AUSTRIA Trends and Developments Contributed by: Markus Fellner, Paul Luiki and Peter Blaschke, Fellner Wratzfeld & Partner
The law governing the Flexible Company is largely based on the Limited Liability Company Act (GmbH). However, compared to a GmbH, FlexCo shareholders enjoy greater flexibility and design freedom. Formal requirements have been eased, particularly regarding the transfer of shares. Instead of a notarial deed, a private deed drawn up by a notary or lawyer is sufficient for the share transfer. Resolutions by circulation can also be passed without the individual con - sent of all shareholders if the articles of associa - tion contain such a provision. Shareholders may also exercise the voting rights associated with a share in a non-uniform manner. This is particu - larly important for trust structures. In addition, a special class of corporate value shares (enterprise value shares) has been intro - duced for employee participation programs. These enterprise-value shares can comprise up to 25% of the share capital. These enterprise value shares have no voting rights but include a right to participate in the company’s balance sheet profit and liquidation proceeds. The option of non-voting corporate value shares is an important tool to attract highly skilled pro - fessionals. The new tax model for employee participation also offers significant practical advantages: there is no taxation or valuation at the time of share allocation; taxation only occurs upon sale, following a flat-rate model. The FlexCo also enables flexible capital meas - ures that were previously only available to joint- stock companies, such as conditional capital increases and authorised capital. Moreover, the minimum share capital for both GmbHs and Flex - Cos has been uniformly reduced to EUR10,000, making company formation more accessible to a broader range of entrepreneurs.
However, one of the drawbacks of the new Flex - Co is that the obligation to have a supervisory board applies at an earlier stage than traditional GmbHs. A FlexCo is obliged by law to establish a supervisory board if it exceeds two out of three of the following characteristics: • EUR5 million balance sheet total; • EUR10 million in annual turnover; or • more than 50 employees on an annual aver - age. In contrast, a GmbH only needs a supervisory board if its share capital exceeds EUR70,000, the number of shareholders exceeds 50, or the average number of employees exceeds 300. Overall, the FlexCo is proving to be a success story and is becoming increasingly popular with both investors and founders. The Start-Up Promotion Act, which came into force on 1 January 2024, introduced tax incen - tives for employee participation in start-ups to increase employee loyalty and, in particular, address the so-called “dry income problem.” The dry income problem has arisen in cases where start-ups and young SMEs lacked liquid - ity and were, therefore, unable to provide mon - etary compensation for highly qualified employ - ees. When this was compensated by granting equity shares, immediate taxation resulted in an additional liquidity burden for the recipients, thus creating the dry income problem. Recent Legal Changes Start-Up Promotion Act Under the new regulations, employees who acquire shares in a company within ten years of its founding – provided the company is of limited size (a maximum of 100 employees or annual revenue of up to EUR40 million, with no corpo -
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