Austrian Limited

a new corporate form for start-ups

Austrian Limited

Countries are perceived as attractive start-up locations if a company can be established as cost-efficiently, quickly and unbureaucratically as possible. Due to the high administrative outlay and costs, Austria has largely been an unattractive destination for foreign investors. 

The government programme 2020-2024 now provides for the creation of a new corporate form that is particularly suitable for start-ups. The new legal form “Austrian Limited” is intended to make Austria more appealing as a business location and attract foreign start-up investors through more flexibility, fewer formalities and lower start-up costs. The Federal Ministry for Digital and Economic Affairs has already commissioned a legal opinion in which the concept of the Austrian Limited is still worked out in detail. Because start-ups usually require fast and cost-effective formation, the plan is for the Austrian Limited to be formed entirely online. In order to accelerate the formation process, the involvement of a notary will no longer be mandatory in the future. Another new feature is that, due to the global nature of business, all documents, resolutions and internal communication will be permitted to be drafted in English. 

Another special feature of the Austrian Limited is that a company’s shareholders will no longer be entered into the company register. Instead, the Austrian Limited is to keep its own share register in accordance with the model followed by stock corporations. In order to make the Austrian Limited more attractive compared to its international rivals, the nominal capital is to amount to at least EUR 5,000, at least half of which is to be paid-in in cash upon formation. Another feature is that the shareholders may also contribute their work performance to the company as capital. The organisational structure of an Austrian Limited is also to be flexible, meaning that the smaller the company, the simpler the structure can be. In any case, an Austrian Limited will have its general meeting as its supreme body and its board of management as its governing body. It is envisaged that the regulations regarding managing directors will be based on those of a GmbH and that the establishment of the supervisory board will only be obligatory if certain threshold values are exceeded. In addition, it would be possible to hold the general meeting both in the presence of the shareholders and virtually and to adopt shareholders’ resolutions in writing (by email). 

Each shareholder should hold one share in an Austrian Limited. Under the new regulatory concept, there will be different classes of shares, which are associated with different rights and obligations. In addition to ordinary shares, special classes are also provided for, such as preference shares or shares without voting rights. The latter plays an important role, especially in connection with employee share ownership, because start-ups are often in urgent need of skilled employees for whom they are unable to pay market salaries at the outset. For this reason, employee participation models are provided for, which are intended to make the employees involved in the company’s success even more motivated to continue their engagement with the company in question. Furthermore, it is very important for young start-ups to be able to quickly dispose of the shares in the company so they can cover their financing needs. In order to ensure the most cost-effective and flexible transfer of shares, it will be possible to transfer shares in an Austrian Limited without the involvement of a notary. However, for the sake of legal certainty, it seems advisable to conclude a written assignment agreement (without a notary being involved). 

Start-ups usually have to finance themselves via venture capital in their initial phase. As a result, investors are often involved in start-ups via capital increases. For this reason, capital measures are also to enjoy more flexibility in the future. This is because a capital increase for a limited liability company is costly and time-consuming, which is particularly disadvantageous for start-ups. In line with this, the implementation of a capital increase is to be greatly simplified for an Austrian Limited, to the extent that all the steps connected to the capital increase will no longer require the involvement of a notary. In the event that very rapid action is required to raise equity capital, the Austrian Limited, unlike a GmbH, will also permit authorised capital. 

The new, unbureaucratic legal form, which is to be created on the basis of an international model, is primarily intended to attract foreign start-up investors to Austria and thus significantly revitalise the Austrian start-up scene. This new legal form not only brings better conditions for investors and founders of start-ups: it also brings new incentives for their employees due to the participation models described above. The prospects are looking good in terms of Austria’s ability to attract foreign investors to the country after the introduction of this new legal form, especially in the post-Brexit era. 

For the purpose of the international recognition of the Austrian Limited, Austrian legislators will refer to the “European Model Company Act”, which is a standard recognised throughout Europe, when creating and structuring this new company form. 


AUTHORS:

Mag. Ronald Frankl, Attorney-at-Law and Managing Partner at LGP
Dr. Natalia Feriencikova, Attorney-at-Law at LGP

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