Stabilisation and restructuring law in Austria

The first measures introduced by the Austrian government are focused on SMEs, sole proprietors and the tourism industry. Please note that guarantees will also be extended to larger companies; it is not yet known when and under which conditions such extensions will be carried out.

1.1 Hardship fund for sole proprietors

Sole proprietors, new self-employed individuals pursuant to Austrian social security law, freelancers and micro-entrepreneurs (less than 10 employees) are entitled to direct financial subsidies, provided they meet the requirements.

1.2 AWS Bridging Financing Guarantees for SMEs

The Austria Economic Services (Austria Wirtschaftsservice, AWS) provides guarantees as security for bridging loans to “healthy” commercial and industrial SMEs (companies with less than 250 employees, maximum EUR 50 million turnover or EUR 43 million balance sheet total) to cover running costs e.g. rent, personnel costs, purchase of goods, insurance and leasing instalments.:

• guarantees are applied for by the lending bank and are only available for loans up to EUR 2.5 million with a term of five (5) years
• a guarantee secures 80% of a bridging loan.

1.3 Bridging Guarantees for SMEs in the Hotel and Tourism sectors

The Austrian Tourism Bank (Österreichische Tourismus Bank, ÖHT) provides guarantees as security for bridging loans for SMEs in the hotel and tourism sector:

• ÖHT grants the applying companies a federal guarantee of 80% as collateral for new bridging loans (overdraft facilities) at their house banks
• guarantee amounts range from EUR 100,000 to EUR 4 million.

1.4 Credit lines for export companies

The Austrian Control Bank (Österreichische Kontrollbank, ÖKB) provides credit lines (overdraft facilities) to export companies of 10% (large companies) or 15% (small- and medium-sized enterprises) of their export turnover. The funds provided amount to EUR 2 billion:

• maximum limit per debtor is EUR 60 million
• existing export activity is a requirement to receive credit
• no additional securities required other than proof that the company was economically sound until the start of the effects of COVID-19 in Austria.

The revolving loans are primarily intended to secure the location and continue the operations of the exporters. The financing is initially limited to two (2) years with the possibility of extending it thereafter. The costs are based on the Kontrollbank refinancing framework (KRR).

The Austrian Government has decided on an aid package of up to EUR 38 billion for the stabilisation of the Austrian economy. The major parts of this stabilisation package are:

• short-term compensations schemes listed above
• financing of short-time work to reduce lay-offs
• EUR 15 billion emergency aid fund (please see below)
• moratorium on bank loans: consumer loans and loans to micro-enterprises must be deferred if they are affected by the Corona crisis
• further, deferrals for tax payments and reductions in advance tax payments are granted by the financial authorities.

Emergency Aid Fund

On 3 April the Austrian parliament enacted a EUR 15 billion emergency fund that is supposed to support companies which are most affected by the spread of COVID-19 and the measures to contain it. Companies having an acute demand for liquidity can apply for working capital loans at their regular banks. Those working capital loans are supported by the Government by way of the following two instruments:

1. Guarantees of the Republic to secure 90% of the amount of working capital loans. The maximum term is five (5) years and can be extended by up to five (5) years.

2. Further, for companies that have suffered major drops in turnover, parts of the working capital loans will be converted into non-repayable grants. Depending on the drop in turnover, the following thresholds apply:

• drop in turnover between 40 and 60%: 25% of the working capital loan becomes non-repayable
• drop in turnover between 60 and 80%: 50% of the working capital loan becomes non-repayable
• drop in turnover of more than 80%: 75% of the working capital loan becomes non-repayable.

Further details:

• the guaranteed working capital loans are capped at the lower of three (3) months’ revenues and EUR 120 million; the non-repayable grants are capped at EUR 90 million
• a loan interest rate of a maximum of 1% and guarantee fees which are prescribed by the EU, and which range between 0.25 and 2% depending on the size of the company and the duration of the guarantee, are applicable
• applications for loans will be possible from 8 April 2020
• the aim is to process applications from submission to approval within seven (7) working days; the first payments should therefore be possible as early as 15 April 2020.

Please see above.

The Ministry of Commerce is currently preparing the notification to the Commission of state aid measures to support the economy and mitigate the economic effects of the COVID-19 crisis. The basis for the notification to the Commission is a legal framework published on 19 March 2020. This framework provides for the possibility of submitting applications for subsidies by the end of the year.

Due to the urgency of the measures to be taken, the Commission stated that it intended to approve the subsidies within a few days.

5.1 AWS Bridging Financing Guarantees for SMEs

• commercial and industrial SMEs with registered seat or permanent establishment in Austria
• excluded from any guarantees are (amongst others): 
  • companies which meet the Company Reorganisation Act (URG) criteria in the financial year preceding the application (deemed reorganisation requirement, i.e. equity ratio less than 8% and notional debt repayment period of more than 15 years)
  • companies which meet the statutory requirements for the opening of insolvency proceedings at the request of creditors
  • banks and other financing institutions
  • insurance companies (except insurance agents and brokers, who are eligible)
  • real estate companies (e.g. property developers and renting & leasing; except real estate brokers and property management companies that are eligible for subsidies).

5.2 Bridging Financing Guarantees for SMEs in the Hotel and Tourism sectors

• companies that are members of the tourism and leisure industry division of the Austrian Chamber of Commerce (Wirtschaftskammer)
• only applicants whose companies were viable and competitive before the onset of the crisis, i.e. which do not meet the URG criteria (see above) (based on the 2018 annual financial statements), are eligible for guarantees
• the company needed to be actively conducting business before the crisis occurred; the cut-off date is 11 March 2020.

5.3 Credit lines for export companies

• target group is domestic exporters (large enterprises and SMEs):
  • which were economically sound before the start of the COVID 19 effects in Austria
  • whose goods and services are not covered by the Austrian Security Control Act and/or the Austrian War Material Regulatio, and
  • generally have an Austrian added value of at least 25%.

5.4 Emergency Aid Fund

• prerequisites for the guarantees are:
  • location and business activities in Austria
  • demand for liquidity in Austria
  • certain limitation on bonuses for members of the Management Board of stock corporations
  • limitations for distribution of dividends.  

• prerequisites for the non-repayable grants are:
  • location and business activities in Austria 
  • fixed costs must have been incurred in Austria
  • companies must take all reasonable measures to reduce fixed costs and to maintain jobs in Austria (short-time work)
  • companies must have been “healthy” before the COVID-19 crisis
  • the financial and insurance industry are excluded.

Please see above.

7.1 AWS guarantees for SMEs

• companies need to have their registered seat or a permanent establishment in Austria
• origin of the mother/holding company should not be relevant.

7.2 Guarantees for the hotel and tourism sector

• companies that are members of the tourism and leisure industry division of the Austrian Chamber of Commerce (Wirtschaftskammer)
• origin of mother/holding company should not be relevant.

7.3 Credit lines by the Austrian Control Bank (ÖKB)

• credit lines are for Austrian companies
• further, they can only be applied for if at least 25% of the added value of the exported goods of the respective company was generated in Austria
• all deliveries for which an Austrian certificate of origin is issued are considered to be 100% Austrian added value.

7.4 Emergency Aid Fund

• financial measures under the Emergency Aid Fund will only be granted to companies which have their registered seat or a permanent establishment in Austria and carry out their main operational activities in Austria
• the exact criteria for “main operational activities” have not been announced yet; the Austrian Minister of Finance is responsible for defining criteria for the distribution of funds by way of regulations.

The Government announced that a prerequisite for guarantees under the Emergency Aid Fund for stock corporations will be limitations of bonus payments to members of management boards. Further, dividends shall not be paid from liquidity coming from the Emergency Aid Fund between 16 March 2020 and 16 March 2021. The specific legal basis is yet to be announced.

• The legislator introduced a new bill which now states that in case illiquidity of a company is caused by an epidemic or pandemic, then the maximum term for filing for insolvency is increased from 60 days to 120 days.
• Debtors now have 120 days to find a mutually beneficial arrangement with the creditors. The precondition is that the insolvency (i.e. the inability to pay or over-indebtedness under insolvency law) has occurred due to the exceptional situation.
• Further, the obligation to file for insolvency is suspended until 30 June 2020 if the over-indebtedness under insolvency law has occurred after 1 March 2020.
• In addition, during this period creditors will not be able to apply for insolvency of their debtors. In case a company is over-indebted on 30 June 2020, the debtor will have to file for insolvency within 60 days after 30 June 2020 or within 120 days after the occurrence of over-indebtedness, depending on which period ends later.
• This shall not affect the obligation to file for insolvency in the event of actual insolvency (Zahlungsunfähigkeit) since a number of Government financing measures have been announced or already implemented that should secure the endowment with liquidity until the end of the COVID-19 crisis.

In addition to the amended application deadlines set out above, the legislator introduced the following changes:

10.1 Appeal law

• The legislator introduced the measure of short-time work with the goal of enabling companies to retain employees instead of laying them off.
• Since support payments cannot be paid immediately, Austrian banks currently accept the confirmation of short-time work support of the Austrian labour market service (Arbeitsmarktservice, AMS) as security for bridging loans.
• The grant of the bridging loan cannot be appealed by creditors in insolvency proceedings in the case of a company going insolvent which:

• applied fr short-time work between 1 March 2020 and 30 June 2020
• received bridging lans for the pre-financing of the salaries, and
• paid them back immediately after receipt f short-time working support by the AMS.

• This provision is only applicable if neither a pledge nor a comparable security has been provided from the company’s assets, nor the lender is aware of the company’s insolvency at the time the credit is granted.

10.2 Equity Compensation law (Eigenkapitalersatzgesetz, EKEG)

• In Austria, a loan granted by a shareholder to its company in times of crisis is considered as “replacing equity”.
• In case the company goes insolvent, such loans are subordinate to other claims in the insolvency proceedings.
• As an incentive for shareholders to grant their companies loans, a new provision of the EKEG provides that shareholder loans which are granted between 5 April 2020 and 30 June 2020 for not more than 120 days, and for which the company has neither provided a pledge nor furnished another comparable security from its own assets, do not fall under the EKEG.

No.

No additional measures yet.