Austrian Law Blog:


Can an investor buy the insolvency administrator´s right to contest a (real estate) transaction, which the insolvent debtor concluded before the opening of the insolvency proceedings?

Yes, in a recent case an insolvency administrator successfully sold to an investor for a purchase price of EUR 5,000 the right to contest the insolvent company’s sale of a real estate to the wife of the manager of the insolvent company. The investor then filed a lawsuit against the wife for payment of approx. EUR 470,000 arguing that the debtor sold the real estate at a price below the reasonable market price.

When a company files for bankruptcy, the court appoints an insolvency administrator, whose responsibility is to best satisfy the claims of the creditors e.g. by realizing the debtor’s remaining assets. Additionally, sec. 37 of the Austrian Insolvency Code (IO) enables the insolvency administrator to contest certain transactions, which the debtor has successfully concluded (shortly) before the bankruptcy, provided that reversal of the transaction will put the bankrupt’s estate in a better financial position (e.g. the debtor sold real estate below the reasonable market price). 

According to the prevailing view and literature, this right of the insolvency administrator cannot be transferred (i.e. sold) to a third party, e.g. an investor. In a recent decision (17 Ob 6/19k), the Austrian Supreme Court (OGH), has taken a different view: the purpose of sec. 37 IO is to bundle the creditors’ rights in one person, the insolvency administrator, who acts only in their interest. Contrary to the opinion of most scholars, the Supreme Court concluded that the insolvency administrator can also sell the right to contest a transaction (together with the underlying benefits of a successful challenge). As stated by the Supreme Court, it is irrelevant who contests the transaction; be it the creditors represented by the insolvency administrator, or a third party. 

According to the Supreme Court, the transfer of the right to contest a transaction must not be contrary to the purpose of the insolvency proceedings. However, the Supreme Court also held that it was not necessary that the investor pays to the insolvency administrator (i.e. bankrupt’s estate) a reasonable purchase price for the acquisition of the right to contest the debtor’s real estate transaction.

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