Trust money and client funds in insolvency: organise the agreement, account entries and allocation for a separation review.
BRANDAUER Rechtsanwälte
Insolvency law, Salzburg and throughout Austria
We review the procedural status, contracts, payment records and security, then explain which legal question needs to be addressed next.
When a person or company becomes insolvent while holding money for somebody else, the decisive issues are the legal relationship and the traceable flow of funds. Client money in a trust account does not enter the insolvency estate merely because it is held by the insolvent counterparty.
A separation claim requires the agreement, the purpose of the holding arrangement, the allocation of the balance and the current account position to fit together. Calling an account a trust account does not settle the matter. Mixed funds, completed payments and an untraceable balance create a different legal starting point.
This article sets out a practical review path for client funds, deposits and other third-party money. Austrian insolvency law distinguishes estate assets, third-party rights and separation. A claim for repayment therefore has to be assessed separately from a possible right to a specific balance.
This short check considers role, holding purpose and evidence. It does not replace a review of the agreement and the account.
Discuss the specific matter with the firm.
Collect the agreement, payment reason and all provisions on holding and release.
Match the agreement, payment proof, account entry and current balance. Write to the insolvency administrator, identify the balance precisely and request that it be preserved pending review. Keep this request separate from any repayment claim.
Request a transparent reconciliation of the held funds and secure your own payment records. An account label is insufficient. Only the allocation of receipts, payments, set-offs and the remaining balance shows whether a specific balance exists.
For an ordinary payment, first examine whether a repayment or damages claim exists. Check whether a custody mandate, trust arrangement or another legal basis gave you a right to this specific money.
Read the agreement as a whole. The relevant points are the custody instruction, the purpose of the funds, the person entitled to repayment, permitted releases and the treatment of interest or costs. A deposit, settlement balance or amount reserved for a defined transaction may each require a separate legal assessment.
The account label is evidence, but it is not conclusive. An account called a trust account may have been operated like an ordinary business account. Conversely, a clear agreement can matter even where the technical account name is different. The complete performance of the arrangement remains decisive.
Check who made each transfer and who was meant to receive the money back. Third-party payments, several beneficiaries and pooled instructions can change the allocation. Record every payment with date, amount, purpose and the relevant contractual term.
The same payment may appear in the file while raising different legal questions.
| Review position | Question | Useful evidence |
|---|---|---|
| Separation Right to a specific balance | Was the amount held for the beneficiary and is it still identifiable? | Trust agreement, individual entry, statement, reconciliation and balance |
| Insolvency claim Payment or repayment claim | Does a claim exist against the insolvent counterparty? | Agreement, maturity, notice, termination or settlement position |
| Reconciliation Allocation still open | Which receipts, releases and costs make up the remaining amount? | Transaction journal, client ledger, supporting records and correspondence |
This table is a working structure. The legal result depends on the agreement, the flow of funds and the circumstances of the case.
Create a flow-of-funds schedule from receipt to current position. Record each receipt, beneficiary, purpose, release, set-off, fee and remaining amount. Compare it with statements and any client-money ledger. Differences are separate review points and should not be replaced by estimates.
A separate account makes allocation easier. It does not answer every legal question. If the account served several people, an individual reconciliation is required. If money was transferred to a general account, examine whether the specific amount can still be traced through entries and the balance. Timing alone does not establish that result.
Secure the documents before an account is closed or data is deleted. Request a reconciliation as a contracting party and record when each item was received. Original statements, exports and the related communications will usually be important later.
Austrian insolvency law protects third-party rights in estate assets according to general legal principles. For money, the preliminary question is therefore whether a specific balance exists that cannot be attributed to the debtor. If that allocation cannot be established, a payment claim against the estate or debtor may still exist. The two routes must be kept distinct in the file.
A claim filing should state the legal basis, amount, maturity and evidence. A separation request should identify the balance, holding purpose, account reference and requested action. Draft both positions consistently and avoid statements that rule out the alternative without a factual basis.
For amounts already released or set off, determine the exact date. The review depends on whether a balance remains, whether the release was authorised and which remedies may follow from an unauthorised use. Calling an amount “client money” does not replace this chronology.
The first letter should identify the proceedings, reference number, counterparty and your role. Attach an evidence matrix listing document, date, amount, entry, purpose and its significance for allocation. State whether you seek separation, a reconciliation, repayment or, as a precaution, filing of a claim.
Request confirmation of the balance, transaction records and treatment of the money. Do not assume that a deadline in your letter is a statutory deadline. Procedural time limits and the proper form of assertion must be checked against the court notice and the specific proceedings.
Avoid setting off against, accessing or blocking an account yourself. Those steps can create further legal issues. A complete, factual and provable presentation provides the better basis for the next decision.
The Austrian Insolvency Code in the Federal Legal Information System provides the statutory starting point for estate assets, third-party rights and separation, in particular sections 2, 11 and 44 IO. The official version of the Austrian Civil Code is relevant to the contractual arrangement and general civil-law principles.
No. The account label does not decide the issue. The agreement, holding purpose, records, balance and allocation of the specific money must be assessed together.
An individual reconciliation is particularly important. For each person, receipt, authorised release, costs and remaining balance must be traceable. A total figure alone will usually not establish allocation.
Clarify recipient, date, purpose and legal basis of the transfer. Depending on the agreement, a repayment or damages claim may exist. A right to a specific replacement amount requires separate review.
That depends on the legal position and procedural stage. If a payment claim exists alongside or instead of separation, filing must not be overlooked. The court notice and proceedings determine the applicable form and deadline.
This article distinguishes security rights from a right to a specific trust balance.
This article explains the examination hearing, disputes and the next steps for a money claim.
The topic page explains rights in estate assets and the evidence typically required.
Use the checklist to organise contracts, location and payment records for a review.
Arrange the basis, amount, payments and procedural records for further action.
Tell us your role, the business concerned and the procedural status. We respond within one business day.
Address
BRANDAUER Rechtsanwälte GmbH Giselakai 51 5020 Salzburg
Phone
+43 662 6280000