One of the brightest stars in the Austrian corporate sky is The Flexible Company.
Where does the story begin?
It's true that Austria dislikes change. We are aware of that. Legislative changes consequently frequently proceed slowly. But one of the biggest shifts in recent memory will occur in 2024 with the creation of a new legal company called the Flexibly Company (also known as Austrian Limited). The goal of this new structure is to give new businesses the flexibility they need to draw in funding and workforce.
The new FlexCo can be considered as the GmbH's younger sibling. In what way? Because, unless otherwise specified, all currently enacted laws must be applied in accordance with the regulations. According to the Government's justifications for the Act, FlexCo is likewise based on the GmbH model combined with AG.
What is the purpose of the GmbH?
Startup businesses in Austria have chosen the GmbH for their business operations over the last ten years. Investors, institutions, and employees view the GmbH with confidence and security because of the stringent regulations regarding registration, registered capital, and shareholder structure on the one hand, and the intricate registration process on the other. The GmbH came to represent legitimacy and approval.
However, this also brought about the opposite side of the coin: rigidity. Attracting investors and staff became very difficult due to the restrictive legal structure, which limited the options for restructuring the shareholder scheme and required the founders' physical presence for registration. The government developed the legal proposal in response to these requirements.
What will the new structure look like?
Like its older sibling, the FlexCo is a company with registered capital. This implies that the business will be responsible for its own debts up to the amount of registered capital and current assets. There will be no personal liability for the company's debts for the shareholders. All liability bridging regulations that apply to the GmbH will, however, also apply to the FlexCo.
The registered capital will drop to 10,000.00 euros, which is a big change. Unlike with the GmbH, the minimum value of a share will be one euro, not seventy-nine euros. Reducing the founders' financial risk when they launch their own businesses is the goal.
In addition, the FlexCo will provide a flexible shareholder structure, which represents a big modification to the new rules. Articles of association may specify that shares may be subdivided into units of share, each with a nominal value of at least one euro. The ability to purchase shares in various financing rounds with various categories is made possible by this flexibility. Within the confines of the current legal system, the founders will be free to make their own decisions regarding it in the articles of association.
Employee benefits include company value shares or Unternehmswert-Anteile
The company value shares (Unternehmenswert-Anteile), which were introduced with the FlexCo, were a significant change in addition to the flexible shareholders' structure. These shares are intended to entice workers by offering the possibility of future financial success, mostly in relation to "exit events" in the company’s business plan.
The articles of association must regulate the value of the company's shares, and the total value of such shares cannot exceed 25% of the registered capital. These shareholders do not have voting rights, despite being on an equal footing with "regular" shareholders. To guarantee their safety, safeguards like the right to information and the requirement to receive instruction are in place.
The "tag-along" right
Another "protection measure" for the minor shareholders and a novel addition to Austrian GmbH regulations is the tag-along right. This right comes into play when founding shareholders intend to sell the majority of their business shares. Founding shareholders, as designated in the articles of association, must hold the majority of the capital in the company at the time of issuing the value shares. An exit event, defining the intended majority sale of these shares to third parties who initially provided the founding shareholders with the majority of the capital, triggers the tag-along right. To ensure the protection of tag-along rights, there are also regulations in place for the successive sale of shares.
Transfer of Shares in the Company
In the case of FlexKapG (Flexibilisierung des Kapitalgesellschaftsrechts), a substitute for the notarial deed formality is suggested for share transfers in order to comply with the government program's goals for flexible share allocation to investors. This option reduces bureaucratic procedures while preserving legal protection for shareholders and other parties.
Written resolutions are used to make decisions
A written resolution is usually acceptable in FlexKapG provided that all shareholders approve of this strategy. Startups in particular may want to include provisions in their articles of association that allow for the passing of circular resolutions without individual consent. This flexibility eliminates the need for a statutory minimum participation quorum and permits a valid resolution with the participation of all eligible shareholders in the relevant vote.
Flexible Fundraising
The ability to issue financial instruments with future subscription or conversion rights is established by the new regulations. Subject to approval by the shareholders with a three-quarters majority, this gives shareholders greater flexibility in the procurement of capital.
In summary, the launch of the Flexibly Company (FlexCo) is poised to completely transform the corporate environment in Austria. It solves the shortcomings of the conventional GmbH by providing a more flexible legal entity with lower registered capital requirements and adjustable shareholder structures. Entrepreneurs, employees, and investors find it even more appealing when company value shares and alternative share transfer methods are included. As Austria accepts this shift, businesses will have exciting new prospects in the years to come.
Conclusion
The Flexible Company, a rising star in Austria's corporate landscape, is set to revolutionize the way businesses operate and attract investments and talent. Its introduction in 2024 brings a fresh approach to legal structures, offering founders more flexibility and empowering employees. As the business landscape evolves, the FlexCo is poised to be a game-changer for ambitious entrepreneurs.
Stay tuned for more insights into this exciting development and its implications for your business.
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