Signa Development Insolvency Proceedings: Insolvency Administrator Loses Again Before the OLG Vienna

Background of the Proceedings

According to reporting, the specific dispute concerns the tax treatment of transactions around Signa Development, which is regarded as one of the key companies of the former Signa property group. The Republic of Austria or the Tax Office for Large Enterprises respectively had taken a position against the view of the insolvency administrator. The Higher Regional Court of Vienna followed the state's position in its decision.

The defeat at second instance means that the insolvency administrator was unable to assert its previous line in these proceedings. It now has the option of continuing the legal route with an extraordinary appeal to the Supreme Court of Justice. Until a decision is reached there, the question of the amount at which claims by the Republic are to be recognized in the insolvency proceedings remains open.

Next Step: Supreme Court of Justice

Independently of these court proceedings, the realization of properties allocated to Signa Development is also proving difficult. For example, the originally envisaged sale of a plot in the German city of Wolfsburg, on which a bistro for VW employees is located, to Volkswagen is currently "nicht wahrscheinlich" ("not probable") according to the available information. The poor market situation in the automotive industry is cited as the reason.

Wolfsburg Deal with VW Wobbling

This development exemplifies the difficulties that the working-through of the Signa complex continues to be confronted with. While at the legal level individual proceedings are ending with different outcomes, at the same time the practical realization options for the remaining properties are limited by the cyclical situation in the automotive industry and the real-estate sector.

The WKStA (Central Public Prosecutor's Office for Economic Crime and Corruption) and the SOKO Signa (Task Force Signa) are dealing, in parallel to the civil-law working-through, with criminal-law allegations in the surroundings of the Signa complex. Findings from these investigations can also become relevant for the civil-law proceedings concerning the insolvency estate. However, no direct overlap with the current OLG ruling can be derived from the available information.

Criminal Investigations Running in Parallel

Industry observers see the sluggish working-through as a typical feature of large insolvency clusters: a multitude of companies, a complex asset structure and a large number of creditors – including banks, suppliers and the public sector – lead to individual proceedings being drawn out over years. In the case of the Signa complex, there is the additional factor that individual assets can only be disposed of to a limited extent.

Overall, the current procedural status makes clear that the insolvency of Signa Development will continue to have legal and economic after-effects for years to come. Neither the OLG decision nor the pending decision of the Supreme Court of Justice nor the difficult market situation for individual properties will lead to a conclusive clarification in the short term. Creditors will have to prepare for a long haul.