As of 1st January 2024, with the so-called Flexible Corporation (Flexible Kapitalgesellschaft, „FlexKapG or „FlexCo“) Austrian company law offers a new legal form for corporations, showing in many aspects a more liberal legal regime than the variants of the (Austrian) private limited company („GmbH“) and the public company („AG“). It allows a simplified incorporation, shares must only amount to the nominal value of 1 €, and only a quarter of the contributions in cash must be deposited upon its registration. Furthermore, the acquisition of own shares is largely allowed, the shareholders meeting may authorise directors to increase the share capital or to issue various kinds of financial instruments. In addition, the transfer of shares and the declaration of the subscriber of new shares which are in principle subject to notarial recording may also be validly performed on the basis of a private document drafted by an attorney at law. However, as far as the minimum share capital is concerned, the FlexCo does not offer any advantage, requiring an amount identical as the one applicable to the ordinary GmbH, which nevertheless has been simultaneously reduced from formerly 35,000 € to 10,000 €.
The possibility to issue non-voting shares (“Unternehmenswertanteile”) up to the amount of less than 25% of the shares capital represents FlexCo´s most promoted feature, intended to encourage the issuance of stock-option schemes by start-ups to their employees. Unternehmenswertanteile offer real shares in the company, but do not grant any voting rights and information rights only to a limited extent. At the employee´s level, subject to the fulfilment of the requirements laid down in § 67a of the Austrian Income Tax Act (EstG), they are given a preferential tax treatment. To the contrary, as far as the prohibition to repay contributions to shareholders is concerned, in consonance with the general regime applicable to ordinary GmbHs and AGs laid down in §§ 82; 83 of the Austrian Limited Liablity Companies Act (“GmbhG”), protecting not only the statutory share capital, but the company´s total assets, and which is interpreted strictly by the Austrian case law, FlexCo turns out to be anything but flexible, leading to the consequence that FlexCo is not likely to be used as a subsidiary, in particular in (cross-border) corporate groups. It is also regrettable that Austrian Private International company law has not been amended accordingly, remaining therefore doubtful if FlexCos are allowed to have their real seat in other countries, in some of which even more extensive tax incentives than under Austrian rax law are granted (so for instance in Spain under the start-up Act 28/2012). As a consequence thereof, unfortunately founders and digital nomads resident in such States are not likely to incorporate their businesses in the legal form of an Austrian FlexCo, even though in practise there is often a high demand for such corporations. So for instance in Spain, where extensive fiscal incentives are granted, but for reasons derived from company law, the domestic legal form of the Spanish limited liability company (SL) is not appropriate because it does not offer the possibility to create own shares for these kind of employee incentives. A further drawback of FlexCo lies in the fact that it will be subject to the Austrian regime of employee participation rights and obliged to install a supervisory board as soon as it reaches the threschold of a medium sized comnpany pursuant to accounting rules, thus at an earlier stage as it would usually be the case in an ordinary Austrian GmbH. On the other hand, without any doubt also founders and employees fiscally resident in Austria can make full use of the aforementioned beneficial Austrian tax regime by fulfilling the requirements laid down by Austrian tax law, even though the incorporate a foreign legal form offered by another EU /EEA Member State distinct from a FlexCo, in the event its corporate law enables the issuance of real stock-options, not only phantom-stocks. Because § 67a EStG does not distinguish between the lex societatis of the company issuing the shares – a differentiation that would anyway be impossible under EU law being open discrimination. As a consequence thereof, without losing the tax benefits, founders are able to incorporate for example under the legal form of an Irish ltd. or a German GmbH, both allowing non-voting shares without restrictions, in the case of the former not even requiring any notarial recording, und as far as employee participation rights at board level are concerned, or not making any provisions for it (so the Irish ltd) or providing for it, but not applying it to employees working in Austria (so the German GmbH).
In sum, it is predictably that in the domestic competition between Austrian legal forms, FlexCo will certainly soon gain ground and outstrip the Austrian GmbH and partially also the AG. However, in international competition of legal forms, the Austrian Act on the Flexible Corporation should only be considered as a desirable first step in the right direction. Because legal forms of corporations of other EU Member States which are fully available also to Austrian founders and employees partially grant considerably more advantages as far as corporate law is concerned.
Florian Deck, 8 January 2024