Austrian Justice Minister Zadić Plans Reforms in Connection with the Signa Insolvency

PeopleEntrepreneurs ♦ Published: January 24, 2024; 11:11 ♦ (Vindobona)

The insolvency of the Signa real estate company has far-reaching consequences, which are now also prompting the Austrian Ministry of Justice under the leadership of Green Justice Minister Alma Zadić. In a five-point plan in response to Signa's insolvency, Zadić plans to significantly tighten the penalties for failing to submit balance sheets.

Austrian Justice Minister Zadić proposes increased penalties for missing balance sheets due to Signa and a five-point plan for reform of the criminal offense of balance sheet falsification. / Picture: © BMJ/Antonio Nedić

The minister is proposing to increase the penalties for companies of public interest to up to 100,000 euros, as reported by "DerStandard". This would apply in particular if companies such as Signa fail to submit their balance sheets on time and thus conceal their true financial circumstances.

Gaps in the penal code

In addition to the increased penalties, Zadić wants to examine whether there are loopholes in the Criminal Code that allow companies not to submit balance sheets without this having criminal consequences. Currently, it is illegal to falsify financial statements, but not to fail to submit them.

In the case of Signa, there was also the fact that no consolidated financial statements were submitted. This made the transparency of the financial interdependencies within the group more difficult. Zadić is therefore planning to extend the consolidation obligation.

While the ÖVP has so far shown restraint, the implementation of the reforms will depend on the coalition partner. In the meantime, Signa is still looking for financial backers to help it overcome its insolvency. Rumors suggest that investor Hans Peter Haselsteiner and Raiffeisenbank International (RBI) could step in as lenders.

Uncertainty in the future of Signa project companies

The financial uncertainty of the project companies of the insolvent Signa real estate company Development remains after the latest creditors' committee. Despite the urgent need for a liquidity injection to keep the business running, the results of the meeting were kept confidential.

Signa restructuring board member Erhard Grossnigg had previously demanded a substantial sum from the existing investors to finance the project companies of Signa Prime and Development, as reported by ORF. A deadline of January 15 passed without any concrete results. The possibility of an insolvency loan for the project companies of both companies, which has priority over the claims that were raised before the opening of insolvency proceedings, is now on the table.

Series of insolvencies

In addition to the ongoing search for money at Signa, a series of insolvencies continues to occur within the company network. Several German project companies are affected, including prestigious Signa projects in Berlin, such as the Karstadt properties on Hermannplatz and Kurfürstendamm 231. Insolvencies have also been reported in Munich, including the owner company of the Galeria building on Rotkreuzplatz.

The "Standard" recently reported that 32 subsidiaries of German Development had to file for insolvency alone. The insolvency of Elbtower Immobilien GmbH & Co. KG, owner of the valuable Elbtower property, was also announced. The ongoing financial problems and series of insolvencies raise questions about the future stability and direction of the company. As reported, the exact impact of these developments on the real estate industry and affected stakeholders remains to be seen.