Responsibility To Investigate - An Update On Avoidance Risks

Following the opening of insolvency proceedings, the insolvency receiver typically tries to enlarge the insolvency estate by asserting voidance claims. Legal acts that occurred within certain suspect periods prior to the opening of insolvency proceedings might be declared void. Creditors may mitigate certain avoidance risks by investigating the debtor's financial situation when conducting legal transactions.

Responsibility to investigate

Legal acts, e.g. payments carried out after the debtor became materially insolvent or after filing for insolvency proceedings may be challenged under certain circumstances if the creditor knew or should have known of the material insolvency or insolvency petition (Sec 31 of the Austrian Insolvency Act). An entity is materially insolvent if it is illiquid (zahlungsunfähig) or over-indebted in terms of Austrian insolvency law (insolvenzrechtlich überschuldet).