Share buybacks facilitated
In the last session before the summer break, the Austrian parliament passed an amendment to the Joint-Stock Companies Act (Aktiengesetz), the Stock Exchange Act (Börsegesetz) and the Commercial Code (Handelsgesetzbuch) facilitating share buybacks by publicly listed companies.
Under existing legislation share buybacks were permissible as a means to prevent imminent and material damage to the company or to prepare a share offering to employees or the management of the company. Generally, the number of repurchased shares was limited to 10 % of the subscribed capital.
The new regulations are intended to adapt Austrian corporate law with international developments, in particular with the Second EC Company Directive and the German Law on Control and Transparency of Companies (Gesetz zur Kontrolle und Transparenz im Unternehmensbereich). The latter to a certain extent served as a model for the Austrian law.
Balancing the interests of both the creditors, the shareholders and the company the new regulations only apply to the reacquisition of shares of joint stock companies listed on a stock exchange in Austria or in any other member state of the OECD or any other regulated public securities exchange in one of such member states. Such publicly listed companies may buy back shares under the following conditions:
- a resolution has to be passed at a general meeting authorizing the management board (Vorstand) to buy back shares for a period not exceeding 18 months;
- the resolution must specify the lowest and highest consideration for the repurchased shares;
- the resolution specifying the reacquisition program has to be published in the Official Gazette (Amtsblatt zur Wiener Zeitung);
- the Stock Exchange Act requires the company to publish the reacquisition program prior to its commencement in the manner laid down by the act;
- the number of shares repurchased under the program may not exceed 10 % of the subscribed capital;
- the company has to give equal treatment to the shareholders. It is deemed to give equal treatment if the shares are acquired on the stock exchange or by public tender offer; and
- shares may not be repurchased for trading purposes.
The company may withdraw the acquired shares by simple majority vote of the general meeting, if the shares are fully paid up using the profit or free reserves.
The Austrian Takeover Code (Übernahmegesetz) also applies to the buy-back of shares listed on an Austrian stock exchange, if the shares are acquired by public tender offer. In this case the company is under an obligation to file an offer circular with the Takeover Commission and comply with the rules for voluntary offers.
Certain changes to accounting provisions of the Austrian Commercial Code (Handelsgesetzbuch) were adopted providing for the portion of the consideration exceeding the nominal value of the shares to be set off against free reserves.
Peter Huber and Marcel L Aschenbrenner