Measures to mitigate the effects of the coronavirus pandemic on the Austrian economy

On 16 March 2020, the Austrian government imposed drastic measures to contain the SARSCoV2 virus, commonly known as Covid-19. The international Covid-19 crisis resulted in a seven-week complete lockdown in Austria, with only ‘critical infrastructure’ such as banks, supermarkets, pharmacies and hospitals remaining open for business.

Simultaneously, the Austrian government applied several economic measures, attempting to cushion the severe impact of the lockdown for the Austrian economy. Austria quickly set up the Covid-19 Finanzierungsagentur des Bundes GmbH (COFAG) commissioned with ‘the provision of services and the taking of financial measures necessary to maintain the solvency and to bridge liquidity difficulties of companies in connection with the spread of Covid-19 and the resulting economic effects’, which was equipped with a total financial framework of €15bn. COFAG’s central financing instrument is the issuing of bridge guarantees for up to 100% of the credit value applied for at banks as well as the granting of fixed-cost subsidies. COFAG does not grant any financial aid to undertakings considered to have been in financial difficulties before the onset of the Covid-19 pandemic.

In addition, after these initial emergency measures the Austrian legislator adopted numerous legislative changes, also in the field of insolvency law, to mitigate the economic impact of the coronavirus crisis.

Legal changes in insolvency law due to the Covid-19 pandemic

Duty to file for insolvency

The Austrian insolvency regime differentiates two scenarios, each of which leads to an obligation to file for insolvency under the Austrian Insolvency Act.


Illiquidity is assumed, if the debtor is unable to pay more than 5% of its due (monetary) liabilities and cannot obtain the necessary means of payment in the foreseeable future.


Over-indebtedness occurs, when a company is both arithmetically over-indebted (ie the liabilities of the debtor exceed its assets) and a positive going-concern prognosis is not feasible.

When Austrian companies are either illiquid or over-indebted, their respective management is obliged to file for insolvency proceedings immediately, and at the latest within 60 days after the insolvency was triggered if the management took reasonable, yet unsuccessful restructuring measures to prevent insolvency. If the debtor’s insolvency is caused by a natural disaster such as the coronavirus, the 60-day period is doubled to 120 days. In the course of the Covid crisis the Austrian legislator clarified that also epidemics or pandemics lead to an extension of this period to 120 days.

In addition, the Austrian legislator temporarily suspended the obligation to file for insolvency due to over-indebtedness until 31 January 2021, if the over-indebtedness occurred in the period between 1 March 2020 and 31 January 2021. If a debtor is over-indebted at the end of 31 January 2021, it must file for the opening of insolvency proceedings without undue delay, but at the latest within 60 days after 31 January 2021 or 120 days after the occurrence of over-indebtedness, whichever period ends later.

Shareholder loans

In order to increase the willingness of shareholders to contribute to restructuring measures of insolvency-endangered companies, the Austrian legislator also provided for simplifications in the otherwise rather strict Austrian equity replacement legislation. While monetary shareholder loans would usually be considered equity replacing and therefore subordinate to creditor claims in insolvency proceedings if given for more than 60 days, such shareholder loans can now be granted for up to 120 days until 31 January 2021 and will not be considered equity replacing and thus not subordinate to creditor claims.

Financing of salaries of employees on short-time work

Bridge loans used to pre-finance salaries of employees on short-time work, which were taken out in the period between 1 March 2020 and 31 January 2021, and immediate repayment of such loans upon receipt of the short-time work subsidy, are not subject to Austrian insolvency voidance, if neither a pledge nor comparable security from the borrower’s assets was provided for the loan and the lender was not aware of the borrower’s insolvency when the loan was granted. This legislative initiative aims at further strengthening the willingness of banks to support companies through the Covid-19 crisis and save jobs at the same time.

Effects of the coronavirus pandemic on the number of insolvencies

The measures adopted by the Austrian government to mitigate the economic impact of the Covid-19 pandemic resulted in the number of insolvent companies in the first half of 2020 being significantly lower than in the same period in 2019 (by about 25%). However, at the same time the overall liabilities involved in insolvency proceedings increased by about 86%. This shows that larger companies, which tend to file for insolvencies themselves, also did so in the course of the Covid-19 crisis, whereas tax authorities as well as the health insurance institutions, which apply for the opening of insolvency proceedings in most cases involving smaller liabilities, have not filed for insolvency as frequently since the outbreak of the coronavirus crisis.


While the first few months after the lockdown were all about cushioning the severe economic impacts of the Covid-19 crisis, the next phase will be all about getting the economy back up and running as quickly as possible. The Austrian government has already taken measures, introducing the ‘investment premium’, equipped with a financial framework of €1bn, which was quickly depleted and is currently under discussion for an increase. The investment premium can be applied for by all companies which do not fulfil insolvency criteria. Eligible are new investments in depreciable fixed assets at Austrian business premises of a company, for which the Covid-19 investment premium has been applied for between 1 September 2020 and 28 February 2021. Additionally, the investment measures have to be taken between 1 August 2020 and 28 February 2021. The amount of the premium is 7% and increases in the investment areas of green technology, digitisation and health up to 14 % of the investment with an upper limit of the calculation basis of €50m.

At the moment, the number of coronavirus infections is increasing. It is not foreseeable whether there will be a further lockdown, but it is clear that another lockdown would lead to further slumps in the Austrian economy that will need to be kept in check with additional legislative measures.