Austria to introduce new legal form of company – what is Austrian Limited?
The planned introduction of a new form of a share-capital company, part of the Austrian government’s current program, has piqued the interest of the Austrian professional public. Our northern neighbours’ so-called Austrian Limited, a new, pared-down legal form with a lower minimum share capital requirement is intended primarily for start-ups in their infancy. The idea being that start-ups availing of this new-look company model will be more attractive to foreign investors.
Key novelties foreseen in the current proposal on introduction of Austrian Limited:
a) Easier establishment and transfer of business shares
Under the proposal, Austrian Limited will be established through Articles of Association done in simple written form (a notarial deed will not be required). The same applies to all related documentation, i.e. statements, resolutions of the general meeting, share purchase agreement and application for registration with the court register, which will not be competent to verify the content of the articles of association. All the necessary documentation (including the articles of association and annual reports) may be prepared and signed in either German or English.
b) Lower share capital
The minimum share capital of Austrian Limited may be as low as EUR 5,000.00 which is significantly less than EUR 35,000.00 otherwise needed when incorporating a limited liability company (GmbH) in Austria.
c) Less transparency
Shareholders of Austrian Limited will not be registered in the Austrian Business Register. The company will only have to keep a special book of shares (Anteilsbuch). This arrangement will primarily simplify incorporation of the company and each transfer of shares and will therefore cut the associated costs. In addition, it should satisfy the wishes of those investors who want to ensure a certain degree of discretion in such investments and were until now forced to search for a solution in fiduciary shareholders.
d) Adoption of resolutions at general meetings
Shareholders of Austrian Limited will be able to adopt resolutions at the shareholders meeting (virtual meetings will be an option) or at the correspondence session where the articles of association allow for the adoption of resolutions in that manner. In this case, resolutions adopted by correspondence will enjoy the exact same status as resolutions adopted at the general meeting. For example, shareholders will be able to adopt a resolution to increase the share capital via e-mail. Unlike the current regulation, there may also be business shares without voting rights.
Start-ups usually have a limited seed capital at their disposal and must be able to react quickly to market developments. Austrian Limited will therefore enable entrepreneurs to pour more of their resources into developing the company and their business ideas, while at the same time making such start-ups more competitive internationally and more attractive to foreign investors. Certainly, less red-tape, and in turn, greater flexibility are a step in the right direction – but the question is whether entrepreneurs and third parties will end up paying a high price for the convenience. Articles of association written by legal lay people, the content of which are not verified by either a notary or the court register can often lead to legal disputes, while less transparency can also be problematic from a money-laundering perspective.
Austrian Limited is, of course, adapted to the Austrian economy and cannot be directly copied across to the Slovenian legal order. It does however put forward certain ideas that would be worth considering in Slovenia if we want to be/remain competitive in attracting foreign investors and encouraging small entrepreneurs.
Author: Martin Pirkovič, Associate
