liability only if actual access is secured. In the same decision, the Supreme Court considered whether procedural costs were secured by a callable insolvency estate loan. It focused on the fact that the restructuring administrator did not have direct access to the loan and that her remuneration had not been paid or secured.

Before drawdown, the credit terms, account controls and release steps should therefore be compared line by line. A tranche available only after consent from a finance provider or after another condition is met cannot be treated in the financial plan as immediately usable liquidity. The same applies to money restricted to a particular purpose. The plan should identify the payments actually covered and explain how the remaining estate liabilities will be met.

§ 171 Abs. 1 IO generally allows the debtor to undertake legal transactions in self-administration. Transactions outside the ordinary course of business require the restructuring administrator approval. The same applies to withdrawal, termination or dissolution of certain contracts under §§ 21, 23 and 25 IO.

Whether insolvency estate financing is in the ordinary course of business cannot be answered abstractly for every company. Loan amount, term, security, purpose, stage of the crisis and effect on creditors matter. Where the classification is uncertain, the financing should not be implemented as binding without the required consent.

The debtor must also refrain from an ordinary transaction if the restructuring administrator objects. A transaction carried out against these limits is ineffective towards creditors if the third party knew or should have known that consent was missing or that an objection had been made.

§ 172 IO reserves, among other things, avoidance of legal transactions under §§ 27 to 43 IO, verification of claims under §§ 102 ff IO, certain notices and business completions, and certain realisations and enforcement-related acts. These reserved powers add a further boundary to the consent requirement under § 171 IO.

For an insolvency loan, check whether financing is connected with a reserved realisation, a court restriction or a specific order of the insolvency court. The court may prohibit the debtor from particular legal transactions, or from carrying them out without the restructuring administrator consent, where this is necessary to prevent disadvantages for creditors.

The credit agreement, procedural order and internal payment process should show the same allocation of powers. Different account access or a drawdown without the required approval can make the later review of self-administration and estate liabilities more difficult.

§ 170 IO lists several grounds for withdrawing self-administration. They include circumstances indicating disadvantages for creditors, breaches of cooperation or information duties, conduct against creditor interests, failure to meet § 169 IO requirements, failure to follow the financial plan, an incorrect statement of assets and late payment of estate liabilities.

A missed loan tranche does not automatically withdraw self-administration. It may, however, require an immediate update of the financial plan and a comprehensible report to the restructuring administrator and the court. The key issues are the actual liquidity gap, the due dates of estate liabilities and whether replacement funding will be available in time.

If self-administration is withdrawn, an insolvency administrator is appointed. Under § 170 Abs. 2 IO, the effects of the withdrawal begin at the start of the day following public notification. Until then, the parties should not derive their powers and payment process from an internal financing arrangement alone.