The new Insolvency Code came into force in Liechtenstein on 1 January 2021.
The focus of this total revision of insolvency law was to harmonize insolvency law for natural persons and legal entities, to create an attractive reorganization procedure, to achieve the best possible satisfaction of creditors and at the same time to promote the continuation and reorganization of companies.
In addition, the possibility of debt release for consumers and former entrepreneurs, which has long existed in other countries, was now also introduced in Liechtenstein for the first time in order to grant them the opportunity for a new start and second chance.
In drafting the Insolvency Code, Liechtenstein largely followed the already reformed Austrian law, which is why the doctrine and case law from Austria will have to be taken into account. Insolvency proceedings are now conducted either as “bankruptcy proceedings” or as “reorganisation proceedings” and the terminology corresponds to the Austrian Insolvency Code.
The core element of the reform was to establish the facilitation and promotion of corporate reorganization in Liechtenstein instead of the liquidation of companies. This is intended to make it easier for a bona fide debtor to make a fresh economic start. The new insolvency law provides for the possibility of reorganization proceedings with and without self-administration.
The new reorganization procedure with self-administration, which provides for the submission of a reorganization plan before the opening of insolvency proceedings, is intended to motivate the debtor to take timely action to reorganize and to prevent the filing of an insolvency petition from being delayed.
Furthermore, the debtor may submit the reorganization plan not only before the opening of insolvency proceedings, but until the termination of insolvency proceedings. This is to ensure that the opportunity for reorganization can be taken during the entire insolvency proceedings.
The minimum quota to be offered to the creditors in the restructuring plan and to be paid within two years was also reduced from 40% to 20% and the acceptance of the restructuring plan was facilitated by reducing the approval requirement from previously two-thirds to a simple majority of the creditors.
If the debtor is convicted of fraudulent bankruptcy within two years of confirmation of the reorganization plan, the restructuring plan becomes null and void and all claims are revived. If the reorganization plan was brought about by fraudulent acts or inadmissible special benefits for creditors, the reorganization plan can also be annulled by a court decision within three years of confirmation of the reorganization plan.
The Insolvency Code abolished the previously existing classes of creditor claims and all insolvency creditors now have the same position. The rights of creditors were also strengthened by the establishment of a creditors committee.
Another significant innovation is the introduction of a special procedure for the debt relief of natural persons. Within this framework, a bona fide debtor should, be able to obtain a discharge of debt and thus a fresh economic start within five years. The discharge of debt takes place without the consent of creditors. However, these new provisions for natural persons will only come into force from January 2022.