In late 2022, the European Commission presented a proposal for a directive to harmonize certain aspects of insolvency law. With the adoption of Directive (EU) 2026/799, this legislative initiative has now been completed: The European Parliament adopted the text at first reading on March 10, 2026; the Council endorsed the Parliament’s position and adopted the legislative act on March 30, 2026; publication in the Official Journal took place on April 1, 2026. Member States are generally required to transpose the directive into national law by January 22, 2029.

The EU Directive is another building block toward the completion of the European Capital Markets Union. Its aim is to eliminate cross-border differences in substantive insolvency law, which have so far led to legal uncertainty, reduced predictability of liquidation proceeds, and thus higher barriers to cross-border investment. Unlike the European Insolvency Regulation (EuInsVO), which primarily governs international jurisdiction, recognition, and coordination, the new directive addresses selected areas of substantive insolvency law and establishes minimum standards across the Union.

Pre-Pack Procedure: The Cornerstone of the Reform

At the heart of the EU directive is the new pre-pack procedure. A pre-pack procedure allows for the sale of a company to be negotiated with a third party even before the opening of insolvency proceedings and for the takeover to be prepared in a binding manner, so that it can be implemented in an expedited procedure immediately after the opening of insolvency proceedings. Pursuant to Art. 21 et seq., the Directive provides for such a procedure in two phases: In the preparatory phase, a buyer is sought and the sale process is structured and prepared prior to the formal opening of insolvency proceedings. In this phase, it will also be possible to apply for protection from enforcement. An independent and qualified administrator (“monitor”) appointed by the court oversees this process. This represents a departure from the previous insolvency administrator, who only acts after the proceedings have opened. In the subsequent liquidation phase, the sale is implemented immediately following the opening of insolvency proceedings. This clearly reflects the objective under EU law: the going-concern sale should not begin only after the opening of insolvency proceedings, but rather be prepared in the run-up to insolvency in order to minimize value losses and reputational damage as much as possible and to reduce the subsequent duration of the proceedings.

1. Preparation phase (Art. 23 et seq.); and
2. Liquidation phase (Art. 28 et seq.).

At the same time, the EU Directive clarifies for the preparation phase that the sale process must be conducted in a competitive, transparent, and fair manner and must comply with market standards. According to the Directive’s interpretation, this requires that the sale process be consistent with the customary rules and practices for M&A transactions in the respective Member State, that potentially interested parties be invited to participate, that potential purchasers be provided with the same information for their due diligence, and that bids be solicited through a structured process (Recital 44). The best bid determined in this process must be submitted either to the court or the competent authority for approval or—where national law so provides—to the creditors for approval.

It is noteworthy that the Directive expressly does not conceive of the pre-pack procedure as a preventive restructuring procedure. Rather, the liquidation phase must take place through insolvency proceedings that are not merely of a preventive restructuring nature. At the same time, the intervention under EU law remains limited. Key issues such as the ranking of creditors’ claims (waterfall), the distribution of proceeds, and the specific participation of creditors remain, in principle, a matter of national law.

The Directive thus harmonizes the procedural framework for the pre-packaged sale of a business, but not the entire distribution system under insolvency law. It is designed as a minimum harmonization and, in principle, leaves stricter or more extensive national regulations unaffected.

Obligation to File for Insolvency

The Directive does not establish a general EU-wide deadline for opening insolvency proceedings. Neither the grounds for insolvency nor the conditions under which insolvency proceedings may be opened are harmonized across the EU. These matters remain subject to national law. However, the obligation of company directors to file a petition for the opening of insolvency proceedings within three months after they have become aware that the company is insolvent under national law, or could reasonably be expected to have become aware of this, is harmonized (Art. 40(1) and (2)). In this way, the Directive aims to limit delays in filing for insolvency and to minimize losses for creditors.

At the same time, the Directive allows Member States a certain degree of flexibility. In particular, they may provide that the obligation to file a petition is also satisfied by a timely public notice of the company’s insolvency in a register, so that creditors may in turn apply for the opening of proceedings. Similarly, the obligation to file a petition may be suspended if the directors take measures that offer creditors an equivalent level of protection (Art. 41). However, the Directive also requires civil liability rules in any event where directors fail to comply with their obligation to file a petition in a timely manner or where alternative protective measures do not lead to an equivalent result (Art. 42; Recitals 60 and 61). In such cases, creditors should be placed in the position they would have been in had the application for the opening of insolvency proceedings been filed by the directors within the time limit set by the Member States.

Identification and Tracing of Assets (Asset Tracing)

Another key focus of the Directive is on the more efficient identification and tracing of assets. The underlying rationale is that insolvency practitioners often lack sufficiently rapid access—particularly in cross-border cases—to the information necessary to locate assets forming part of the estate or subject to avoidance actions. For this reason, the EU Directive provides for tiered access to national bank account registers (via the system for interconnecting bank account registers to be developed and operated by the Commission), information on beneficial owners, and electronic data retrieval systems (Recitals 19 to 28).

Creditors’ Committees

Member States must ensure that, following the opening of insolvency proceedings, a creditors’ committee is established if so decided or requested by the creditors’ meeting or—where national law does not provide for a creditors’ meeting—if the creditors so request in accordance with national law (Art. 44).

In particular, the Directive permits the establishment of a creditors’ committee even before the opening of insolvency proceedings, and it allows Member States to refrain from establishing such a committee for reasons of proportionality if the burdens associated with its activities would outweigh the benefits (Art. 44(2) and (3); Recital 65). Members must be appointed without delay, and their composition should adequately reflect the diverse interests of creditors. Employees or their representatives should be eligible for appointment as members unless an equivalent alternative mechanism for representing their interests exists; cross-border creditors must also not be excluded (Art. 45; Recital 67).

The members of the creditors’ committees are exempt from personal liability for their actions in their capacity as committee members, unless it has been established that they have breached their duties with respect to the interests of the creditors intentionally or through gross negligence. This liability protection model is to be secured by insurance to be taken out at the expense of the insolvency estate.

Bridge Financing

Article 2 of the EU Directive defines “bridge financing” as new financial support provided by an existing or new creditor, which includes at least financial support during the pre-pack procedure and is reasonably and immediately necessary to continue the debtor’s business operations or a part thereof, or to preserve or enhance the value of the enterprise.

The provisions on bridge financing follow clearly recognized insolvency principles: Necessary “fresh money” should be able to be mobilized during the critical phase prior to the completion of the sale of the business without the financiers being exposed to risks of avoidance, invalidity, or liability solely because of a potential disadvantage to creditors (Art. 36, Recital 15). At the same time, the possibility of satisfying interim financing on a preferential basis relative to other creditors and of accessing liquidation proceeds to secure it corresponds to the principle recognized under insolvency law that bridge financing necessary for the continuation of business operations or for maintaining or increasing the value of the company may be given preferential treatment under certain conditions. In essence, Article 36 of the EU Directive thus combines the promotion of recovery with creditor protection in a manner consistent with the fundamental concept of modern restructuring instruments.

Pre-emption Rights and Credit Bidding

To ensure an undistorted bidding process, the EU Directive also contains provisions on pre-emption rights and credit bidding (Art. 37). In principle, bidders may not be granted pre-emption rights. The only exception is that statutory pre-emption rights not affected by the debtor’s insolvency remain in force and are enforceable. While secured creditors should be able to participate in the bidding process through credit bidding, they may only set off their claims against the purchase price up to an amount that does not exceed the market value of the company. This is intended to prevent secured creditors from gaining an undue advantage in the bidding process and to prevent potential competitors from being deterred from submitting a bid (Recital 55).

Insolvency Avoidance Actions – Comparison of the Directive’s Provisions with Current Austrian Insolvency Avoidance Law

Compared to current Austrian law, it is evident that the Directive requires less of a systemic change and more of a selective readjustment for Austria in the area of avoidance actions. Austrian avoidance law already provides, under §§ 28 to 31 IO, for a tiered system comprising avoidance based on intent, avoidance based on preferential treatment, and avoidance based on knowledge of insolvency. In addition, § 29 IO applies to gratuitous dispositions. The temporal scope is also differentiated under current law: § 28 IO extends—depending on the facts—up to ten years back, § 29 IO covers gratuitous dispositions within two years, § 30 IO relates to security measures or satisfactions after the onset of insolvency, after the filing of the insolvency petition, or within the last sixty days prior thereto, and § 31 IO covers legal acts after the onset of insolvency or after the filing of the insolvency petition with an absolute six-month limit.

Particularly in the case of avoidance of transactions under §§ 30, 31 IO, there is a significant similarity to the provisions of the EU Directive. Article 7 of the EU Directive functionally distinguishes between incongruent and congruent transactions: For benefits resulting from satisfaction or security provided within three months prior to the relevant insolvency petition or between the petition and the opening of proceedings, the detrimental effect is generally sufficient; if, however, a due claim is satisfied or secured in the manner owed, the Directive additionally requires the creditor’s positive knowledge of the insolvency. By comparison, § 30 IO covers objective preferential treatment, in particular non-congruent satisfaction, without a subjective element, whereas § 31 IO, in the case of congruent satisfaction and disadvantageous legal transactions, requires knowledge or negligent ignorance of the insolvency or the insolvency petition.

In substance, the Austrian legal situation is therefore already very close to the EU model. Differences exist primarily in the time limits: While the Directive prescribes a uniform three-month period for preferential treatment throughout the EU, the IO operates with the time limits outlined above and is thus structurally more complex.

A greater need for adaptation, however, could arise regarding the avoidance of legal acts “without consideration or in return for consideration that is manifestly inadequate.” The Directive requires a separate minimum threshold for this with a twelve-month period and excludes only gifts or donations of symbolic value (Art. 8, Recital 13). Although Austrian law provides, under § 29 IO, for the avoidance of gratuitous dispositions within two years and, under § 28(4) IO, for the avoidance of asset-squandering purchase, exchange, and supply contracts within the last year;

the EU law concept of “manifestly inadequate consideration,” however, is not identical to the Austrian concept of gratuitousness, nor is it entirely synonymous with dissipation of assets. It is precisely here, therefore, that there may be a need for legislative clarification to explicitly cover cases of an evident but not entirely gratuitous imbalance in a manner consistent with EU law.

In contrast, Austrian law already goes further than the EU Directive when it comes to avoidance based on intent. Article 9 of the EU Directive requires a two-year period and positive knowledge on the part of the other party for legal acts intended to disadvantage creditors. For related parties, positive knowledge is presumed to be rebuttable. Section 28(1) IO, by contrast, is stricter and covers legal acts where the other party had positive knowledge of the debtor’s intent to disadvantage creditors within ten years prior to the opening of proceedings. Mere negligent ignorance is precisely not sufficient here. Section 28(2) IO also covers cases within two years where the intent to disadvantage creditors must have been known, i.e., where there is culpable ignorance. Furthermore, Section 28 IO does not require the debtor to be materially insolvent; the Supreme Court has confirmed this on multiple occasions, for example in 6 Ob 110/00w and 1 Ob 156/05f. For Austria, therefore, the EU Directive does not necessitate any substantive tightening of the law in this area. Rather, it is evident that national law already exceeds the minimum standards set by EU law.

Implications for Austrian Insolvency Law

For Austria, the Directive thus means more than just the introduction of the pre-pack procedure. In addition to creating an independent legal basis for the pre-arranged sale of a business, the question will also arise as to how the EU requirements regarding the obligation of managers to file for insolvency, the access of insolvency administrators to registers and databases, and structured creditor participation are to be integrated into the existing system of the Insolvency Code. In the law of avoidance, the Directive is unlikely to force a complete overhaul of the system, but it will likely require specific adjustments to deadlines, terminology, and procedural mechanisms.

It will be particularly interesting to see how the centerpiece of the reform, the pre-pack procedure, is integrated into the Austrian landscape of insolvency and restructuring proceedings. Since the pre-pack procedure is essentially a process that formally precedes insolvency proceedings but is closely related to them, it cannot yet be seamlessly integrated into either the Insolvency Code (IO) or the Restructuring Code (ReO). A discussion regarding the relationship between insolvency, restructuring, and pre-pack procedures will therefore likely be unavoidable.

Conclusion: It remains exciting!

With Directive (EU) 2026/799, the European Union is taking another step toward substantive harmonization of national insolvency laws. While the core innovation lies in the pre-pack procedure, the practical significance of the directive extends far beyond that. For Austria, this does not entail a complete overhaul of the system, but it does require the Austrian legislature to make significant adjustments in several areas of the Insolvency Code. The implementation by 2029 will therefore be worth following with particular interest.