Choosing or changing a multinational company's headquarters involves considerations of quality of living and political stability in addition to economic and legal issues. This arti-cle, in two parts, outlines some of the advantages of and basic information about choos-ing Austria for a company's headquarters. Part 1 is an overview of Austria's social and political background and of some legal forms to consider for a holding company. Part 2 will introduce Austrian tax law and provide additional legal information.
Living in Austria
Located in the centre of Europe, Austria offers an outstanding geographical position. The quick and easy accessibility of branches and subsidiaries in different locations is crucial. For example, from Vienna one can reach Berlin or Zurich in less than 90 minutes, Frankfurt or London in about two hours, and Moscow in less than three hours.
Also, according to Mercer Consulting Group's 2010 survey, for the second straight year the quality of living in Vienna for expatriates is first among 221 large cities (Paris is 34 and London 39). Yet Vienna ranks only 28th for cost of living.
Austria offers stable politics and has been a member of the EU since 1995. And Austria's political stability mirrors its social stability: Between 2000 and 2011, average unemployment was about half the EU's (4.4% versus 8.7%). From 2004 to 2008, not a single working day was lost due to strikes, while the EU average was 43 days lost. Furthermore, the World Competitiveness Yearbook 2010 ranks Austria first in protecting personal security and private ownership.
Introduction to Austrian corporate law
Considering the business and economic risks a company is exposed to, shareholders throughout the world seek to limit their liability as far as possible. This also applies to the legal form of a company headquarters. The following is a brief overview of some possible legal forms for an Austrian holding company that do not entail personal liability from shareholders. The list contains only basic information; it is not a comprehensive treatment of the advantages and disadvantages of these legal forms.
Amongst others, Austrian company law offers these forms: (i) Limited Liability Company (GmbH), (ii) Stock Company (AG) and (iii) Limited Partnership (KG), all of which enjoy a legal personality.
The Limited Liability Company (GmbH)
The GmbH is the most common legal form for companies in Austria (about 2/3 of registered companies are GmbHs). It permits almost all business purposes, with only a few exceptions (e.g., insurance or political activities). Accordingly, most holding companies in Austria are GmbHs. As its name implies, shareholder liability is limited. Limited liability may, however, be overridden by banks who grant loans and demand additional security, such as guarantees from the shareholders or managing directors.
There are no restrictions on shareholders. Individuals, corporations, partnerships, residents, non-residents, Austrians, non-Austrians, and foreign corporations can all be founders and shareholders. Share transfers must be concluded by notarial deed.
The equity capital of a GmbH must be at least EUR 35,000 and every shareholder must invest at least EUR 70. An Austrian GmbH's minimum equity capital is the highest in the EU – a fact that brings trust in the company from investors and business partners throughout Europe. Furthermore, the shareholders need to deposit a cash amount of only EUR 17,500.
The GmbH must have at least one managing director who is subject to shareholders' resolutions. This means that shareholders have the right to issue directives that obligate the managing director(s) to act accordingly. The obligation to observe such directives is delimited by instructions that would give rise to criminal responsibility of the managing director(s).
A supervisory board is optional except in some cases (e.g., if the company employs more than 300 people).
A big advantage of the Austrian Limited Liabilities Companies Act (GmbHG) is that it enables a flexible and dispositive designing of the GmbH.
Both Austrian statutory provisions and constant judicature on capital maintenance rank among the strictest in the EU and protect not only the company's share capital but all company assets. This means that the company may distribute only its profits. This, again, engenders trust in the GmbH from investors and business partners.
The Stock Company (AG)
An AG has no restrictions on its intended business purposes. It requires a minimum share capital of EUR 70,000, while a single stock must be at least EUR 1.
There are no restrictions on shareholders, and the transfer of shares is – by contrast to the GmbH – easy. The tradability of its shares (also in the stock market) is the AG's main advantage.
The AG, though, is subject to a strict regime of statutory provisions. For example, it must always have a supervisory board (two tier management system).
With regard to capital maintenance, please see the remarks above.
The Limited Partnership (Kommanditgesellschaft; KG) in the form of a GmbH & Co KG
The KG is a partnership, as its name implies. It consists of at least one shareholder with unlimited liability (general partner) and at least one shareholder with limited liability (limited partner). The limited partner is liable towards creditors only for that sum entered as a liability deposit in the Company Register. There are no regulations on the deposit; any amount may be determined. Limited partners are not entitled to represent the company. They merely have certain control rights, which can be amended through the articles of association (AoA).
The founding of a KG is simple, and no notarial deed is needed. But, because there are few statutory provisions, the AoA should be precise to avoid conflicts between shareholders wherever possible.
The KG can be structured as a GmbH & Co KG. As its name says, a GmbH can be assigned as general partner, so the GmbH holds the position of general partner with unlimited liability. Complete limitation of shareholders liability can thus be achieved.
It should be mentioned, however, that the Austrian Supreme Court has held that the rules on capital maintenance (originally designed for corporations) also apply to a KG if no individual holds the position of general partner. Therefore, please refer to the remarks on capital maintenance above under "The Limited liability Company (GmbH)".
An Austrian headquarters means the possibility of reorganisations, such as mergers, demergers and conversions. Such measures often bring tax relief and allow for the reorganisation of a group of (affiliated) companies.
Austria offers a variety of reasons to establish or relocate a company headquarters there. Next to the high quality of living and stable political and legal systems are the above-mentioned legal forms, which allow for the designing of a group of (affiliated) companies according to the needs and wishes of the top management or shareholders.
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.