Current developments in the Austrian Act on Limited Liability Companies (GmbHG)
Austrian limited liability companies (Gesellschaften mit beschränkter Haftung; GmbH) have become less attractive for entrepreneurs over the past few years. In order to increase their attractiveness, the Austrian legislator has inter alia approved certain changes to the Austrian Act on Limited Liability Companies (GmbH Gesetz; GmbHG).
Reduction of minimum share capital to EUR 10,000
From 1 July 2013 onwards, the required minimum share capital of a GmbH has been reduced from EUR 35,000 to EUR 10,000. Since in case of a cash formation only half of the nominal capital has to be paid in upon establishing a GmbH, from 1 July 2013 the minimum amount of share capital to be paid in upon establishment is EUR 5,000 instead of EUR 17,500.
Any GmbH incorporated prior to 1 July 2013 may reduce its share capital to the new minimum share capital of EUR 10,000. However, the statutory rules for an ordinary capital decrease must be observed (eg creditor notification). No simplified capital decrease procedure has been adopted by the Austrian legislator.
Lower incorporation costs
The formation of a GmbH, as well as any further transfer of shares in a GmbH, still requires the preparation of a notarial deed. However, the costs for the notary public in connection with the formation of a GmbH have been reduced significantly to – in the simplest case – EUR 600 (excl VAT). Further, in case the founding shareholder(s) already provide the notary public with a final draft of the new GmbH’s articles of association that does not require any further amendment, the costs for the notary public are further reduced by 50%.
Finally, in case the GmbH is founded by an individual and if the Act on the Promotion of New Company Formations (Neugründungs-Förderungsgesetz) applies, the tariff for notarial costs may be reduced to even less than EUR 80 (excl VAT) in case standard articles of association are used. This does not apply if a GmbH is founded by a legal entity.
Reduction of Tax Burden
Due to the reduction of the minimum share capital to EUR 10,000, both the capital duty (1%) to be paid at incorporation and the minimum corporate income tax are lower, since they are imposed by reference to the nominal capital.
No Publication Costs
Prior to 1 July 2013, the incorporation of a GmbH had to be published in the official gazette “Amtsblatt zur Wiener Zeitung”, triggering additional costs for the founding shareholder(s). Since 1 July 2013, the founding shareholder(s) may decide at its/their sole discretion that publications related to the incorporation of a GmbH may now be posted in the official electronic data base (Ediktsdatei) (www.edikte.justiz.gv.at).
Two further amendments regarding GmbH’s have been implemented, both of which have entered into force as of 1 July 2013.
The Austrian Insolvency Code (Insolvenzordnung; IO) has been amended so that a shareholder holding more than 50% of a company’s nominal share capital is obliged to file for insolvency if the company (i) is insolvent, and (ii) does not have any directors. This obligation exists regardless of whether a majority shareholder may actually be in the position to appoint new directors authorized to represent the company or may do so only together with other shareholders.
Further, the managing directors of a GmbH are obliged to convene a general meeting of shareholders if the equity ratio of the GmbH is less than 8% and the fictitious debt repayment period amounts to more than 15 years. These two elements are known from Sections 23, 24 of the Company Reorganization Act (Unternehmensreorganisationsgesetz; URG) to which the Act on Limited Liability Companies refers in this context.
In the short term, the reduction of both the minimum share capital (to EUR 10,000) and other incorporation costs will likely make the GmbH more attractive to entrepreneurs. It remains to be seen whether further amendments to the GmbHG will be necessary to increase its attractiveness in the long term.