The Austrian legal system provides for the following entities:
- Offene Gesellschaft (OG) (general business partnership) - The associates are liable towards the creditors of the company without restriction.
- Kommanditgesellschaft (KG) (limited business partnership) - One of the associates is liable up to a certain amount to be agreed (limited liability). However, liability is unrestricted for the other associate(s).
- Aktiengesellschaft (AG) (private stock and public stock listed company)
- Gesellschaft mit beschränkter Haftung (GmbH) (limited liability company)
- Erwerbs- und Wirtschaftsgenossenschaft (cooperative and industrial and provident society)
- Verein (association)
- European Public Company (Societas Europaea - SE)
- European Economic Interest Grouping (EEIG)
The main differences between partnerships and companies lie within the terms of liability and establishment. Whereas companies offer a limited liability to all of their shareholders, associates of partnerships are liable with the total amount of their personal assets, except in case of a limited business partnership, which offers at least one of the associates a limited liability. Corporate law practice far more often uses corporate structures like the limited liability company, followed by the limited business partnership and the general partnership.
The two most commonly used types of companies are the LLC and the public or private stock listed company. As per the end of 2013, we counted 87,913 LLCs and 1,512 stock companies in Austria.
Limited liability company (‘Gesellschaft mit beschränkter Haftung‘)
The law of the Limited Liability Company is governed by the 'Gesetz über Gesellschaft mit beschränkter Haftung' (GmbHG).A limited liability company must have an obligatory minimum share capital of EUR 35,000 of which fifty percent must be paid in upon formation. Under certain prerequisites, start-ups are required to raise a share capital amounting to only EUR 10,000 (fifty percent must be paid in upon formation). Contributions in kind are possible as well, however the contributed assets must be assessed/valuated by an independent auditor. The shares are freely transferable subject to the articles of association, which may arrange for limitations as to the transferability. The LLC has at least two mandatory bodies: the managing director(s) and the general meeting (shareholders’ meeting). An LLC must have at least one managing director.
Private stock and public stock listed company (‘Aktiengesellschaft’)
The law of the Stock Company is governed by the ‘Aktiengesetz’ (AktG) of 1965. The minimum share capital of a stock company must amount to EUR 70,000, with each share amounting at least to a value of EUR 1.00. Under certain prerequisites, the share capital can be raised completely and/or in parts by contributions in kind and/or transfers of assets (however, the contributed assets must be assessed/valuated by an independent auditor). A stock company has four obligatory bodies: board of directors (executive body), supervisory board (two-tier system), a general meeting and an auditor. The general meeting is the meeting of the shareholders. The board of directors is appointed by resolution of the supervisory board for a maximum of five years (minimum: one member). Members of the managing board may not be a member of the supervisory board simultaneously. The supervisory board is required to consist of at least three members. The first supervisory board is appointed by the founders, subsequently members of the supervisory board are appointed by the general meeting. A stock corporation requires auditors who are elected by the general meeting.
Limited Liability company (‘Gesellschaft mit beschränkter Haftung’)
The LLC comes into existence upon entry in the Business Register, based on an application for entry in the business register to be signed by all managing directors. Their signatures must be notarised. The articles of association must be drafted in the form of a notarial deed, a managing director must be appointed by a shareholders’ resolution, the payment of the share capital must be arranged for and the articles of association must be filed with the Business Registry, which requires the following information upon application:
- Company name;
- Registered company seat and business address;
- Brief description of the LLC’s business;
- Name and date of birth of the managing directors and their power of
representation;
- Name and date of birth of the shareholders;
- Notarised specimen signatures of the managing directors;
- The amount of the share capital and the bank’s confirmation of its payment;
Stock company (‘Aktiengesellschaft’)
Like the LLC, a stock company is established by entry in the Business Register. The application has to be signed by all founders and members of the director’s board, as well as the members of the supervisory board in notarised form and must contain the following information:
- Company name;
- Registered company seat and business address;
- Brief description of the company’s business;
- Name and date of birth of the managing directors and their power of
representation;
- Name and date of birth of the chairman, and the other supervisory board
members;
- Type of shares;
- The notarial resolutions of the meeting of the founders including the notarial
deed of the articles of association;
- Documents on the appointment of the board of directors and the
supervisory board;
- Foundation report and the audit reports of the board of directors the
supervisory and the foundation Auditors;
- Notarised specimen signatures (specimen signatures on behalf the
company) of the members of the board of directors;
- The amount of the share capital and the bank’s confirmation of its payment
Shareholders of both companies may be any individual or legal entity. Neither Austrian citizenship, nor a place of residence in Austria, are requirements for a shareholder. However, the ultimate beneficial owner must be disclosed to the bank when opening the company’s bank account. According to our experience, banks may cause delays or deny an account-opening due to their (internal) KYC-procedures, depending on the shareholder’s origin (e.g. EU or non-EU member). At least one of the managing directors must have a residence in Austria.
LLC:
A new managing director is appointed by adopting a shareholders’ resolution. The resolution and a specimen of the new director’s signature (both notarised) must be filed with the Business Register. Moreover, the application must be signed and notarised.
Stock company:
The board of directors is appointed by resolution of the supervisory board. Once elected a member of the board of directors may only be revoked by the supervisory board in case of an important reason (violation of duties, incapacity for proper management or withdrawal of confidence by the general meeting). As with the LLC, the resolution and a specimen of the new managing director’s signature must be filed with the Business Register.
By-laws (meaning articles of association):
By-laws (LLC or stock company) must be drafted in the form of a notarial deed, hence any amendments must be made in the same form and filed with the Business Registry. Both types of entities require a shareholders’ agreement (general meeting or general assembly) in the form of a resolution to amend the company’s by-laws.
[space – inconsistent with 4b) and c)]It is possible to arrange for all these forms of representation as mentioned above (see 2.-3.). However, for amendments to be valid, a shareholders’ resolution must be adopted. Further, the resolution must be filed with the Business Register.
A sole director has full authority. In case joint directors have been appointed, they are only allowed to act jointly on behalf of the company. If several directors have been appointed, it is also possible that one director has full authority, whereas the others may only act jointly. Moreover, directors are able to empower a third person by power of attorney to act on behalf of the company for a specified matter.
Stock company and LLC:
Mandatory two-tier board system.
The supervisory board’s main purpose is supervising and controlling the company’s management board, however, other tasks may be determined within the articles of association. The supervisory board has to meet at least four times in each company’s fiscal year.
The SE and the EEIG are offered as further corporate structures based on the respective European directives. An SE founded in Austria may offer certain flexibility to choose a one-tier or two-tier board system.
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This information was compiled by Alix Frank Rechtsanwälte GmbH.