Insolvency Law at Liechtenstein
Liechtenstein's insolvency framework underwent a significant overhaul with the enactment of the Insolvency Code on January 1, 2021. This comprehensive reform aimed to harmonize procedures for both individuals and legal entities, emphasizing restructuring over liquidation, and introducing mechanisms to facilitate a "fresh start" for honest debtors. (New Liechtenstein Insolvency Code – Rechtsanwaltskanzlei Dr. Niedermüller)
⚖️ Key Features of the 2021 Insolvency Code
1. Unified Procedures for Individuals and Legal Entities
The reform aligned insolvency proceedings for natural persons and legal entities, adopting terminology and structures similar to Austria's Insolvency Code. This unification simplifies the legal landscape and enhances consistency in application. (New Liechtenstein Insolvency Code – Rechtsanwaltskanzlei Dr. Niedermüller)
2. Restructuring Proceedings
The core objective shifted towards enabling the continuation and restructuring of businesses rather than liquidation. Key provisions include:
Self-Administration: Debtors can propose a restructuring plan before insolvency proceedings commence, allowing them to retain control during the process.
Creditors' Approval: The restructuring plan requires a simple majority of creditors present at the hearing, reducing the previous two-thirds majority requirement.
Minimum Repayment: The minimum repayment to creditors within two years was lowered from 40% to 20%.
Fraudulent Conduct: If the debtor is convicted of fraudulent bankruptcy within two years of plan confirmation, the restructuring plan becomes void, and all claims are revived. (New FL insolvency law: restructuring instead of liquidation - Niedermüller Attorneys at Law, New Liechtenstein Insolvency Code – Rechtsanwaltskanzlei Dr. Niedermüller)
3. Debt Relief for Individuals
Aimed at providing a "second chance" for honest debtors, the reform introduced:
Debt Settlement Procedure: Debtors can propose a payment plan to creditors, which, upon approval, leads to debt relief after fulfilling the agreed payments.
Absorption Procedure: In cases where a payment plan isn't feasible, the debtor assigns seizable assets to a trustee for distribution among creditors over five years.
Discharge: Debtors may achieve debt discharge without creditor consent, subject to fulfilling obligations. (New Liechtenstein Insolvency Code – Rechtsanwaltskanzlei Dr. Niedermüller, Insolvency and Debt Settlement Proceedings in Liechtenstein | Article | Chambers and Partners)
4. Liquidation Proceedings
When restructuring isn't viable, liquidation proceedings are initiated:
Initiation: Can be filed by the company or creditors.
Process: Assets are liquidated, and proceeds are distributed among creditors.
Court Role: The court oversees the process, appointing a liquidator to manage the proceedings.
5. Creditor Rights and Committees
The reform strengthened creditor rights by:
Equal Treatment: Abolishing classes of creditor claims, ensuring all creditors are treated equally.
Creditors' Committee: Establishing committees to oversee proceedings and protect creditor interests. (New Liechtenstein Insolvency Code – Rechtsanwaltskanzlei Dr. Niedermüller)
6. International Recognition of Insolvency
Liechtenstein recognizes foreign insolvency proceedings based on the principle of reciprocity. Without an international agreement, foreign insolvency administrators must demonstrate that their home country recognizes Liechtenstein's insolvency proceedings for recognition to be granted. (Supreme Court Rules on the Recognition of Foreign Insolvencies | Gasser Partner Attorneys at Law)
🏛️ Legal Framework
Insolvency Code (2021): Governs all insolvency and debt settlement proceedings.
Companies Act: Regulates corporate governance and liquidation processes.
Civil Code: Provides provisions related to personal insolvency and debt relief. (Insolvency and Debt Settlement Proceedings in Liechtenstein | Article | Chambers and Partners)
📌 Practical Considerations
Timely Action: Debtors are encouraged to initiate proceedings early to explore restructuring options.
Professional Guidance: Engaging legal and financial advisors is crucial to navigate the complexities of insolvency proceedings.
Court Involvement: The Princely Court plays a central role in overseeing and approving insolvency and debt settlement procedures. (Insolvency and Debt Settlement Proceedings in Liechtenstein | Article | Chambers and Partners)
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