Fundamental changes in Austrian corporate law
Wolfgang Sieh
Fiebinger Polak Leon & Partners
Vienna
Wolfgang Sieh (Bio)
On July 7 2011 the Federal Chamber of the Austrian parliament resolved the Corporate Amendment Act 2011 (CAA 2011). The CAA 2011 was published in the Official Gazette on July 27 2011. In essence, the CAA 2011 addresses fundamental changes for Austrian joint-stock companies and simplifications of merger and de-merger procedures.
End of bearer shares for unlisted companies
Austrian joint-stock companies may either issue bearer shares (Inhaberaktien) or registered shares (Namensaktien). Holders of bearer shares are considered shareholders. Holders of bearer shares are not registered in any public register and may exercise their shareholder rights anonymously. Registered shares, however, must state the shareholder's name. They may be transferred by way of endorsement, assignment or universal succession. Only the registered shareholder may exercise the rights arising from the registered share.
In its report published on December 1 2009 the Financial Action Task Force on Money Laundering criticised the lack of transparency in connection with bearer shares of Austrian joint-stock companies.
Therefore, the CAA 2011 provides that bearer shares may no longer be issued by joint-stock companies and European Companies, which are not listed on the stock-exchange (the Affected Companies). However, companies preparing an IPO may issue bearer shares even though they are not yet listed.
Since in Austria most joint-stock companies are unlisted, the abolition of bearer shares has a major impact on Austria's corporate environment.
Effect of abolition of bearer shares
The provisions of the Affected Companies' articles of association regarding bearer shares will need to be changed accordingly, and will need to contain those provisions that relate to registered shares.
Furthermore, all issued share certificates must be exchanged. If shareholders should refuse to have their certificates exchanged, the company may declare these certificates void.
In addition, Affected Companies must keep a register of all shareholders (Aktienbuch). This register must contain the name, address, date of birth or register number, number of shares, share numbers, par-value of the shares (if any) and the bank account (of an OECD/EEA Bank) which is used for all payments by the company for the benefit of the respective shareholder. If a shareholder who is not yet the owner of the shares is registered, the owner of the shares needs to be registered as well. Thus, the identification of the owner of the shares must be possible and any payments from the company to the shareholder must be traceable. Given that in practice most unlisted companies are issuing interim share certificates, which must already now contain the name of the shareholder, the administrative effort for setting-up the register of shareholders should not be disproportionate.
It is argued that the Affected Companies will benefit from the CAA 2011 because they will get to know the identity of their shareholders, and that this information shall be relevant in the decision-making process of the company. In addition, administrative costs may be reduced. For instance, shareholders' meetings may be called by inviting individual shareholders directly, rather than by publishing a notification in the official gazette.
The abolition of bearer shares for Affected Companies came into effect as per August 1 2011. However, affected companies shall not be in a rush to set the appropriate measures, since the new rules must be observed only as per the end of 2013. Therefore, it is advisable to implement the necessary changes in the course of the next regular shareholders' meeting.
Abolition of interim share certificates
Under the old rules, joint-stock companies were allowed to issue interim share certificates (Zwischenscheine) in lieu of actual share certificates. These interim share certificates could be issued as long as no official share certificates were issued.
As bearer shares were now abolished for unlisted companies, and given that listed companies now have to issue global certificates immediately (see below), the provisions regarding interim share certificates became irrelevant.
Changes for listed companies
According to the CAA 2011, listed companies may either issue bearer shares or registered shares, as before. Due to the frequent trading of shares in listed companies, the administrative work required for keeping a register of all current shareholders was considered disproportional. In addition, according to Section 91 et seq. of the Austrian Stock Exchange Act, special reporting requirements apply to shareholders of listed companies if certain participation thresholds are met.
According to the CAA 2011 listed companies must issue global certificates for bearer shares and must deposit these certificates with a bank that keeps a 'central depository for securities' (Wertpapiersammelbank). Thus, share transactions shall only be possible via securities accounts, and this shall facilitate the tracing of transactions by the investigating authorities.
Furthermore, the CAA 2011 provides that listed companies must register their current internet page and the fact that they are listed with the commercial register. Unlisted companies may register their current internet page with the commercial register as well, but are not obliged to do so. However, certain administrative facilitations apply only if the current internet page is registered.
Changes in Austrian restructuring provisions
Based on Directive 2009/109/EC, certain reporting and documentation requirements in the case of mergers and demergers were amended by the CAA 2011, in order to reduce the administrative burden to a minimum.
Certain reports are no longer required in case of upstream mergers of a 100% subsidiary and in case of demergers where the shares of the new company are allocated to the shareholders of the company being divided in proportion to their participation quota in the capital of that company (verhältniswahrende Spaltung).
Furthermore, extended possibilities to waive certain reports and the omission of an interim balance sheet are addressed. It is also possible to publish the merger agreement or the division plan electronically instead of filing it with the commercial court and publishing it in the Official Gazette (Amtsblatt).
Lastly, creditors whose claims against the transferring company are endangered due to a demerger now have an enforceable right to request that the demerged company provides adequate collateral as a security for the claims of its creditors.