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"FlexCo"

A new form of commercial company in Austria for start-ups

"FlexCo"

Countries where it is possible to establish a new company as efficiently as possible, quickly and without unnecessary bureaucracy are perceived as attractive places for start-ups. Austria has so far been perceived by foreign start-up investors as an unattractive country due to its heavy bureaucratic burden.

In order to stimulate start-up culture in Austria, the Austrian government's programme for 2020-2024 envisages the creation of a new form of commercial company that would be particularly suitable for innovative start-ups.

A new form of commercial company called "Flexible Capital Company" (FlexCo), to be created on the basis of an international model, is intended to increase the attractiveness of Austria as a place to do business and to attract foreign start-up investors to Austria through greater flexibility, less formality and lower start-up costs.

FlexCo should be a special form of the standard Austrian limited liability companies (GmbH) and public limited companies (AG) and be open to all entrepreneurs. This new form of company will not be limited to start-ups.

Low minimum share capital

In order to make FlexCo more attractive in international comparison, a minimum share capital  of € 10.000,00 is set, of which at least half must be paid up at the company's incorporation. 

There is currently a discussion on whether the shareholders can also contribute with their work (e.g. know-how) to the company.

Establishment of FlexCo

Start-ups require a fast, non-bureaucratic and cost-friendly company establishment. Under the current situation, a notarial deed would be required to establish a FlexCo, although this can nowadays be done electronically thanks to digitalisation in the notarial sector. 

In addition, FlexCo is also registered in the Austrian commercial register, as is the case with a standard limited liability company (GmbH) and a public limited company (AG). 

In order to speed up incorporation, it would also be desirable to remove bureaucratic obstacles such as notarial formalities and registration in the commercial register. The ideal scenario would be if FlexCo could be established exclusively online. In view of the globalisation of the business environment, it would also be advisable if the English language were allowed to be used in the drafting of all necessary documents and resolutions. 

It remains to be seen whether the Austrian legislator will divert from the bureaucratic hurdles mentioned above in the final bill and take the modern and non-bureaucratic route.

Flexible allocation of shares and capital measures

Each shareholder should have a share in FlexCo. It is planned that a capital contribution of at least € 1,00 can be issued (determined). 

There should also be different types of shares with different rights and obligations attached to them. In addition to ordinary shares, specific types of shares, such as preference shares or non-voting shares, would also be granted. Thus, shareholders in FlexCo may acquire and hold different types of shares.

It is no secret that start-ups rely on capital from investors, especially in the early stages after their inception. Recruiting investors into a company should therefore be fast and non-bureaucratic. In order to create a cost-effective and flexible transfer of shares in FlexCo to investors, the Austrian legislator should abolish the currently foreseen involvement of a notary in this process.

Investors often get involved in start-ups through equity raises, which bring new capital into the company. For this reason, the transfer of shares to FlexCo should also have more flexibility. Unlike a capital increase in a limited liability company (GmbH), which is complex and time-consuming, the implementation of a FlexCo capital increase should be much simpler. The possibility of circular resolutions in written form (and thus abolishing formal notarial acts) as well as the drawing up of resolutions on reserves by way of the appropriation of share capital are also being discussed.

Employee participation models to attract skilled workers

In the early stages, it is very important for start-ups to attract highly skilled and motivated employees. However, start-ups cannot - at least initially - offer their employees salaries in line with normal market wages. This is why employees and statutory bodies of start-ups like to be motivated by the employee participation model. Participating in the success of the company strengthens employees' motivation to work for the company.

Non-voting shares, which offer financial incentives to employees but do not include voting rights, play an important role in the context of employee participation models.

Result

The introduction of a new form of company - the FlexCo - is generally welcomed in Austria and offers a more cost-effective alternative to the traditional limited liability companies that already exist in Austria. The new legal form not only brings better conditions for investors and start-up founders, but also new incentives for their employees, thanks to employee participation models. 

The extent to which the outlined project will ultimately be realised will only become apparent with the draft Austrian law, which is currently still being drafted.