The Essential Corporate Law in Austria

These are the highlights if you want to know the essential of Corporate Law in Austria.  This entry was drafted by Kraft & Wildenhofer  for ”E-IURE COMPENDIUM” 2018. Link to e-IURE Network.

This collaboration is a brief step-by-step guidance. In no case it can be considered as legal advice. If you want -or need – legal advice, ask for a lawyer or a law firm. In that case  “Kraft & Wildenhofer”  is an excellent option in Austria.

Regulations and Rules of Corporate Law in Austria

The main statutes in corporate law are the Code of Enterprises (Unternehmensgesetzbuch, UGB), which entered into force on January 1st, 2007, the Law on Limited Liability Companies (Gesetz über Gesellschaften mit beschränkter Haftung, GmbHG) and the Stock Corporation Act (Aktiengesetz, AktG).

Other relevant statutes are the General Civil Code (Allgemeines Bürgerliches Gesetzbuch, ABGB), the Law on Co-operative Societies (Genossenschaftsgesetz), the Law on the Commercial Register (Firmenbuchgesetz), the Law on Private Foundations (Privatstiftungsgesetz), the Insurance Companies Supervision Act (Versicherungsaufsichts-gesetz) and the Act on the Statute of the Societas Europaea (SE-Gesetz).

Type of Companies

The most common types of companies in Austria are the General Partnership (Offene Gesellschaft, OG), the Limited Partnership (Kommanditgesellschaft, KG), the Company with Limited Liability (Gesellschaft mit beschränkter Haftung, GmbH), the Stock Company (Aktiengesellschaft, AG) and the Private Foundation (Privatstiftung).

Since 2007 the most types of companies are also open to the so-called liberal professions („freie Berufe“), as for example lawyers, notaries, doctors, pharmacists, accountants or architects, however the various professional codes contain certain restrictions.

Further types of companies are the Civil Law Association (Gesellschaft nach bürgerlichem Recht, GesbR), the Cooperative (Genossenschaft), the European Economic Interest Grouping (Europäische wirtschaftliche Interessenvereinigung, EWIV), the European Company (Europäische Gesellschaft, SE) and the European Cooperative Society (Europäische Genossenschaft, SCE).

Liability of Shareholders

The liability of the shareholders of a Company with Limited Liability or a Stock Company is limited to their capital contribution. On the contrary the partners of a General Partnership are fully and personally liable for the debts of the Partnership, the liability to creditors cannot be limited. A Limited Partnership consists of at least one general partner (Komplementär), who is liable like a partner of a General Partnership, and of at least one limited partner (Kommanditist), whose liability is restricted to the amount of his capital contribution (Einlage).

Share Capital

The minimum share capital (Stammkapital) of a Company with Limited Liability is EUR 35,000. In principle, at least one half of the capital must be paid in cash (but there are exceptions for contributions in kind).

The minimum stock capital (Grundkapital) of a Stock Company is EUR 70,000. At least 25 per cent of the stated capital stock (plus any premium) must be paid up prior to the registration. The minimum nominal value of the shares is EUR 1,00 unless the shares simply represent a percentage of the share capital (without a nominal value). It is possible to issue non-voting preferred shares which grant a right to a preferred dividend but do not include any voting rights. Since 2011 non-listed companies have to issue registered shares.

There is no minimum share capital for General Partnerships and Limited Partnerships.

Corporate Governance

All partners of a General Partnership (and all general partners of a Limited Partnership) are entitled and obliged to manage and to represent the partnership. The partnership agreement may stipulate other regulations.

Companies with limited liability must have the following corporate bodies: (i) managing director(s) (Geschäftsführer), (ii) shareholders assembly (Generalversammlung). A supervisory board (Aufsichtsrat) is only compulsory for large companies (e.g., more than 300 employees) and optional for the others.

The shareholders assembly must meet at least once a year and is called by the managing directors. Shareholders resolutions can also be adopted by written consent, if all shareholders agree. The following decisions – inter alia – require a resolution by the shareholders:

• the appointment and dismissal of managing directors
• approval of the annual report
• distribution of profits
• release from liability of the managing directors
• changes to the articles of association, including an increase or reduction of the share capital
• raising of claims against the managing directors
• liquidation of the company

Simple Majority for AGM resolutions

Generally, shareholder resolutions of a Company with Limited Liability require a simple majority of the shareholders present. Unanimous voting is required inter alia for a change of the object of business of the company. A majority of 75 per cent is required inter alia for changes to the articles of the association (with a few exceptions) or the sale of the corporate assets as a whole. The articles of association may provide other rules.

Board of Directors in Limited Liability Companies

The management board of a Company with Limited Liability consists of one or more managing directors, who are appointed and dismissed by the shareholders. The managing directors represent the company and do the day-to-day business. Usually the managing directors have an employment contract with the company which stipulates the remuneration of the directors. The managing directors are personally liable towards the company for exercising the care and diligence of a prudent businessman in performing their tasks. They are not personally liable towards creditors of the company in general but only if they violate special legal rules (e.g., the requirement that they file for bankruptcy on a timely basis).

Board of Directors in Listed Companies

The corporate bodies of a Stock company are the board of directors (Vorstand), the shareholders meeting (Hauptversammlung) and the supervisory board (Aufsichtsrat).

AGM on a regular basis

A shareholders meeting is called by the board of directors and must be held at least once a year within eight month after the end of an accounting year. The following matters, inter alia, require a shareholders resolution:

– appointment of the members of the supervisory board

– appointment of the auditors

– changes to the articles of association, including an increase or reduction of the share capital

– approval of the annual report (unless the supervisory board approves it)

– distribution of profits

– release from liability of the board of directors and the supervisory board.

Shareholders resolutions are in principle adopted by a simple majority. For certain fundamental decisions, in particular changes of the articles of association a qualified majority of 75 percent of the votes is required.

BoD Members

The board of directors consists of one or more members, represents the company and carries out the day-to-day business. The members of the board of directors are appointed by the supervisory board for a period of 5 years (reappointment is permitted). Usually the members of the board of directors are employed with the company, and are regarded as free employees (“freie Dienstnehmer”), so they are not protected by labour laws. Profit shares are common. The members of the board of directors are personally liable towards the company for exercising the care and diligence of a prudent businessman in performing their tasks.

The supervisory board members are appointed by the shareholders meeting (except the representatives of the employees). There have to be at least three members. The supervisory board must supervise the management board. A number of transactions must be approved by the supervisory board, e.g., the acquisition, alienation and mortgaging of real estate, opening and closing of branches, determination of the general business policy etc. The liability of the members of the supervisory board is the same as the liability of the members of the management board.

Annual Account – Financial and operating results

The financial statements (Jahresabschluss) consist of the balance sheet, the profit and loss statement, an appendix and a position report.

The financial statements have to be prepared by the management within five months of the end to the accounting year. They require the approval of the shareholders assembly in the case of a Company with Limited Liability and the supervisory board in the case of a Stock Corporation. Furthermore a statutory audit is required for Stock Corporations, large or medium sized Companies with Limited Liability, banks, insurance companies and investment funds.

The financial statements must be filed with the commercial register (except Partnerships which must only register if the general partner is a corporation) within nine month of the end to the accounting year. Large Stock Corporations, companies listed on the stock exchange, banks, insurance companies and investments funds must publish the financial statements in the “Wiener Zeitung”. Any delay in such filing of the financial statements is subject to a penalty which is imposed against the company and the managing director (Sec 283 UGB).

Establishing of a Company

For the foundation of a Company with Limited Liability the registration with the Commercial Register is necessary. The following documents have to be filed: (i) articles of association including at least the name and the legal seat of the company, the company purpose, the amount of the share capital and the contribution of every shareholder. The founders have to appoint managing directors, who have to sign specimen signatures, which are deposited at the Commercial Register. The Application for Registration has to include an affidavit to be issued by the managing director that the share capital has been paid to the bank account of the company and that the managing director may dispose of it without third party rights.

Liquidating a Company

For Corporations such as the Company with Limited Liability and the Stock Corporation a formal winding-up procedure is provided by law. If the shareholders agree to dissolve the company or the company is dissolved of any other reason, the company enters into a liquidation period. During this period the company is represented by the liquidators (who may be the directors or third parties). The property of the company is sold and the debts are paid. The remaining funds are distributed to the shareholders. At the end of the procedure the company is struck from the register.

Reforms affecting companies with limited liability for small enterprises

In 2013 a reform was issued allowing the foundation of a company with limited liability with a minimum capital of EUR 10,000, which has to be paid in half. This privilege of foundation (“Gründungsprivileg”) has to be mentioned in the company register. With a change of the articles of association and payment of the missing “normal” minimum capital of EUR 35,000 this privilege ends. In any case the privilege ends after 10 years after the foundation, which means that the capital has to be increased to EUR 35,000. The main advantage of this reform is a reduction of foundations costs.

As of January 1st, 2018 it will be possible to establish the so called “single member” or “one-person Company with Limited Liability”. The purpose of this new concept is to simplify and thereby to speed up the process of the foundation of a company with limited liability and therefor to minimize the expenses.

The creation of the simplified company with limited liability is possible when the one and only shareholder is an individual person and managing director at the same time. To establish the company a notarial deed is not needed. The electronical way of foundation is enough, though it is required to doubtlessly determine the identity of the only shareholder. The application for registration in the companies register is carried out electronically by the bank after the capital is paid in cash and the identity of the shareholder is successfully determined.