Acquisition Finance 2023

Last Updated May 25, 2023


Law and Practice


Fellner Wratzfeld & Partners is one of Austria’s leading business law firms and is based in Vienna. The firm has a team of more than 70 highly qualified legal practitioners and provides legal advice in all major legal areas, including banking and finance, corporate/M&A, real estate, infrastructure and procurement law, reorganisation and restructuring. The firm has also developed an ESG practice covering all financing-related topics, among others. Fellner Wratzfeld & Partners represents Austrian and international private companies as well as clients from the public sector. It regularly advises renowned credit institutions and financial service providers on financing and other projects, including company reorganisations. The firm draws upon substantial experience gained in the financing of complex consortia and continues to be involved in the largest banking and finance cases in Austria.

In Austria, acquisition financing is mainly provided and arranged by international and national credit institutions, with Austrian banks often providing financing for small and medium-sized enterprises (SMEs). LBO structures, which regularly consist of different financing stages and tranches, are to be distinguished from classic acquisition financing. In the case of an LBO, it is common to have different financing layers. Replacing parts of the bank financing after closing with high-yield bonds has become a common feature in the case of larger LBOs. 

If the target is a large Austrian company, the acquisition financing or LBO structure is usually provided by international financing syndicates consisting of renowned international credit institutions.

Commercial lending requires a banking licence in Austria. 

In order to provide loan financing on a commercial level to companies in Austria, there are three possible options.

  • Application for a banking licence – obtaining a banking licence is a rather complicated procedure and requires in-depth preparation over a longer period of time. One of the legal requirements that has to be satisfied and is especially extensive is the preparation of an appropriate business plan, which is reviewed by the supervisory authority.
  • It is legally possible for a credit institute of another EU member state to establish a branch (the existing banking licence would need to be notified to the Austrian regulator).
  • The most common approach for non-Austrian banks wishing to engage in the lending business and avoid establishing a permanent presence is utilising the EU freedom of services in another EU member state. 

For non-banks it is possible to participate in the lending business only if this activity is exempted from the requirements of holding a banking licence (eg, acquisition of loan portfolios by special securitisation purpose entities or through the use of bonds and initial loans by credit institutions, which are transferred to new lenders outside of Austria after the first loan has been granted). However, the strict regulatory requirements always require a case-by-case assessment.

According to Section 4 (1) of the Austrian Banking Act, the banking licence has to be issued by the Austrian regulator (the Financial Markets Authority – FMA) for lending business (ie, the provision of financing to borrowers on a commercial basis). Notified licences of a credit institution domiciled in another European Economic Area (EEA) jurisdiction (based on the home member state concept) will be held equivalent for this purpose. The same applies to the acquisition of (loan) receivables on a commercial basis (ie, factoring), which in principle prevents workaround structures, such as the disbursement of a loan by an Austrian “fronting bank” and immediate acquisition of the loan by a foreign, non-licensed lender. Limited exceptions to this principle apply, inter alia, to insurance companies granting loans for the purpose of creating a reserved asset base regarding their insured persons or customers. 

Crowdfunding has recently been regulated in statutory law and provides for exceptions from both the banking licence and capital markets prospectus requirements, if and to the extent that the financing does not exceed certain thresholds. 

Luxembourg-based CPI Property Group paid EUR403.5 million to acquire a 12.7% stake in Austria՚s Immofinanz AG in 2022. This was thus the largest transaction involving Austrian companies; the second-largest deal was the purchase of the British-American packaging manufacturer Essentra Packaging by the Austrian Mayr-Melnhof AG for EUR363.5 million.

In order to mitigate the economic effects of the COVID-19 crisis, in particular those arising from lockdowns, the Austrian government applied several economic measures to stabilise companies affected by the lockdowns such as issuing bridge guarantees for up to 100% of the credit value applied for banks as well as the granting of fixed-cost subsidies. These legal (and economic) measures provided by the Austrian government led to a significant decrease in the insolvency rate. Most of these support measures have since ceased. At present, the number of insolvency proceedings is almost back to the pre-crisis level. The substantial increase of the insolvency rate predictably has materialised and has an impact on the number of corporate transactions in Austria. 

With the war in the Ukraine, a new geopolitical crisis factor has arisen, which has a significant impact on business, both directly and indirectly.

The sanctions imposed by the EU and the USA have led to disruptions in direct business relations of Austrian companies with Russia and Belarus. The sanctions restrict the import and export of goods and services (military goods embargo, sectoral and goods and service-related restrictions, but also luxury goods) as well as the access to capital and financial markets and the implementation of payment transactions. These immediate effects had a massive impact on companies, particularly with regard to business relations with sanctioned companies in Russia and Belarus.

Austrian companies are also affected by the indirect effects of a deterioration in the overall economic situation, which manifests itself in significant price increases in a wide variety of areas, triggered primarily by rising energy prices. Austria is heavily dependent on Russian gas. The inflation rate is steadily increasing and has led to the European Central Bank to raise the base rate. This, in turn, increases the capital costs for Austrian companies.

In general, the choice of a foreign law as applicable contract law is permissible, even if the contract is to be enforced in Austria; in terms of market practice this might apply to (English or German law-governed) loan agreements. 

In cross-border large-volume acquisition financing transactions, English law is usually chosen for the transaction documentation. However, due to Brexit, German law has become more important for transactions with respect to an Austrian target. German law could become the second market standard. Small acquisition financings are usually governed by Austrian law. The basis for such smaller financing transactions are usually standardised loan agreements as used by the respective credit institutions. 

However, regarding the granting and perfection of security rights, there are restrictions, which, depending on the type of security, are in most instances governed by local (Austrian) law. This would apply among others to pledges over shares in Austrian companies, pledges or security assignments of Austrian law governed receivables and the creation of pledges or mortgages over Austrian real properties. Therefore, it is a common market practice that security rights over assets located in Austria or provided by Austrian domiciled transferors or pledgers are documented in Austrian law-governed security documentation.

The recommended LMA forms are usually used for international loan syndicates or large-volume domestic syndicate transactions. However, for smaller domestic transactions, shorter contract documents are typically used. 

The financing documentation used for Austrian financial transactions therefore varies considerably depending on the type of transaction and the parties involved.

The transaction language chosen in acquisition financing transactions also varies considerably depending on the parties involved. For cross-border transactions, English is usually chosen as the transaction language. Domestic transactions, in which the borrower is a less internationally-oriented company with little international exposure, are usually documented in German. However, it is evident that domestic lenders are increasingly tending to document transactions in English, which also increases flexibility in connection with syndications.

A legal opinion regularly states the existence of a legal relationship, eg, the legality, effectiveness and enforceability of a contract.

In financing transactions, the typical content of a legal opinion relates on the one hand to the transaction documents and collateral, and on the other hand to the legal status of the borrower or guarantors and security providers. The issuance of one or more legal opinions is usually a precondition for the disbursement of funds in connection with a financing transaction.

A distinction must be made between opinions that confirm, inter alia, the validity and enforceability of loan and security agreements ("enforceability opinion") and those that confirm the existence of the borrower or guarantor as well as the fact that all necessary board resolutions have been passed and that the signatory of the agreements has the corresponding power of representation ("capacity opinion"). In addition, certain expert opinions are often obtained to confirm certain tax assumptions ("tax opinion").

Usually, lender’s counsel issues enforceability opinions and borrower’s counsel issues capacity opinions. If guarantees are obtained from foreign subsidiaries, the entire opinion with respect to those subsidiaries is often provided by the local counsel engaged by the borrower.

Senior loans (with various tranches with different maturities) are the most important instruments for debt-financing of acquisitions. They are considered as the least expensive form of financing the purchase price and are usually more secured than any other debt, such as subordinated loans (Nachrangdarlehen), because senior loans are usually collateralised by assets. Additionally, other financing products are increasingly used for acquisition financing in Austria, such as mezzanine debt and hybrid instruments. Overall, senior loans have the lowest cost of capital compared to other tranches in the capital structure. The interest rates on senior loans are typically lower than those on other debt components in the capital structure. In the case of liquidation, senior debt must be paid back first before other creditors receive payment. Senior debt is also ranked higher than high-yield debt in the capital structure. 

It is quite common that multi-tranche senior loans are granted, which provide for different maturities. Senior loans are commonly used for the required working capital of the target company.

Senior loans are accessible by various businesses and widely offered by banks. The banks generally have low costs of funding and a profitable spread between costs and the interest rate they charge to their borrowers.

It can be observed in the market that alternative forms of financing have increased in recent years; not least because of the current economic instability caused by Russia’s war in Ukraine and the aftermath of COVID-19.

Mezzanine loans are provided in the form of unsecured or subordinated loans (Nachrangdarlehen) often combined with a high interest rate or a so-called equity kicker. 

Inter-creditor agreements or the respective security documentation can clarify the relation between mezzanine creditors and other creditors by way of contractually subordinating the claims of the mezzanine creditors; or alternatively through a structural subordination of the mezzanine tranches. In addition, it is possible to grant second-rank collateral for most security interests regulated under Austrian law.

With regard to a company’s capital structure, mezzanine finance stands between equity and debt, and thus is hybrid. The main purpose of mezzanine loans is filling the gap between equity and senior debt and is typically used in real estate financing. 

A PIK loan is a kind of mezzanine loan where the borrower is allowed to make interest payments in forms other than cash. PIK loans are commonly used in LBO structures. Typically, the payment of interest may be made by issuing another debt or by issuing of stock options. PIK loans are often taken if a company has liquidity problems but has the capability to pay interest without paying in cash form. This is attractive to companies that want to avoid making current cash outlays for debt interest, such as during a management or leveraged buyout or during a growth phase of the business. In order to protect their liquid assets, companies pay their liabilities with using new liabilities. Under Austrian law, there are generally no legal restrictions on the inclusion of PIK elements in the overall debt consideration.

Traditional bridge loans are temporary loans with an initial maturity of one year or less, put in place to bridge a potential gap between the announcement of an acquisition until a company can secure permanent financing, in particular if the timeline regarding a transaction does not allow for full syndication of the loan before closing. In Austria they are used for various scenarios, such as acquisition financings, LBOs and before bond issuance. 

Bridge loans are interim financing options usually used by companies to solidify their short-term position until a long-term financing option can be arranged and they are normally used to fulfil a company’s short-term working capital needs. Bridge loans are often repaid by the final loan proceeds.

The interest rates of bridge loans depend on the credit rating and default risk of the borrower. However, the interest rates are higher than typical rates under ordinary circumstances – in addition, the documentation often provides for interest rate increases or additional fees periodically across the term of the loan or in case of extension. 

The borrower is thus incentivised to repay the bridge loan as soon as possible.

Bonds are not usually used for the initial funding of acquisitions. However, due to the strict requirements with respect to banking licences in Austria, the issuance of bonds is commonly used in acquisition financings and LBOs with Austrian companies involved. 

Commercial lending is considered a regulated activity in Austria and thus requires a banking licence under the Austrian Banking Act if the respective lending business is deemed to be carried on in Austria. For non-banks it is possible to participate in the lending business only if this activity is exempted from the requirements of holding a banking licence (eg, acquisition of loan portfolios by special securitisation purpose entities or through the use of bonds and initial loans by credit institutions, which are transferred to new lenders outside of Austria after the first loan has been granted).

A banking licence otherwise required under the Austrian Banking Act can be lawfully circumvented if, instead of granting a loan, bonds are issued by the borrower and acquired by the lender. The issuance and purchase of bonds does not require a banking licence in Austria. There are signs that bonds may become cheaper than loans, which should give bond financing some advantage in an environment that predominately relies on bank financing.

For some transactions, the issuance of high-yield bonds may also be a financing option. However, given the usual volume of acquisitions in Austria, high-yield bonds are of minor importance.

A private placement means the non-public issuance of assets (in particular shares and bonds). The purchasers are pre-selected investors and institutions rather than publicly on the open market. Usually, a longer business relationship already exists between the issuer and the purchaser. A private placement is an alternative to an initial public offer (IPO) for a company seeking to raise capital. Private placements have become a common way for start-ups to raise financing, particularly those in the internet and financial technology sectors. 

With regard to private placements, a distinction is made between self-emission (Selbstemission), where the issuer places its securities with the investors itself, and external-emission (Fremdemission), where the issuer makes use of an issuing bank for the issuance.

Under certain circumstances, a private placement omits various administrative expenses as well as information and prospectus obligations that are mandatory for a public placement. For this reason, assets can often not only be sold much more quickly by way of a private placement, but – due to the lower costs – higher returns can also be achieved. By additionally agreeing on subscription options (warrants), which allow shares to be purchased at a later date at a pre-determined price, further profit options can be achieved while virtually excluding risks.

The risks associated with private placements arise in particular from the contractual arrangements. In contrast to public placements, the contract does not have to meet any minimum legal standards and is not subject to governmental review. For this reason, the individual contractual clauses should be subjected to a detailed examination. In particular, the information memorandum often drawn up and used as a basis for the sale also entails a liability risk.

Generally, private placements are far less common in Europe than in the USA and play a minor role in Austria.

Loan notes (Schuldscheine) have become more popular among corporate borrowers in the recent years to cover financing needs. From a legal perspective, loan notes are loans and not securities and cannot be traded on an exchange. Loan notes are usually governed by German law. However, also loan notes do not play a significant role in Austrian acquisition financings/LBOs/MBOs.

Beside real estate financing and securitisations, asset-based financing is not very common in Austria.

Particularly due to the real estate boom in Austria’s major cities, asset-based financing has increased significantly over the past few years. Financing is often made with a floating volume against a fluctuating asset pool. 

The loan market for real estate financing is dominated by domestic and German mortgage lenders. These mortgage lenders may issue bonds. 

In addition to real estate transactions, financing of renewable energy and natural gas assets plays a more important role in the market. Asset-based financing transactions are regularly fully collateralised and have no recourse elements. Furthermore, an increase in securitisation transaction has been recorded in Austria, as this is a suitable way for many banks to clean up their balance sheets.

Agreements between creditor groups, so-called intercreditor agreements, are a common and widespread instrument in corporate financings. An intercreditor agreement typically regulates the ranking relationship between these creditor groups in the distribution of payments and enforcement proceeds from joint collateral.

If there are multi-layered financing instruments (senior loans, second lien, mezzanine, high-yield bonds), it is common to have intercreditor agreements. 

Intercreditor agreements are usually governed by the law governing the underlying finance documents. The binding force of an intercreditor agreement in case of insolvency proceedings is a fundamental issue. 

Contractual Subordination

In the case of lender classes, contractual subordination is very common in international acquisitions or between junior and senior lenders. Austrian statutory or case law does not set out whether it is effective or not. However, for insolvency proceedings, a contractual subordination pursuant to an intercreditor agreement may be effective, if it does not result in any disadvantages for the other lenders. 

Structural Subordination

Structural subordination is regularly used if, eg, different classes in relation to hybrid agreements exist. 

Subordination of Equity/Quasi-equity

Please see Contractual Subordination above.

Sharing Agreements

Provisions providing for the sharing of security are typically found in intercreditor agreements. Attention has to be paid as to whether the security constitutes an accessory (akzessorisch) security interest which is dependent on the secured obligation. Accordingly, accessory security interests granted under Austrian law can only be validly granted to and maintained for the benefit of the creditor of the secured obligation. Thus, in most cases a separate parallel debt structure is established in the intercreditor agreement, which is not governed by Austrian law and under which a security agent is the holder of the parallel debt owed by each debtor. 

Thus, an additional feature of intercreditor agreements that has developed in the market and which is worth noting is that not only is the security in rem governed by the rules of the intercreditor agreements but also guarantees:

  • to ensure equal satisfaction of all secured creditors; and
  • to prevent the enforcement of guarantees, in particular by single bondholders, from interfering with an orderly workout and giving them a holdout potential.

If companies fall into financial difficulties and have to rearrange their debt financing through secured loans and secured bonds, it is common that loans and bonds are secured on a pari passu basis (as opposed to the bank/bond financings in the case of LBOs where the loan element is in most cases senior to the bonds) and, as a consequence, voting arrangements between bank lenders and bondholders have been discussed in depth and “one dollar, one vote‟ has become the commonly chosen structure.

In intercreditor agreements, hedge counterparties do not usually play a significant role. Typically, there are no provisions between creditors in this respect. Interest hedging is often provided by the lenders themselves. 

Security Overview

In Austria, there are two general groups of collateral that may be used to secure lending obligations: personal collateral and in rem collateral.

The following types of personal collateral for securing lending obligations are the most common:

  • assumption of debt;
  • sureties;
  • guarantees; and
  • letters of comfort.

Most common types of in rem collateral are:

  • pledge of assets (such as a pledge on movables or a mortgage);
  • transfer of title for security purposes;
  • assignment for security purposes; and
  • retention of title.

In LBO structures, the usual form of security granted is share pledges. In addition, receivables, bank accounts, inventory, real estate as well as intellectual property rights are regularly pledged to the financing bank. There is no “one size fits all” approach, and collateral packages are carefully agreed on a case-by-case basis, taking into account the practical value of the collateral and the cost to create and administer it.

However, the most common type of security granted in the context of acquisition financing transactions is the pledge of shares in limited liability companies or joint stock companies.

Restriction can arise with regard to Austrian capital maintenance rules, which may prohibit the provision of “side-stream” or “upstream” collateral by group companies. 

The infringement of these rules leads to the invalidity of the security, in some cases even towards the lenders. 

Austrian Law Particularities

In Austria, the concept of a general security interest in all assets of the pledgee to the assignee does not exist. As a result of the various different perfection requirements for different types of collateral under Austrian law (eg, entry into the land register for mortgages, book entry for the assignment of claims as an alternative to the notification to the third-party debtors, the notification of the company when pledging shares in an Austrian limited liability company), but also for reasons of enhancing the enforceability of collateral even in case one category of collateral was not perfected or is not enforceable, it is a standard market practice to have a security agreement for each class.

In addition, under Austrian law most collateral is strictly accessory and therefore depends on the validity of the underlying secured obligations. The beneficiary of the collateral must have an independent claim to the secured obligations at all times.

The collateral will cease, if accessory collateral, such as sureties or pledges, would become separate from the underlying secured obligation. Under Austrian law, the concept of a collateral trustee is regularly used. 

Overview of the Common Securities


The pledge of shares in limited liability companies or joint stock companies is the most common form of security granted in Austria. The type of entity from which the shares will be pledged is important, as it will determine the perfection mode for the pledge. The shares of a joint stock corporation are deemed physical assets. Thus, the pledge is perfected by either physical transfer (in the case of bearer shares) or by endorsement of the share certificate and physical transfer (in the case of registered shares). Pledges over shares are perfected by delivering a notice of the pledge to the relevant third party.

Bank accounts

The credit balance of bank accounts is pledged under an account pledge agreement or a financial collateral arrangement under the Austrian law implementation of the Financial Collateral Directive, which will be either a security financial collateral arrangement or a title transfer financial collateral arrangement. 


Security over receivables can be taken by way of a pledge or an assignment of the contractual rights for security purposes (Sicherungszession). The main difference is that, in the case of a pledge, the pledgee is granted the right to preferential satisfaction out of the proceeds, while in the case of an assignment the assignee becomes the "owner" of the claim holding it on trust for the assignor for security with the purpose of obtaining preferential satisfaction. Technically, an account pledge is a pledge of the receivables which the customer has in relation to its bank account. Consequently, the account pledge follows the rules of a pledge over receivables and must be perfected by notifying the bank of the pledge or adequate markings in the pledgor՚s records and accounts (Buchvermerk). Usually trade receivables, insurance receivables or intra group receivables are pledged or assigned. 

Real estate

Real estate includes (i) land, (ii) objects permanently attached to the land (unselbständige Bestandteile), such as buildings, which cannot be subject to separate ownership, except for buildings on third party’s land (Superädifikate), and (iii) accessories that server the economic purpose of the real property. 

A mortgage (Hypothek) is the only form of security for real estate. A mortgage is the right granted to a creditor concerning a debt to obtain preferential satisfaction from real estate if the debtor does not meet its payment obligations. The existence of a mortgage depends on the actual existence of the underlying debt which the mortgage secures.

IP rights

The most common types of intellectual property for which security is granted are:

  • patents;
  • trade marks;
  • designs; and 
  • domains.

It is not possible to transfer copyrights (Urheberrechte) and therefore a transfer of a copyright per se is not used as security. However, it is possible to grant security over rights under a licence to use a copyright. The most common form of security over intellectual property is a pledge.

Moveable assets

The most common form of security over movable assets is a pledge. A less commonly possibility is the transfer of title for security purposes (Sicherungsübereignung). A transfer, however, is not more advantageous than a pledge, as it is subject to the same perfection requirements as a pledge. 

The following forms are required.


There is no specific registration or translation required.

Bank Accounts

It is necessary to consider whether terms and conditions of the bank account are applicable to the business relation with the customer as this may create prior ranking pledges. These pledges will have priority if previously established. Technically, an account pledge is a pledge of the receivables which the customer has in relation to its bank account. Consequently, the account pledge follows the rules of a pledge over receivables and must be perfected by notifying the bank of the pledge or adequate markings in the pledgor’s records and accounts (Buchvermerk).


Fo the pledge or assignment over receivables, no legalisation, registration or translation is required.

Real Estate

To create a mortgage, the mortgagor and the mortgagee must enter into a mortgage deed (Hypothekarurkunde or Pfandurkunde). Further, the registration of the mortgage in the Austrian land register (Grundbuch) and the translation into German are required. To be admissible for registration in the land register, the signatures on that deed must be notarised. 

Movable Assets

Creation of a pledge requires a pledge agreement (Pfandbestellungsvertrag) but there are no formal requirements in relation to the agreement. No legalisation, registration or translation is required. The requirements of perfecting a pledge depend on whether the asset is deemed movable or immovable.

IP Rights

To create a pledge over intellectual property rights, the pledgor and pledgee must enter into a pledge agreement. The pledge must be registered in the following specialised registers in order to perfect the pledge:

  • patent register (Patentregister);
  • trade mark register (Markenregister); or
  • design register (Musterregister).

These registers are kept by the Austrian Patent Office (Österreichisches Patentamt).

Registration of Securities

Under Austrian law only the pledging of real estate and intellectual property requires registration. The registration requirements depend on the type of securities. A pledge (Pfandrecht) and a security assignment (Sicherungszession) are possessory interests and thus cannot be registered.

Generally, the respective perfection steps depend on the asset qualification. A distinction has to be made between movable and immovable assets. No valid security interest will be created, if the necessary perfection steps are not properly met. 

Perfection of Securities


The type of entity (joint stock company or limited liability company) from which the shares will be pledged will determine the perfection mode for the pledge. The shares of a joint stock corporation are deemed physical assets. Thus, the pledge is perfected by either physical transfer (in the case of bearer shares) or by endorsement of the share certificate and physical transfer (in the case of registered shares). Pledges over shares are perfected by delivering a notice of the pledge to the relevant third party.

Bank accounts

In order to perfect the security interest over a bank account, there is a requirement to either set a book-entry (Buchvermerk) or notify the account bank.


To perfect the pledge/assignment over receivables, there is a requirement to either notify the third-party debtor or to set a book-entry (Buchvermerk) in the pledgor’s/assignor’s respective books. Assignment of rights are generally subject to stamp duty in the amount of 0.8 % of the receivable, however, assignments of rights for the securing of credit securities are exempt. 

Real estate

Security over real estate is perfected by registration of the mortgage in the Austrian land register (Grundbuch) after filing an application for registration together with a notarised deed of mortgage with the competent district court (Bezirksgericht). The registration will trigger fees in the amount of 1.2 % of the registered amount. 

Movable assets

In general, perfection requires delivery to the pledgee or its custodian. Alternative methods are available in certain instances, eg, affixing placards identifying the secured party.

IP rights

In order to validly perfect the pledge over IP rights, the pledgor has to either register the pledged rights in the respective public register at the Austrian Patent Office (Österreichisches Patentamt) or, if the IP rights are not registered, set a book-entry (Buchvermerk) in its respective books.

Austrian Capital Maintenance Rules

In general, a company can guarantee or secure the obligations of another group company. However, due to the strict Austrian capital maintenance rules, a company guarantee or security of another group company may violate Austrian capital maintenance rules pursuant to Section 82 of the Austrian Act on Limited Liability Companies (GmbH-Gesetz – GmbHG) and Sections 52 and 65 et seq of the Austrian Stock Corporation Act (Aktiengesetz), in particular the capital maintenance rules (Kapitalerhaltungsvorschriften). The granting of upstream/side-stream loans, facilities, financings, guarantees (including the assumption of joint and several liability) or security interests is subject to limitations. A downstream guarantee or any other security to a subsidiary company is not restricted under Austrian law. The Austrian capital maintenance rules apply to limited liability companies and joint stock companies as well as to certain kind of partnerships, where the only unlimited partner is a limited liability company or joint stock company.

The main purpose of the capital maintenance rules is to guarantee the preservation of the company’s liability fund for the protection of the company’s creditors. Capital maintenance rules are violated if the company՚s assets are distributed to a shareholder or third party in contrary to the mandatory statutory provisions. As a general rule (and subject to some further exemptions), shareholders must not claim more than the net profit (Bilanzgewinn) as evidenced in the latest annual financial statements of the corporation. Any transfer of assets (in the broadest sense, including benefits such as the granting of guarantees or security interests) that exceeds such net profit (as shown in the approved financial statements), and is not based on a proper shareholders’ resolution approving such distribution, is null and void.

A company must ensure that the transaction is in line with the “arms length principle” when entering into a transaction with its shareholders or group companies on the same or on an upper group level, otherwise such transaction could violate the Austrian capital maintenance rules. However, a transaction that is operationally justified (betrieblich gerechtfertigt), meaning the transaction is clearly in the benefit of the company and that would have been concluded with a third party under the same conditions, even though there is an objective imbalance between service and consideration, does not violate Austrian capital maintenance rules.

If a transaction violates Austrian capital maintenance rules, this transaction could be null and void and the company may claim for repayment/restitution. Further, the management might become personally liable to the company for any damage resulting thereof.

Targeted companies are in principle prohibited from financing or providing assistance in the financing of the acquisition of their own shares. Austrian law has strict rules on capital maintenance and therefore generally prohibits the return of equity to shareholders outside arm’s length transactions (Verbot der Einlagenrückgewähr), except for the distribution of the balance sheet profit, in the course of a formal reduction of the registered share capital or for the surplus paid to shareholders following liquidation.

Furthermore, the Stock Corporations Act explicitly states in Section 66a that a targeted company is prohibited from financing or providing assistance in the financing of the acquisition of its own shares or the shares of a parent company.

The articles of association or the by-laws may restrict the creation of security interests. 

Austrian law and conflicts of law rules generally permit the choice of a foreign law as the governing law of a contract, even if the respective contract is to be enforced in Austria. Regulation (EC) No 593/2008 of 17 June 2008 on the law applicable to contractual obligations (Rome I) is applicable in Austria and must be observed in this context. Following this Regulation, Austrian courts will principally recognise the contractual choice of foreign law, subject to certain requirements (eg, actual conflict of laws or the contract relates to a civil and/or commercial matter), and to this extent, Austrian courts have jurisdiction for claims under such a contract. However, some restrictions apply regarding the granting and perfection of security rights, which, depending on the type of security, is in many cases governed by local Austrian law (eg, for pledges over shares in Austrian companies, pledges over security assignments of Austrian law-governed receivables or for the creation of mortgages over real estate properties located in Austria). Hence, it is common market practice that security rights over assets which are located in Austria, including those which are provided by Austrian domiciled transferors or pledgors, have Austrian law-governed security documentation. In cases where there is no actual conflict of law or the contract is solely connected to EU member states, the parties are not allowed to choose the law of a non-member state. Additionally, no choice of law will be recognised by Austrian courts which would violate Austrian ordre public.

In principle, there are two types of guarantees in Austria, as set out below.

  • Surety pursuant to Section 1346 of the Austrian General Civil Code (ABGB), under which the guarantor undertakes to fulfil certain obligations of the debtor if the latter defaults on payment when due. The guarantee is accessory to the underlying legal relationship between the beneficiary as creditor and the debtor. 
  • Abstract guarantee according to Section 880a ABGB, by which the guarantor undertakes to pay on formal demand of the beneficiary (on first demand), without examining the merits of the demand. The guarantor՚s obligation to pay is abstract and therefore independent of the underlying legal relationship between the beneficiary as creditor and the debtor. The guarantor may therefore not raise any objections based on the underlying legal relationship, but may only assert an abuse of rights (Rechtsmissbrauch) by the beneficiary.

Downstream guarantees (or other securities) are not restricted by Austrian law. Stringent limitations apply, however, to upstream and side-stream guarantees provided by corporations (and equivalent entities). As a basic principle, distributions to (direct or indirect) shareholders of a corporation (AG, GmbH, GmbH & Co KG, ie, a limited partnership in which the only unlimited partner is a GmbH) may only be effected under specific circumstances, namely (i) in the form of formal dividend distributions based on a shareholders’ resolution, (ii) in the case of a capital decrease (which also requires a shareholders’ resolution), or (iii) in the form of a distribution of liquidation surplus. In addition, it is recognised that a company and its shareholders may enter into transactions with each other on arm’s length terms and conditions. This requirement entails that the management of the company makes – prior to entering into such a transaction – a comprehensive assessment of a proposed transaction, in particular of the risks involved, and shall only enter into such transactions with its (direct or indirect shareholder or a sister company) if and to the extent that it would enter into the transaction on identical terms and conditions with any unrelated third party. However, the management must not enter into a transaction, if by any such transaction the existence of the company would be threatened. To some extent, Austrian law jurisprudence also accepts specific corporate benefits as an adequate means of justification for granting upstream and side-stream guarantees. Requirements for such corporate benefit are that the corporate benefit must not be disproportionate to the risk and that it must be specific and not only general, such as a general “group benefit”. Austrian case law on these restrictions is based on a case-by-case evaluation and has become increasingly stringent over the last 20 years. In practice, it is advisable to have the management of the company assess the proposed transaction in accordance with the above criteria. Potential consequences of a breach of these Austrian capital maintenance rules include personal liability of the management as well as nullity of the respective transaction. The above principles do not only apply in respect to funds or loans paid by a company but to all benefits granted by such, including guarantees for borrowings.

The granting of guarantees on a commercial basis in Austria qualifies as banking business pursuant to Section 1, paragraph 1, No 8 of the Austrian Banking Act (Bankwesengesetz – BWG). While there is no statutory exemption for group financings, it is recognised that guarantees do not require a banking licence to the extent that they are granted solely for the obligations and liabilities of group companies with a view to achieving a group’s other overriding commercial goals.

In Austria there is no requirement for a guarantee fee. However, the parties commonly agree on the payment of a guarantee fee to the guarantor.

Under the Austrian Equity Substitution Act (Eigenkapitalersatz-Gesetz – EKEG), a lender who is granted extensive rights of control over the borrower, together with decisive influence on the borrower’s business in the loan agreement or any related security document may, for the purposes of the Act, be qualified as a shareholder of the borrower. A loan made by such lender to a borrower which is in a “crisis” is considered as equity subordinated to the claims of all secured and unsecured creditors of such subsidiary. Therefore, the borrower is prohibited to repay the loan to the lending shareholder as long as the crisis subsists. A debtor is considered to be in a crisis if it is in any of the following situations:

  • illiquidity (Zahlungsunfähigkeit) within the meaning of Section 66 of the Austrian Insolvency Act (Insolvenzordnung – IO);
  • over-indebtedness (Überschuldung) within the meaning of Section 67 of the Austrian Insolvency Act; or
  • thin capitalisation (an equity ratio of less than 8% and the fictional debt redemption period longer than 15 years), unless no reorganisation of the debtor is required under the Austrian Reorganisation Act (Unternehmensreorganisationsgesetz).

However, the extending of loans that were initially granted before a crisis was imminent is not considered as equity in order to help with keeping up liquidity of a struggling company to a certain extent.

If contracts are not mutually fulfilled on or before the date insolvency proceedings started, the insolvency administrator can choose between performance or non-performance of the contract. There are special rules for leases and employment contracts. 

Certain transactions can be declared void as regards the creditors where a successful challenge is made by the administrator either by legal challenge or defence under the Insolvency Act. The reasons for voidability are as follows. 

  • Discriminatory intent (Benachteiligungsabsicht) – this applies if the debtor acted with the intent to create a disadvantage for its creditors and the other contracting party either: 
    1. knew of this intent (up to ten years preceding the initiation of insolvency proceedings); or
    2. should have known of this intent (up to two years preceding the initiation of insolvency proceedings). 
  • Squandering of assets (Vermögensverschleuderung) – a transaction can be challenged if it is seen as squandering the company՚s assets. The other party to the transaction must have known or should have known that this was the case (up to one year preceding the initiation of insolvency proceedings).
  • Gifts made by the company (Schenkung) – gifts made by the company can be challenged if made in the two years before the start of insolvency proceedings. 
  • Preferential treatment of creditors (Begünstigungsabsicht) – acts that favour one creditor over another can be set aside if they occurred in the 60 days before insolvency or after the start of insolvency proceedings. 
  • Post-insolvency transaction (Kenntnis der Zahlungsunfähigkeit) – transactions taking place after insolvency can be declared void if the creditor knew or should have known about the insolvency.

Any disposition of a company’s property by the debtor made after bankruptcy proceedings have started is void in proceedings without a debtor-in-possession since in such cases only the administrator is authorised to represent the debtor. In reorganisation proceedings with a debtor-in-possession, the debtor is entitled to carry on ordinary business activities, but needs the approval of the reorganisation administrator for extraordinary business activities. Any impermissible divestment of the debtor’s property must be repaid to the insolvency estate. In case this is impossible, damages must be paid.

If third parties have become incontestably entitled to property which is to be restituted, the person during whose possession the incontestable encumbrance of rights has taken place must pay damages to the insolvency estate in case such person’s acquisition is contestable. In addition, the bona fide transferee of a gratuitous conveyance must provide for a restitution of assets only to the extent such transferee is enriched thereby; provided, however, that where such transferee’s acquisition of ownership also would be contestable in case of a non-gratuitous acquisition, the entirety of the assets that are the subject of the conveyance must be restituted.

Stamp duty is imposed in connection with certain legally defined transactions for which a written contract has been established. 

The Austrian administration՚s understanding of a “written contract” is very broad and covers not only paper contracts but also contracts concluded by electronic mean (eg, electronically signed emails).

Pursuant to the Austrian Stamp Duty Act (Gebührengesetz), Austrian stamp duty applies for certain transactions (eg, the assignments of receivables, sureties, mortgages) if a document is drawn up that is evidencing the transaction as well as an Austrian connection is established. Special care has to be taken in relation to several finance documents commonly used in acquisition financings/LBOs.

Effective since or after 1 January 2011, loan and credit agreements are not subject to Austrian stamp duty. Therefore, a significant potential tax burden and risk has been removed from granting loans to Austrian borrowers.

Thus, a loan agreement itself is not subject to Austrian stamp duty, but it may refer to other agreements which are subject to stamp duty. Certain types of security arrangements (eg, suretyships and assignments) would also be subject to stamp duty if they are either executed in Austria or any other action is taken which establishes an Austrian connection.

An Austrian connection exists either if finance documents are signed or handed over in Austria, or if a document is signed outside of Austria (documentation abroad) and has a personal or factual domestic reference.

Personal domestic reference means that all contracting parties have their domicile/management/place of business in Austria. Factual domestic reference means that if the legal transaction concerns a domestic object or has a domestic place of performance.

A stamp duty may also be triggered by references to any finance documents that contain stampable transactions or refer to stampable transactions in another written document (substitute documentation – Ersatzbeurkundung). The referenced legal transaction become the content of the written document for stamp duty purposes. Therefore, a mere reference in any form (eg, letter, paper, email, fax) is sufficient to trigger that risk.

Care has also to be taken in relation to abstract guarantees and sureties (see also 6.1 Types of Guarantees). While an abstract first demand guarantee (including a waiver of all defences) is not subject to stamp duty, a suretyship or an assumption of debt as co-debtor (accessory personal security), for example, triggers stamp duty.

Debt funding may be subject to Austrian stamp duty as well, if it is structured by way of the acquisition of the loan receivables (on a commercial basis). However, various structuring possibilities are available (such as documentation abroad, ie, execution and permanent safekeeping of transaction documentation, certified copies, outside of Austria and strict avoidance of creating “substitute documentation”) in order to avoid triggering stamp duties in those cases.

Risk Mitigation Measures

Various legally permissible structures exist to avoid triggering stamp duties (or to at least reduce stamp duty risk). The most important avoidance structure regarding finance transactions is to set up documentation abroad (Auslandsbeurkundung) to prevent the existence of an Austrian connection. For this reason, the finance documentation should include a respective stamp duty warning on the cover page, a stamp duty clause that allocates the stamp duty risk to one party and a place of performance clause.

With regard to guarantees there are two possibilities to mitigate the risk of triggering Austrian stamp duty:

  • making sure that the guarantee is an abstract, first-demand guarantee (abstrakter Garantievertrag) pursuant to Section 880a second case of the Austrian Civil Code; and
  • limiting the guaranteed obligations to obligations and liabilities under the loan agreement (as opposed to all finance documents).

The first alternative is generally preferred by the lenders, while the second alternative is preferred by the borrowers.

Penalty Fine

The penalty fine set by the Austrian authorities can go up to 100 % of the amount of the stamp duty, if the Austrian stamp duty is not duly paid.

Generally, neither repayments of principal under loan transactions nor interest payments are subject to withholding tax. Rather, these payments will have to be taken into account for purposes of the (corporate) income tax of the lender. An exception to that rule are interest payments on bank deposits or on other non-securitised receivables against banks and interest payments on publicly offered debt instruments (bonds). In these cases, the Austrian withholding tax rate is 27.5 %, subject to a reduction to 25 % for interest paid to corporations.

However, no withholding tax applies to interest payments made to:

  • foreign resident corporate taxpayers (without a permanent establishment in Austria to which the income is attributable);
  • foreign resident individual taxpayers (without a permanent establishment in Austria) if an automatic exchange of information mechanism is in place between Austria and the jurisdiction of residence of the taxpayer and if they provide a qualifying tax residence certificate; or
  • Austrian corporate taxpayers who provide a qualifying declaration of exemption (Befreiungserklärung).

There are numerous double taxation treaties between Austria and a large number of jurisdictions, which typically provide for withholding tax to be considered as deductible or capable of being refunded, or both. If withholding tax has been withheld, the taxpayer must file a refund application to obtain either a full or partial refund (if only a reduction under a tax treaty is available). Capital gains realised on an alienation of loans or bonds would only be subject to withholding taxation in Austria if an Austrian custodian or paying agent is involved in such alienation. Exemptions apply, such as the ones outlined above.

There are no specific thin-capitalisation rules in Austria. The Austrian tax authorities, in general, accept a debt/equity ratio of 4:1 (even higher in a holding context).

Foreign Direct Investments (FDI)

Foreign direct investment (FDI) is a category of long-term cross-border investment in corporations. Investments in foreign companies only qualify as FDI if a minimum equity share of 10% is acquired. Investments below this threshold are classified either as “portfolio investment” or “other investment”.

In Austria, the new legislation on the screening of foreign direct investment is based on the Federal Act on the Control of Foreign Direct Investments (Bundesgesetz über die Kontrolle von ausländischen Direktinvestitionen). This has been in force since 2020.

The investment screening, based on that legislation, requires that the acquisition of an Austrian company, a part of a company, a shareholding or a majority shareholding in a company by natural or legal persons of third state origin (outside of the EU, the EEA or Switzerland) – under certain conditions – has to be approved.

This FDI screening concerns acquisitions of companies in critical infrastructure sectors explicitly defined by law. These include:

  • energy;
  • telecommunications;
  • information technology;
  • transportation;
  • defence;
  • finance;
  • chemicals;
  • foods;
  • robotics;
  • media; and
  • research and development in the medical sector.

Every non-EEA/non-Swiss investor must report:

  • the acquisition of the whole undertaking;
  • the acquisition of a specific share of voting rights (10% for critical infrastructure or 25%);
  • the acquisition of a controlling interest; or
  • the acquisition of material assets, whereby a determining influence on part of an undertaking is acquired.

Such kind of an acquisition in Austrian companies must be reported to the Ministry of Digital and Economic Affairs and may only be closed after the Ministry has cleared it. A de minimis exception applies to small companies, including start-ups, companies with fewer than ten employees and companies with an annual turnover or net assets of less than EUR2 million. Non-compliance with the above-stated requirements can lead to both criminal and administrative sanctions, within and outside of Austria.

These sanctions can apply with extraterritorial effect – ie, not just for actions within Austria, but also for actions which take place outside of Austria.

Credit Institutions

The decision to acquire or increase a direct/indirect qualifying holding in an Austrian credit institution must be reported to the FMA. A qualifying holding is one that represents 10 % or more of the capital and/or voting rights in the credit institution or which reaches other relevant thresholds (20 %, 30 % or 50 %). These reporting requirements also apply to persons which are acting jointly. In addition, obtaining rights to appoint the (majority of the) management board or other means of providing significant influence over the management of the credit institution are considered as a qualifying holding. The European Central Bank evaluates the acquisition of qualifying holdings in credit institutions to make sure that the proposed acquirer meets certain criteria (reliability, financial soundness, etc). If the requirements are not fulfilled, the acquisition might be prohibited or subjected to certain conditions.

Other Regulated Industries

The acquisition of target companies in other regulated industries may require the prior approval of the competent regulatory body or may be subject to certain reporting requirements.

Listed Targets

For listed targets, the major shareholder reporting requirements apply pursuant to the Austrian Stock Exchange Act 2018 (Börsegesetz 2018). Any person who – directly or indirectly – reaches, exceeds or falls below the thresholds required by law (between 4 % and 90 % or, if included in the target’s articles, between 3 % and 90 %) is obliged to notify the FMA, the Vienna Stock Exchange (Wiener Börse – VSE) and the target company without undue delay but within two trading days the latest.

The Austrian Takeover Act (Übernahmegesetz – ÜbG) also provides for the possibility for the target company to lower the takeover threshold which triggers the reporting obligation. Reporting requirements also apply if certain financial instruments are acquired or sold, or if a person can exercise or influence the exercise of voting rights without being the owner of such financial instruments.

Public Takeovers

Public takeover bids are regulated under the ÜbG, if the target is a joint stock corporation (Aktiengesellschaft) domiciled in Austria and its shares are admitted to trading on the VSE on the regulated market. If the joint stock corporation is incorporated in Austria and the shares are not admitted to trading on the VSE but on a regulated market in another member state of the EU and a public bid is or has to be launched, the Austrian Takeover Commission (Übernahmekommission) is the authority in charge of the public bid. The ÜbG requirements regarding inter alia, the notification of employees, the “control” threshold triggering a mandatory bid, exemptions from the duty to launch a mandatory bid and defensive measures apply.

If a public company is not incorporated in Austria but in another EU member state and its shares are not admitted to trading on a stock exchange at the seat of incorporation but on the VSE (if shares are trading on different exchanges within the EU, the first admission of trading takes place on the VSE), the ÜbG requirements regarding the tender offer content and tender offer proceedings apply.

In Austria, there are no other relevant considerations to be taken into account for the practice of acquisition finance. 

Fellner Wratzfeld & Partners

1010 Wien
Schottenring 12

+43 1 53770 0
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Law and Practice


Fellner Wratzfeld & Partners is one of Austria’s leading business law firms and is based in Vienna. The firm has a team of more than 70 highly qualified legal practitioners and provides legal advice in all major legal areas, including banking and finance, corporate/M&A, real estate, infrastructure and procurement law, reorganisation and restructuring. The firm has also developed an ESG practice covering all financing-related topics, among others. Fellner Wratzfeld & Partners represents Austrian and international private companies as well as clients from the public sector. It regularly advises renowned credit institutions and financial service providers on financing and other projects, including company reorganisations. The firm draws upon substantial experience gained in the financing of complex consortia and continues to be involved in the largest banking and finance cases in Austria.

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