Austria: Austria: Automatic Imposition of Fines for Late Filing of Financial Statements

According to the Austrian Commercial Code (Unternehmensgesetzbuch - UGB), managing directors (Geschäftsführer / Vorstandsmitglieder) of Austrian corporations (Kapitalgesellschaften) are obliged to file the corporation's (audited) financial statements (Jahresabschluss und Lagebericht, if applicable) with the competent Austrian Commercial Register (Firmenbuch) within 9 months after the respective balance sheet date (cp. Art 277 para 1 UGB).

Non-compliance with such filing obligation is subject to the imposition of fines (cp. Art. 283 UGB).

In the past, the imposition of such fines of up to EUR 3,600 was in the discretion of the competent Austrian courts. Fines could be repeatedly imposed in case of continuous non-compliance, in which case the upper limit of the fines was increased by 300% in case of mid-sized corporations and 600% in case of large corporations (cp. Art 283 UGB old). However, as a matter of practice of the Austrian courts, the risk of being fined was rather remote.

Now, this has changed.

The latest amendment to the UGB (federal gazette no. 111/2010) replaced the courts' discretion of whether or not to impose a fine for late filing by an automatic imposition of a fine of EUR 700 on (1) each managing director personally (!) and (2) the corporation itself if the filing of the financials is not made in time. The court can only refrain from imposing the fine if the management of the corporation proves that it was obviously hindered by an unforeseen or inevitable event (unvorhergesehenes oder unabwendbares Ereignis), in which case a grace period of 4 weeks can be granted.

Additional fines for each 2 months of non-compliance shall (again - automatically) be imposed until the default is actually remediated. Each repeated fine again amounts (in general) to EUR 700 but increases to EUR 2,100 (300%) in case of mid-sized corporations, and EUR 4,200 (600%), in case of large-sized corporations. And, again, such fines are imposed on (1) each managing director personally (!) and (2) the corporation itself.

The official reasoning for the amendment of Art. 283 is that, according to the parliamentary commentary, not even half of all responsible corporations complied with their filing obligations and that it could be argued that Austria did not implement appropriate measures to enforce the (Community Law based) filing obligations of corporations. Beside that, the automatic imposition of fines is expected to have positive monetary effects due to increased income and reduced costs.

The respective managing director and the corporation can object the fine within 14 days after delivery of the respective notice. The notice of objection shall state the grounds for the late filing. The competent Austrian court must then conduct ordinary proceedings and decide upon a fine in the range of EUR 700 to EUR 3,600. The multipliers for mid-sized (300%) and large (600%) corporations and their managers in case of repeated failure to file apply again.

As outlined above, the corporation itself shall be subject to the same fine as its managing directors. This means that, interestingly, one and the same default will actually be sanctioned at least twice (assuming that there is only one managing director), which appears problematic in view of the punitive nature of the sanction.

The foregoing also applies to certain other duties of managing directors of Austrian corporations as well as to certain filing obligations of liquidators (Abwickler), members of the supervisory boards (Aufsichtsratsmitglieder) and representatives of Austrian branches (Zweigniederlassungen) of foreign corporations (cp. Art 283 para 1 UGB).

The amendments to Art. 283 apply from 1 January 2011 to violations that occur after that date or are not remediated by that date, with a grace period until (including) 28 February 2011 for existing non-compliances.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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