Corporate Law Amendment Act 2023 (GesRÄG 2023, Gesellschaftsrechts-Änderungsgesetz 2023): Introduction of Flexible Company and reduction of minimum share capital to EUR 10,000 for Limited Liability Companies
Start-upn 26 May 2023, along with the Austrian Start-ups Promotion Act (Start-up-Förderungsgesetz), the draft GesRÄG 2023 was published, which aims to create considerable incentives and relief for start-ups and the incorporation of companies in general. In particular, the new company form called Flexible Company (FlexCo) will be introduced and investments in such a company will be facilitated. Under the Start-ups Promotion Act, the legally defined ‘Start-up Employee Shares’ will be subject to a preferential taxation regime.
The FlexCo (in German: FlexKapG) will constitute a hybrid form between a Limited Liability Company (GmbH) and a Stock Corporation (AG), although essentially based on the Austrian Limited Liability Companies Act (GmbHG), which will also apply by way of subsidiary application.
Besides, the minimum share capital for GmbHs will generally be reduced to EUR 10,000, of which at least EUR 5,000 will have to be paid up; the 10-year limit for of the ‘formation privilege’ (i.e., the requirement to increase the capital to the regular minimum share capital of EUR 35,000 and paying up to at least EUR 17,500 after 10 years) will be dropped entirely.
Key Points of the Austrian Flexible Company Act (FlexCo Act; in German: FlexKapGG; Flexible Kapitalgesellschafts-Gesetz)
- Legal form suffix
- Flexible Kapitalgesellschaft or FlexKapG
- Flexible Company or FlexCo
- Share capital at least EUR 10,000
- Whereof at least EUR 5,000 paid up
- Minimum (subscribed) share capital per shareholder: EUR 1
- Minimum payment per shareholder: 25% of subscribed cash contribution
- Contribution in kind possible (requiring a formation audit as for GmbH)
- Simplified decision-making
- Written shareholder resolutions generally permissible → it is no longer required that all shareholders expressly agree to a circular resolution (unlike § 34 GmbHG)
- Voting in text format (even without a wet signature, e.g., by email) can be provided for in the Articles of Association
- Company-Value Shares (Unternehmenswert-Anteile, UW-A) (CV Shares)
- CV Shares can be issued up to (less than) 25% of the share capital
- Nominal value: min 1 cent
- Nominal share capital to be fully paid up
- Participation in the net asset value (profits/losses and liquidation proceeds) pro rata in accordance with share quota
- Deviation possible, provided equal treatment with founding shareholders
- No registration of the Company-Value Shareholders with the Companies Register, only with the (internal) share ledger; however, the list of names and corresponding CV Share quota are to be filed with the Companies Register within 9 months after the accounting date → list of names will be disclosed in the public archive of documents of the Companies Register
- Company-Value Shareholders (CV-Shareholders) have
- no voting rights (only right to participate in the general meeting with right to ask questions and receive information)
- no right to challenge shareholder resolutions
- no obligation of subsequent funding
- no default liability
- no subscription right in case of capital increases
- but tag-along rights in the event of sale of the majority stake by the founding shareholders
- right to information and right of inspection of “books and records, generally meaning accounting records, accounts and (legal) documents
- Tax benefits for CV Shares of employees qualifying as ‘Start-up Employee Shares’ under the new provision § 67a EStG (Austrian Income Tax Act) → essentially no taxation before realisation, end of restriction on transferability or termination of employment (instead of being taxed upon allocation of the shares, as is the general rule), namely
- 75% of the capital gains (or of the market value): at 27.5%
- 25% of the capital gains (or of the market value): at the individual income tax rate
- Pre-conditions:
- Issuance of the CV-Shares at no cost (or at nominal value) within 10 years after the year of incorporation
- Max 100 employees on annual average
- Max revenues: EUR 40 million
- Company not fully included in any consolidated annual accounts
- Sale/transfer of CV Shares only with employer’s approval (restricted transferability)
- Max 10% shareholding per employee
- In case of sale/disposal: employment relationship must have lasted for at least 3 years
- Other realisation only after 5 years
- Simplified transfer of shares
- (Regular) Shares: Recording by a notary or attorney-at-law → no notarial deed required!
- CV-Shares: Written form sufficient
- (Regular) Shares
- Generally divisible
- Can be acquired by the company itself or taken as a security (up to 1/3 of the share capital) under specific conditions
- Issuance of no-par value shares possible (nominal value at least EUR 1)
- Flexible capital measures or restructuring
- Contingent capital increase, e.g., for the purpose of granting subscription rights or share options to employees
- Authorised capital for the potential issuance of new shares within 5 years after incorporation (up to 50% of the share capital)
- Conversion of CV-Shares into (regular) shares possible
- Conversion of GmbH or AG into FlexCo (and vice versa)
- Directors can be authorised for 5 years to issue financial instruments with subsequent subscription and conversion rights
Conclusion
Finally, after a long lead time, it seems that the FlexCo (previously referred to as “Austrian Limited”) becomes reality. It will not only facilitate the formation of a company and bring more flexibility but will also significantly reduce the funds required to set up a company. Besides, the lowered minimum share capital results in a reduction of the minimum corporate income tax to EUR 500 per year. The law is expected to enter into force on 1 November 2023. From then on, when amending the Articles of Association of a GmbH hitherto benefitting from the formation privilege, such formation privilege must be eliminated at the same time. As soon as the new statute becomes effective, existing GmbHs and AGs can be converted into a FlexCos.
As a side-remark, Start-up Employee Shares may not only be granted with respect to a FlexCo but also in relation to a GmbH or an AG – however, as a general rule, not to companies that are part of a group.
It remains to be seen whether the draft legislation will be passed as outlined above or with which amendments. We will keep you informed.
Do you have any questions, or do you need assistance regarding the topics above? We are happy to assist and look forward to hearing from you!
Links
Explanatory notes on the aforementioned ministerial draft (in German)
Ministerial draft of the Austrian Start-up Promotion Act (in German)
Explanatory notes on the aforementioned ministerial draft (in German)
