The agenda published by the Austrian Federal Government at the beginning of 2020 has already provided for the establishment of a new type of corporation: the Austrian Limited. Implementation plans are becoming more concrete. The general aim is to ensure that founders and start-ups have an "internationally competitive option" in the early stages with a new form of corporation.
Currently, the Ministries of Economic Affairs and Justice are still in the process of coordinating the draft legislation, but the first details have been announced.
Minimum nominal share capital of EUR 5,000:
A quarter of the annual profit is to be used to build a revenue reserve (Gewinnrücklage) until the company's balance sheet equity capital reaches a minimum amount to be defined (EUR 10,000 or EUR 35,000). The following key points are currently envisaged in this respect:
- the nominal share capital of the company can be raised through cash contributions, contributions in kind and/or services of the founder(s). However, there should be creditor-protecting accompanying regulations to ensure an appropriate valuation of such services;
- in order to increase the attractiveness of the new type of corporation for international founders, it should be possible to conclude the articles of association in both German and English; and
- it should be possible to complete the entire foundation process digitally.
To keep the corporate governance structure as simple as possible and the running costs as low as possible, there should be basically only one management body and the general assembly of shareholders. The following details were announced:
- the establishment of a supervisory board and an obligatory audit of the financial statements should only be mandatory above certain thresholds, as in the case of an Austrian limited liability company (GmbH);
- it should also be possible to prepare the report on the final audit in English; and
- it should be possible to pass resolutions using electronic signature programs (e.g. DocuSign, HelloSign) or e-mail. Circular shareholder resolutions should in all cases be an equivalent alternative to resolutions in a shareholders' meeting. Circular shareholder resolutions should also be possible in English.
Start-ups typically cannot (at least in the beginning) offer adequate salaries/wages. In most cases, a purely economic participation is desired rather than any other shareholder rights, such as voting rights. Therefore, the introduction of non-voting shares with which only a modicum of shareholder rights is associated (e.g. the submission of the annual financial statements) is considered.
Unfortunately no further information is available yet regarding the eagerly awaited simplification of share transfers to investors or employees.
Prospects for start-ups
The digitalisation that has occurred in the context of the COVID-19 legislation has shown that the digitalisation of legal (corporate) processes works in practice and makes Austria much more attractive for start-up / venture capital. By creating a new type of corporation tailored to these digital processes and providing an improved legal framework for entrepreneurs, Austria has demonstrated its potential to be a great destination for start-up / venture capital.
"By creating a new type of corporation tailored to these digital processes and providing an im-proved legal framework for entrepreneurs, Austria has demonstrated its potential to be a great destination for start-up / venture capital."
It is expected that draft legislation will be published in early 2021. We will then know about the envisaged implementation and will be able to evaluate its claim to offer an internationally competitive option.
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