AUSTRIA Trends and Developments Contributed by: Horst Ebhardt, Philipp Kapl, Hartwig Kienast and Matija Bernat, Kinstellar
rights, governance disputes and insolvency treatment. For PE investors accustomed to the predictable risk profile of the GmbH, this lack of legal maturity may pose a hurdle, particularly in cross-border transac - tions or where external financing is sought. In addi - tion, market familiarity remains limited. Many banks, lenders and M&A counterparties still prefer estab - lished forms such as the GmbH, potentially affect - ing financing negotiations and exit optionality for PE- backed portfolio companies. Another important consideration is the lower govern - ance thresholds under the FlexCo regime. Unlike the GmbH, a FlexCo may become subject to mandatory supervisory board requirements at an earlier stage, specifically once it qualifies as a medium-sized com - pany – ie, meets at least two of the following three thresholds: • balance sheet total: EUR5 million; • net revenue: EUR10 million; or • average headcount: 50 employees. Despite its promising features, the FlexCo has yet to establish itself as a mainstream vehicle for PE trans - actions. Ongoing legal uncertainties, the absence of case law, limited transactional experience and a gen - eral lack of familiarity among PE investors have thus far prevented the FlexCo from emerging as a viable alternative to the more established GmbH structure. Postponement of EU Sustainability Directives As part of the EU’s broader strategy to enhance the bloc’s economic competitiveness, the implementation timelines for two cornerstone sustainability initiatives have been formally delayed by the “Stop-the-Clock” directive. The Corporate Sustainability Reporting Directive (CSRD) will see a phased delay. Public interest large undertakings, parent undertakings of a large group and large issuers with more than 500 employees must already comply with the CSRD, starting in 2025 for financial years beginning on or after 1 January 2024. Large undertakings (with more than 500 employees) and issuers that are large undertakings or issuers that are parent undertakings of a large group are now expected to begin reporting in 2028, while public
interest SMEs, small non-complex institutions, cap - tive insurance undertakings or issuers that are small and medium-sized undertakings or small and non- complex institutions, or captive insurance undertak - ings and captive reinsurance undertakings will follow in 2029. The Corporate Sustainability Due Diligence Direc - tive (CSDDD) has been postponed by one year. EU member states now have until 26 July 2027 to trans- pose the directive into national law, pushing back the expected compliance timeline for affected companies. With its first omnibus initiative, the European Com - mission aims in particular to amend the CSRD and the CSDDD. Under the proposed revision, the scope of the CSRD would be significantly narrowed. In the future, only companies meeting all of the following criteria would be required to report under the CSRD: • more than 1,000 employees; and • either more than EUR50 million in net turnover or more than EUR25 million in total assets. This represents a major shift from the current CSRD threshold, where companies are subject to reporting obligations upon exceeding two out of three criteria: • EUR50 million in net turnover; • EUR25 million in balance sheet total; or • 250 employees. As a result, the pool of companies required to comply with the CSRD will be significantly reduced, with sub - stantial implications for portfolio company compliance and reporting obligations in PE structures. Importantly for PE investors active in the SME seg - ment, publicly listed SMEs are expected to be exclud - ed entirely from the CSRD regime. In parallel, SMEs more generally are to be relieved from burdensome data requests, as CSRD-obliged companies would no longer be allowed to require extensive ESG data col - lection from SMEs within their supply chains. For PE investors, these developments offer regulatory relief and greater clarity when evaluating potential tar - gets and ESG integration strategies. However, despite
30 CHAMBERS.COM
Powered by FlippingBook