Earlier (see International Financial Law Review, October 1996, page 46) briefings on changes brought about by the EU Company Law Amendment Act 1996 focused on those provisions which have a particular effect on the Austrian banking sector. The following seeks to provide a more general outline of the contents of the Act.
The Act is intended to implement EU Directives enacted by the Council of Ministers dealing with company law. More specifically, it aims at transforming:
- the Second Directive of December 13 1976 (77/91/EEC) relating to the formation of public limited companies and the maintenance and alteration of their capital;
- the Third Directive of October 9 1978 (78/855/EEC), covering internal mergers between joint stock companies;
- the Sixth Directive of December 17 1982 (82/891/EEC), dealing with the division of companies and complementing the Third Directive; and
- the Twelfth Directive of December 21 1989 (89/667/EEC) dealing with single-member private limited companies, all of which had previously not been implemented by Austria.
In general, all corporations must disclose (sections 277 and 278 HGB) their annual accounts and their annual business report by filing them with the Commercial Register. However, the Act provides for different duties and rights of corporations with respect to disclosure, publication and auditing requirements, depending on the size and legal structure of the respective corporation. For example, medium-sized limited liability companies (GmbHs) must now have their annual accounts audited under the Act.
Previously, the law distinguished only between 'large' and 'small' corporations for auditing purposes. After the enactment of the Act, corporations (joint-stock companies (AGs) and limited liability companies (GmbHs)) must now be classified as either 'large', 'medium-sized' or 'small' for accounting purposes. The criteria to be employed for this classification are set forth as follows by the Act:
Corporations are considered 'large' for accounting purposes if shares or other securities issued by them are traded in the official or in the unofficial market of a stock exchange in a country within the European Economic Area, or if they have at least two of the following:
- a balance sheet total exceeding Sch150 million (US$12.9 million);
- revenue from sales exceeding Sch300 million during the 12 months preceding the balance sheet day; and
- a yearly average of 250 employees.
Corporations are 'medium-sized' if they fulfil only one or none of the above criteria for large corporations, provided they exceed two of the following three thresholds:
- a balance sheet total exceeding Sch37 million;
- revenue from sales exceeding Sch74 million during the 12 months preceding the balance sheet day; and
- a yearly average of 50 employees.
Corporations are considered 'small' if they fulfil only one or none of the above criteria for medium-sized corporations.
Domestic branch offices of foreign corporations must submit a German translation of the accounting documents which have been drawn up, audited and disclosed in accordance with applicable foreign laws. Under the Act, a foreign corporation as such rather than its branch office must be registered with the Commercial Register (Firmenbuch). Previously, the domestic branch office had to be registered.
Other provisions on accounting have been revised. Among other amendments, the valuation principles have been altered, and an obligation to hold reserves for own stock and for stakes held in parent companies introduced.
Joint-Stock Corporation Act
As before, the articles of association of joint-stock corporations (AGs) have to be legalized by a notary public. The Act requires the document legalized by a notary public to state the names of the founders along with other relevant information. The articles of association as such are now also required to contain information on whether bearer shares or registered shares were issued.
Before the Act, Austrian company law had been rather restrictive as regards the acquisition of own stock by joint-stock corporations. Provisions of the Act extending the possibilities for the acquisition of own stock have already been mentioned above.
Several new provisions deal with contributions in kind by shareholders, most of them with geared to shareholder and creditor protection.
Under the Act, the issuance of new shares to employees of the joint-stock corporation or of an affiliate is sufficient cause to trigger the exclusion of subscription rights of shareholders.
The consent of the minister of Economic Affairs is no longer required for the establishment of an Austrian branch office of a foreign joint-stock corporation. If such a joint-stock corporation has its official seat outside the European Economic Area, it must appoint a representative for the company.
Limited Liability Companies Act
The Act explicitly provides for the formation of 'one-man companies'. Previously, a trustee acted as the second founder during the formation of a limited liability company, and subsequently sold his shares to the other shareholder.
Restructuring of Corporations
Among other modifications, the Act provides enhanced protection for shareholders in mergers. Essentially, comprehensive information on the merger agreement, the 'merger report' issued by the management and supervising boards, the report of the supervisory board, and the report of the auditor, must be submitted to the shareholders.
In some cases, the courts must investigate mergers. For instance, the adequacy of the conversion ratios of shares must be examined if shareholders of either party to the merger holding either 1% of the share capital or shares in the nominal amount of at least Sch1 million demand such an examination.
The merger rules on joint-stock corporations apply analogously to limited liability companies. Modifications of these rules make the procedure less formal for limited liability companies.
The transformation of corporations (ie the transfer of all and any assets and liabilities of a corporation to one shareholder or to a general or limited partnership by way of universal succession) is now governed by the newly enacted Transformation Act (Umwandlungsgesetz), which is part of the Act. In many respects, merger regulations are also applicable to such transformations.
Previously, the division of a corporation and the simultaneous merger of its successors with existing companies (Spaltung zur Aufnahme) was not permissible. The Act now also permits divisions of this type.
Peter Huber/Kurt Retter