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After several years of preparatory work, in which I was personally significantly involved, the Austrian legislator enacted a new legal form of a corporation — the “Flexible Capital Company”, abbreviated “FlexKapG” or “FlexCo”. Together with two other lawyers, I had drawn up a regulatory concept for the new legal form on behalf of the Ministry of Economy. We have also published this regulatory concept in book form with the title “Austrian Limited”1. Following the entry into force of the Flexible Companies Act (FlexKapGG), together with other authors, I have written a handbook on the Flexible Corporation of more than 400 pages2.
The aim that the legislator pursued with the new legal form of flexible capital company was to create a more flexible corporate form of a corporation compared to a GmbH, which is more attractive than the legal form of a GmbH, especially for founders of start-ups and for international investors. In this respect, the goal was certainly achieved. In the almost two years since the introduction of the Flexible Capital Company in Austria, more than 1,400 flexible corporations have already been founded.
Insofar as legislators have created a new category of voting shares — the corporate value shares (“UWA”) — at FlexCo, which — in combination with the tax-based start-up promotion act passed at the same time — should facilitate and make the share participation of employees and other persons in FlexCo more attractive, the attractiveness is due to the dissuasively detailed and overly minority-friendly regulations for UWA and its “co-sale right” to less acceptance bumped. These regulations are often perceived as prohibitive by the founders of FlexCo and in practice they switch to other forms of employee participation.
The flexible corporation (hereinafter referred to as “FlexCo”) may be established for any permitted purpose in accordance with legal requirements. Establishing a one-person company is also permitted. FlexCo is suitable, for example, for commercial and industrial companies, as a holding company, as a project company, as a freelancer company, as a joint venture or for research and development communities.
FlexCo works in a similar way to a GmbH. It has managing directors as managing and representative body. FlexCo only needs to have a supervisory board in exceptional cases. As in the case of a GmbH, the highest body is the shareholders. GmbH law applies to shareholder resolutions, to majority resolutions and to the contestation of shareholder resolutions. The regulatory technology of the Act consists of referring very largely to the provisions of the GmbH Act and making deviating and supplementary regulations for FlexCo in just 29 paragraphs.
FlexCo must include in its company a legal form addition which contains the term “flexible corporation” or “flexible company” or an abbreviation, namely “FlexKapG” or “FlexCo”.
As with a GmbH, the establishment of FlexCo generally requires a notary act. The exception provision on simplified (formless) incorporation involving a credit institution, if the formation is carried out by a single shareholder who is a natural person and at the same time the sole managing director (§ 9 a GmbHG), is also applicable.
Like that of a GmbH, FlexCo's minimum capital is €10,000 (“share capital”). If the capital is raised through cash contributions, it must be paid in at least €5,000, -, as when setting up a GmbH. Each basic investment must amount to at least Euro 1, -3. Contributions in kind are permitted.
Together with the other authors, I had in the report for the Ministry of Economic Affairs on “Austrian Limited”4 proposed not only to allow the possibility of an “ordinary capital increase” to be carried out immediately, but also to allow the institutions of the”authorized capital“, of”contingent capital“, of”authorized conditional capital“as well as the output of Convertible and warranted bonds to introduce. The legislator implemented this proposal. In this way, FlexCo is much more flexible in raising capital than the legal form of a GmbH. The law also allows Acquisition of own shares and from Company value shares by FlexCo itself and their draft following the example of stock corporation law.
Contrary to GmbH law, the articles of association of a FlexCo may provide that the drafting of written circulation resolutions does not require the consent of all shareholders to pass the circulation resolution. However, for a valid written resolution to be passed - which is self-evident anyway - all shareholders with voting rights must be allowed to participate in the vote.
The articles of association may also require compliance with the”textual form“, as regulated by Section 13 (2) AktG — therefore also by e-mail — is sufficient (Section 7 FlexKapGG).
The virtual holding of general meetings in the form of video conferences with a two-way connection in real time is permitted, provided that the articles of association expressly permits this (Section 1 (2) VirtGesG).
In order to promote employee participation in the company, a new category of shares, the “corporate value shares” (“UWA”), was introduced. Although this instrument is typically intended for employee participation programs, it is in no way limited to this group of people.
Company value shares can be issued in the amount of a total of “less than 25% of the share capital”, i.e. only up to 24.999∞ percent. The individual UWA must have a nominal amount of at least €0.01 (= one euro cent).
In order for the start-up tax support for employees to be applicable, individual employees may only hold corporate value shares in the amount of “less than 10% of the capital.”
Holders of enterprise value shares (“corporate value participants”) have the right to attend general meetings and to notify written votes. They are entitled to comprehensive information and questions at general meetings — but only in these meetings. However, they have no voting rights and no right to challenge shareholder resolutions in court. If their legal position guaranteed by the company contract is directly interfered with, this requires their individual consent and therefore, if their rights are violated, they are also entitled to appeal.
Company value shares do not mediate subscription rights in the event of capital increases; however, the latter could be regulated by a company agreement.
In the event of an exit, if the founder or founders sell a majority of their shares, shareholders have a legally securitized co-sale right.
Die Shareholder of FlexCo — as well as that of a GmbH — in the general register of the commercial register (FB) with the name, date of birth and address.
Company value participants On the other hand, FB must be entered as part of the share capital, not by name, but only with the total sum of the common contributions of all UW participants. On the other hand, the names of the owners of the company value shares are not to be entered in the FB general ledger, but only in a share book kept by the company. However, managing directors must provide an updated list of the names of the company value participants (without specifying the nominal amounts of their common investments) (”List of names“) submit to FB. The list of names is publicly available in the FB collection of certificates.
In addition, managing directors must have a”List of shares“to FB, which must not only show the information contained in the list of names, but also the amount of the respective common investment of each UW participant and their deposit. This share list is not publicly available. The obligation to disclose the names to FB naturally entails the risk that, if the official secrecy of the court is not respected, the company value participants, who are often “key employees” of the company, can be identified as such by name and can thus be poached away more easily by competitors.
FlexCo has a supervisory board obligation not only - as is the case with the GmbH - in cases under Section 29 (1) GmbHG5, but even when FlexCo has at least one “medium-sized” capital company within the meaning of accounting regulations (Section 221 (2) and (4) UGB). This is the case when FlexCo in two consecutive financial years — in the event of a reorganization in one Financial year — exceeds two of the following three thresholds:
As a result, the legislator has placed FlexCo worse than the GmbH.
Here, the efforts of the then “green” Minister of Justice to keep the GmbH as a “reserved fee reservoir” for the notary and to make FlexCo unattractive for medium-sized companies are clearly evident. The reason given in the legislative material for the supervisory board obligation that FlexCo has organizational options that are otherwise reserved for public limited companies is not convincing, because FlexCo's supervisory board obligation does not depend on whether a measure should be taken which, in the comparable case of a joint stock company, would involve the supervisory board or not.
an attenuated formal requirement, namely a private document drawn up with the assistance of a lawyer or notary, before (so-called”private attorney-issued certificate“and”notarial private deed“). After all, this means a certain relief, time and cost savings compared to the legal form of a GmbH, where a notary act is mandatory in these cases. This is particularly true when the share transfer or - in the case of a capital increase - the takeover declaration is not drawn up in German but in a foreign language.
The Act allows the conversion of a GmbH into the legal form of a FlexCo and vice versa the conversion of a FlexCo into a GmbH. The special approval requirements of Section 99 GmbHG, as they apply to mergers, must also be met in the event of a transformation that changes legal form (Section 25 FlexKapGG).
The conversion of a FlexCo into a filing company and vice versa of a filing company into a FlexCo is also provided for, mutatis mutandis, the stock corporation law provisions applicable to such transformations of a GmbH.
The merger, division and transformation under the UmwG, as well as the Shareholder Exclusion Act, apply to FlexCo as a result of the reference in Section 1 (2) FlexKapGG to the provisions applicable to limited liability companies.
1 J. Reich-Rohrwig/Ph. Kinsky/S.-F. Kraus, Austrian Limited (2021).
2 Reich-Rohrwig/Reich-Rohrwig/Kinsky (ed.), Flexible Corporation (2024).
3 In comparison, the individual core investments of a GmbH must amount to at least €70, -.
4 J. Reich-Rohrwig/Ph. Kinsky/ S.-F. Kraus, Austrian Limited, a start-up-friendly new legal form (2021) 9 f, 112 ff.
5 See the explanations about the GmbH on this homepage.
