The sale and purchase of private companies usually takes place by means of a share deal where the legal entity of the target company remains unchanged and thus, in principle, agreements entered into by that company and the respective parties also remain unchanged. The buyer of a share is usually not liable for debts of the target company; but if the share capital is not fully paid up or has been repaid, the buyer may be liable for settling the remainder (for buyers of shares in a GmbH, this would even include liability for the rest of the other shareholders).
In instances of smaller businesses and in distressed situations, in particular, buyers also choose to undertake asset deals where all or part of the assets of a going concern are acquired. There is no comprehensive code in Austrian corporate and civil law relating to acquisitions of a business as a going concern but, in principle, every single asset must be transferred in compliance with the respective transfer and form requirements for that particular asset.
The legal framework applicable to a transaction will differ, depending on the type of company involved and whether the transaction is structured as a purchase of shares or a purchase of assets. The choice of the transfer method will depend substantially on a number of considerations, in particular: tax implications, the scope and complexity of the target business, and liability risks connected with the acquisition.
In recent years, it has been increasingly popular for buyouts of a private company to take place following an auction process, where several competing bidders are invited by the seller to bid for the target company and where the seller ordinarily concludes a sale and purchase agreement with the bidder that offers the highest price and the most favorable contractual terms. Further, auction processes are common in Austria for stakes in larger businesses. Bid process letters are frequently used, whereas both nonbinding indicative bid letters and binding letters at the final offer stage are seen.
Two basic structures of mergers can be distinguished. Either the target company is merged into an existing company, with the shareholders of the target company receiving shares in the surviving company as compensation (absorption), or a new company ("NewCo") is formed, to which all the assets and liabilities of two or more companies are transferred, with the shareholders of both/all companies receiving shares in NewCo (consolidation). In both cases, the target companies are dissolved by operation of law. Austrian corporate law allows mergers between two or more GmbHs and two or more AGs. Mergers of GmbHs with AGs are also possible.
Mergers are mainly used for internal reorganizations within groups rather than for acquisitions of an unrelated business.
The predominant forms of legal entities used for doing business in Austria are the GmbH and the AG. The number of GmbHs exceeded 100,000, with AGs at around 1,200. Another legal form for doing business in Austria is the European company (Societas Europaea (SE), which is rarely used). As described in further detail below (see "—What are the different types of limited liability companies?"), a new company form was introduced into Austrian company law as of 1 January 2024, the Austrian flexible company (FlexCo). As the concept of a FlexCo has only just been introduced, it remains to be seen how common it will become in practice.
Austrian company law provides for four types of companies with limited liability: GmbH, FlexCo, AG and SE.
A GmbH is the most frequently used business organization in Austria, and it is governed by the Austrian Limited Liability Companies Act (Gesetz über Gesellschaften mit beschränkter Haftung (GmbHG)). GmbHs are required to have at least one director and this may not be a legal entity.
A GmbH may be established and owned by a single shareholder, including multiple layer structures of sole shareholding. Generally, the minimum share capital of a GmbH is EUR 10,000. There are no requirements for the shareholders to be Austrian nationals. Shares in a GmbH may not be publicly traded. Shareholders must be registered with the Austrian company's register, but registration is declaratory in nature, so it is not a required prerequisite to a share transfer. The GmbH's general assembly is deemed to be the supreme body of the company, in particular, enjoying an extensive instruction right vis-à-vis the company's management.
A new limited liability company form, the flexible company (FlexCo), was introduced into Austrian company law as of 1 January 2024. The flexible company can be treated as a hybrid form between a GmbH and an AG. In addition, options for structuring capital measures, that were previously only found in the AktG, have been adopted.
The minimum share capital of a FlexCo is the same as that of a GmbH (EUR 10,000). The capital contribution to be made by the individual shareholder amounts to EUR 1 (whereas in the case of a GmbH, the minimum share capital contribution amounts to EUR 70). By comparison to a GmbH¸ additional flexibilities were implemented in respect of the FlexCo (e.g. voting in text form and simplifications in connection with the transfer of shares). The FlexCo also offers an additional form of participation in addition to the traditional shareholding, the so-called, "enterprise value shares". Shareholders in this class of shares participate in the net profit and liquidation proceeds of the company. However, they cannot (as a rule) participate in the decision-making process of the company.
While the FlexCo benefits from numerous simplifications (as compared to a GmbH) and is designed to give start-ups more flexibility in the type of corporate vehicle that they use to incorporate, some requirements that apply to FlexCo's are more onerous. For example, the requirement to have a supervisory board applies to a FlexCo and is triggered at a lower threshold than a GmbH. A FlexCo is required to have a supervisory board if: (i) it has more than 50 employees; and (ii) one of the two other size criteria is exceeded (balance sheet total of EUR 5 million, or turnover of EUR 10 million). By comparison, a GmbH is only required to have a supervisory board if it has more than 300 employees.
AGs are governed by the provisions of the AktG. As with the GmbH, in principle, the shareholders of an AG may not be held liable for liabilities of the company. One main difference with the GmbH relates to the focus of the AG: whereas a GmbH is designed as a legal entity for a few individuals (usually involved in the company's management), an AG is designed to attract a large number of investors who are not personally involved in the management of the company. Accordingly, shares in an AG may be publicly traded. However, in practice, only about 70 out of approximately 1,200 AGs are listed on a stock exchange. The legislator has also begun to differentiate between listed and non-listed AGs in various legal reforms. AGs must have managing directors and a supervisory board, which are, unlike the managing director of a GmbH, independent from, and not subject to, shareholders' instructions. Generally, the minimum share capital of an AG is EUR 70,000.
Under Austrian law, there is no restriction on the number of shareholders.
In a share deal, the legal entity of the target company remains unchanged and, therefore, in principle, agreements entered into by that company and respective parties also remain unchanged. The buyer is not usually liable for the debts of the target; however, if the share capital is not fully paid up or has been repaid, the buyer may be liable to pay up the remainder.
In an asset deal, all or part of the assets of a going concern are acquired. Austria currently has no comprehensive code in relation to the acquisition of a business as a going concern. However, in principle, every single asset must be transferred in compliance with the respective transfer and form requirement for that particular asset. Asset transfers are appealing to the buyer for tax reasons and the opportunity to limit the buyer's risks. Further, the buyer can choose whether to acquire all or only certain assets.