Acquisition Finance 2021 Comparisons

Last Updated May 26, 2021

Contributed By Schoenherr

Law and Practice


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Acquisition financing in Austria is usually arranged, provided and underwritten by international and national credit institutions. Austrian banks are active in acquisition finance for small and medium-sized enterprises (SMEs), which are often family-owned. LBO structures usually include different financing levels and tranches. For high-volume LBO structures, high-yield bonds may sometimes be issued in different layers to reflect different investment levels and profiles; this is particularly the case if Austrian assets are acquired as part of larger multi-jurisdictional acquisitions. Acquisition finance and LBO structures related to major Austrian companies usually involve an international financing syndicate consisting of renowned international credit institutions.

Taking into account the requirement of a banking licence for commercial lending in Austria, structures must be in line with the licensing requirements but also give non-banks such as debt funds access to the Austrian financing market as lenders. This includes, for example, the use of bonds and initial lendings by credit institutions, which are transferred to new lenders outside of Austria after the loan has initially been granted. Due to the strict regulatory requirements in Austria, a case-by-case analysis is essential.

The Austrian M&A market saw some activity in 2020, despite the impact of the COVID-19 pandemic, but at a significantly lower pace and with a considerable decline in transaction numbers. The number of announced majority takeovers fell from 217 to 163, a 25% decrease compared to 2019 (source: BCG Global M&A Report).

In line with the European slowdown on public M&A, the Austrian public M&A market did not see any public offers announced or published during 2020. So far in 2021, there has been one significant takeover offer for a listed real estate company (the takeover offer of SOF-11 Klimt CAI S.à r.l., part of the US Starwood Capital Group, for the shares and convertible bonds of CA Immobilien AG).

COVID-19 heavily impacted the Austrian economy and, as such, also the finance market.

2020 was marked by standstill and covenant reset agreements for almost all asset classes. Overall, debt origination declined, except for real estate financing, which remained stable for residential properties.

The Austrian legislator implemented various sources of relief for struggling borrowers, including tax reliefs, state guaranteed financings and subsidies. Furthermore, insolvency by reason of over-indebtedness was suspended. However, unlike in many other neighbouring jurisdictions, no statutory standstill was introduced for corporates (except for micro-entrepreneurs). Also, legally there are no specific statutory “force majeure” provisions that would entitle a borrower to prevent a material adverse change (MAC) termination by a lender in case of a crisis.

Overall, debt documentation did not change in this respect, except for COVID-19-related provisions (eg, covenant calculations in times of a mandatory closure).

Timing-wise, COVID-19 introduced many burdens, such as difficulties in arranging wet-ink signatures. It was possible to mitigate some of these burdens, which will also provide for relief post-pandemic – for example, it became possible to notarise documents virtually, without the need to be present in front of a notary or even in Austria.

International high-volume acquisition financing transactions are usually governed by English law transaction documents. In view of Brexit, German law (which also played a significant role before Brexit) took on increasing importance in transactions involving Austrian targets, and may more and more establish itself as a second market standard. Small financing transactions are usually governed by Austrian law, based on market standard local/house-style credit agreements as used by the respective banks. Security interests in Austrian assets are usually governed by Austrian law.

The finance documentation used for Austrian finance transactions varies significantly depending on the type of transaction and the parties involved. Whereas internal lending syndicates or high-volume transactions by domestic syndicates are usually documented based on the recommended forms published by the Loan Market Association, smaller domestic transactions are still based on rather short form or "LMA-light" documentation.

Even large mortgage-based asset financings are still implemented on a purely bilateral basis, based on short in-house documentation.

Whereas domestic transactions with local borrowers are predominantly documented in German, there is a constant trend among domestic lenders to choose the English language to enhance syndication flexibility.

English continues to be the primary language used in cross-border transactions.

Opinion roles in Austria follow international standards. Lender counsel usually issues enforceability opinions, while borrower counsel typically opines on capacity.

The main elements of acquisition financing structures are senior facilities for the financing of the purchase price. Multi-tranche senior facilities provide different maturity profiles. Senior loans are commonly used for the required working capital of the target company. In addition, for LBOs, maturity profiles for senior facilities vary in line with international standards.

Senior loan agreements are the most important instrument for the debt financing of acquisitions. On top of senior loans, other financing products are increasingly being used for acquisition financing in Austria, such as mezzanine debt and hybrid instruments (see 3.2 Mezzanine/PIK Loans). As acquisition structures regularly provide for special purpose acquisition vehicles (SPVs), equity financing for the SPV will be required.

Equity kickers may be a favourable option for certain types of investors in LBO and MBO structures. This includes the use of convertible bonds (Wandelanleihen) as a form of exit payment, depending on the valuation of the company or as an option providing for the right to acquire shares of the company for an agreed (and to be amended) conversion price at a certain date.

Alternative forms of financing have increased over recent years and this dynamic is expected to be further enhanced by the COVID-19 crisis, which required lenders to reduce debt capacities for certain borrower and asset classes.

Mezzanine financing is typically seen in real estate finance transactions. Documentation either foresees structural (ie, lending to a holding company which then on-lends) or contractual subordination of the mezzanine tranches. Furthermore, it is possible to grant second ranking security for most Austrian law-governed security interests. However, borrowers usually try to avoid second ranking mortgages due to the unusually high ad valorem registration costs (ie, 1.2% of the debt to be secured).

However, no real market practice yet exists with domestic senior lenders, which is why careful deal structuring and additional time for transaction implementation are needed.

Also, there are generally no legal restrictions under Austrian law on including payment-in-kind (PIK) or pay-as-you-can (PAC) elements in the overall debt remuneration.

Bridge loans are customarily used in Austria for various scenarios, including acquisition financings, LBOs or before bond issuances. Where the timeline for a transaction is unclear or does not allow for full syndication of the loan before closing, the banks involved may underwrite the loan and complete the syndication after the acquisition has been completed. Bridge loans with short maturities are often repaid by the final loan proceeds or from a combination of financings such as loans, bonds, bonded loans (Schuldscheindarlehen) and/or equity.

Bridge loans usually provide for unfavourable terms such as additional fees or coupon step-ups in case of extensions. Such elements are usually implemented in the bridge loan documentation to provide incentives for borrowers to repay/take out such bridge loans as soon as possible. In Austria, several bridge-to-bond loans were granted in 2020 in relation to envisaged bond issuances, as the marketability and timing of corporate bond issuances was unclear in the early months of the COVID-19 pandemic.

Acquisition finance and LBOs involving Austrian companies regularly provide for bond issuances, caused by strict banking licence requirements in Austria, among other factors. Lending activities (the conclusion of money-lending agreements and the extension of monetary loans) are qualified as banking activities pursuant to the Austrian Banking Act (Bankwesengesetz). Secured and unsecured lending is considered a regulated activity in Austria if it is performed commercially. Therefore, an Austrian banking licence or a passported banking licence granted by another EU Member State is required. In light of the strict view taken by the Austrian Financial Market Authority (Finanzmarktaufsichtsbehörde – FMA), even granting a single loan may qualify as commercial activity and, hence, require a banking licence.

Whether a lending business will be considered to be carried out in Austria for the purposes of the Austrian Banking Act may also be difficult to determine. The Austrian Banking Act may already apply if the lending activity is conducted from a place outside of Austria but provides for a certain link to Austria (eg, Austrian debtor, Austrian bank account, contact in Austria, etc). As far as there is a certain Austrian nexus, the risk of the licence requirement exists, but can be mitigated if (in particular bearer) bonds are issued by the borrower and purchased by the lender instead of granting of a loan to the borrower.

The issue and purchase of bonds is not subject to a banking licence. Therefore, several matters provide for bond structures in order to avoid lending-related licence requirements that non-bank lenders may not fulfil. In certain cases, high-yield bonds may also be of relevance. However, given the usual volume of acquisitions in Austria, high-yield bonds only play a role in high-volume deals.

Bonded loans (Schuldscheindarlehen) are popular instruments for Austrian corporate borrowers. They are typically governed by German law and assumed in line with German market standards. However, their role in Austrian acquisition financing/LBOs/MBOs is immaterial. The same applies to private placements of bonds, unless such tailored structure is used to avoid Austrian banking law concerns (see 3.4 Bonds/High-Yield Bonds). In these cases, a private notes placement may be a meaningful option to allow the participation of specialised debt funds that do not have an Austrian banking licence or a banking licence to be passported from another EU member state.

Asset-based financing – for all classes of real estate in particular – has significantly increased over the past year due to a real estate boom predominantly in Vienna (in terms of number of transactions, and also number of developments).

Asset-based financing transactions are usually fully ringfenced (ie, security over all material assets) and do not have recourse elements.

The lending market for real estate financings is heavily reduced to domestic and German mortgage lenders with the ability to issue covered bonds. Other players often cannot compete with the margins offered by these players.

Despite real estate debt transactions, the financing of renewable energy assets (in particular solar and wind power), rolling stock and natural gas stored in some of the larger Austrian gas storage facilities plays a more significant role in the market.

Syndicated loans that include an intercreditor agreement are common types of financing for acquisition financings and LBOs in Austria. The respective intercreditor agreements are usually governed by the applicable law of the underlying loan agreement documentation and follow LMA standards in most cases. The LMA standard documentation is widely adapted to reflect Austrian law specifics with regard to the provision of securities and their enforcement. This includes the strict accessoriness principle (Akzessorietät) in Austria, according to which the legal fate of a security is usually directly dependent on that of the secured claim, and is inseparably linked to such claim.

The concept of security trustees is not recognised under Austrian law. Accessory security interests granted under an Austrian law security document can only be validly granted to, and maintained for the benefit of, the creditor of the total of the secured obligations (in its own name and not on behalf of the lenders). There are no provisions under Austrian law or court rulings with respect to parallel debt structures, but it is a common view that foreign law parallel debt should be recognised in Austria. On the contrary, it is uncertain whether an Austrian law-governed parallel debt may validly be established (even if there is legal writing supporting that position).

For both borrowers and lenders, it is important to set out the terms for the repayment of the principal and the payment of interest and fees. To streamline the process, the parties typically appoint a bank as the so-called agent of the syndicate and agree that only payments made to the agent will be considered as fulfilling the borrower's obligations. However, the repayment of the principal, interest payments and the payment of fees are typically not regulated in Austrian intercreditor agreements but in the loan agreement itself (see above).

Under Austrian law, the binding effect of the intercreditor agreement in the case of insolvency proceedings is rather questionable and has not yet been tested by the courts.

Please see 3.4 Bonds/High-Yield Bonds regarding the use of high-yield bonds in Austrian transactions. If an acquisition financing/LBO includes high-yield bonds, bondholders will participate in the security via the security trustee and the securities provided to the trustee holding a parallel debt claim.

Hedge counterparties do not typically play a significant role and no intercreditor provisions are usually foreseen in this respect, as interest hedging is often provided by the lenders themselves.

Thus, no separate voting or enforcement provisions are stipulated for the hedge counterparty.

However, lenders in certain recent transactions have required debt and hedge commitments to be traded separately. This then would usually require that the respective provisions on the role of the hedge counterparty are included. These are, however, often intentionally omitted for now.

Security Overview

Lenders commonly expect to receive collateral over shares in the main group entities in an LBO structure; asset collateral from all relevant entities over their core assets, such as accounts, receivables, machinery, inventory, real estate and intellectual property rights, is also expected. A case-by-case approach needs to be adopted when agreeing on collateral packages. The security packages for LBO structures are more extensive than for acquisition financings. Nevertheless, in both cases strict Austrian capital maintenance rules might limit or even prevent side-stream or upstream securities being provided by group companies (see 5.4 Restrictions on Upstream Security for further information).

Austrian Law Particularities

Under Austrian law, most securities (including pledges, mortgages, security assignments and sureties) are strictly accessory (akzessorisch) and therefore depend on the validity of the underlying secured obligations. The beneficiary of the security needs to have an independent claim over the secured obligations at all times.

Security trustee concepts are regularly used. In view of the accessory nature of many securities, appropriate contractual arrangements (eg, via a joint creditorship or parallel debt) are required in the main finance documents to ensure that all secured obligations vest (also) in an appointed security trustee. It is not yet court-tested practice to create an independent claim of the security agent (so-called parallel debt). Hence, regularly parallel debt structures governed by non-Austrian laws are used, for which there is court-tested practice in relation to parallel debt. The parallel debt claim is then secured by the pledge, and the lenders/bondholders take benefit from the pledge through the security agent. The security interest ceases to exist upon the discharge of the secured obligation (ie, no release is necessary but is customary).

Secured obligations can secure existing as well as future credit claims, as long as they are sufficiently determined or determinable (ie, reference needs to be made to the creditor, the debtor and the legal basis of a claim).

In general, existing and future assets can serve as collateral as long as each asset can be individually specified or is at least specifiable. However, the in rem security interest will only come into existence once the asset is acquired by the security provider.

Overview of Common Securities

Typically, security packages include guarantees, receivable pledges, share pledges and account pledges.


Security over shares is taken by way of a pledge (Pfandrecht). Statutory transfer restrictions (vinkulierte Geschäftsanteile) may limit/prohibit the creation of security. In addition, care has to be taken in determining the appropriate perfections modus for the pledge, depending on the respective legal form of the company concerned. Pledges of shares in an Austrian limited liability company (Gesellschaft mit beschränkter Haftung) require a different transfer than pledges of bearer shares (Inhaberaktien) or of registered shares (Namensaktien) in joint stock companies (Aktiengesellschaft).


Security over inventory is taken by way of a pledge (Pfandrecht) or, less commonly, a security transfer (Sicherungsübereignung) of the assets. As a matter of practice, creation and perfection may be difficult.

Bank accounts

Security over cash deposits in bank accounts is taken by way of a pledge (Pfandrecht) or a financial collateral arrangement (Finanzsicherheit) 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 is taken by way of a pledge (Pfandrecht) or a security assignment (Sicherungszession) of the contractual rights. For credit claims, a financial collateral arrangement (Finanzsicherheit) will also be an option. A typical security package includes trade receivables, insurance receivables, intra-group receivables and receivables under transaction documents. For receivables and rights under insurance policies, restriction on pay-out to the insured (Vinkulierung) is a common form of quasi-security.

IP rights

Security over intellectual property is taken by way of a pledge (Pfandrecht) or, less commonly, a security transfer (Sicherungsübereignung) of the intellectual property rights.

Real estate

Security over real estate is taken by way of a mortgage (Hypothek), which can secure either a specific loan receivable (Festbetragshypothek) or aggregate receivables, typically resulting from an ongoing relationship with the borrower (Höchstbetragshypothek). Mortgages often do not serve as collateral in a standard corporate secured lending due to the significant ad valorem registration costs (1.2%) that are triggered in the course of perfection.

Movable assets

Security over movable assets such as trucks, trains, ships, aircraft, machinery, etc, is taken by way of a pledge (Pfandrecht) or, less commonly, a security transfer (Sicherungsübereignung) of the assets. As a matter of practice, creation and perfection may be difficult.


Guarantees and comfort letters, set-off and netting arrangements, as well as title retention arrangements and, specifically with respect to rights under insurance policies, restriction on pay-out to the insured (Vinkulierung) are commonly used as quasi-security in Austria.

The form requirements are as follows:

  • shares – legalisation of voting proxy and transfer power of attorney (particularly regarding Austrian limited liability companies – GmbH); no registration or translation required;
  • inventory – no legalisation, registration or translation is required;
  • bank accounts – no legalisation, registration or translation required;
  • receivables – no legalisation, registration or translation is required;
  • IP rights – legalisation, registration with the respective register and translation are required;
  • real estate – legalisation, registration of the mortgage with the Austrian land register (Grundbuch) and translation into German are required; and
  • movable assets – no legalisation, registration or translation is required.

Registration and Perfection of Securities

Under Austrian law, both a pledge (Pfandrecht) and a security assignment (Sicherungszession) are possessory interests. Except for real estate and certain intellectual property rights, such interests cannot be registered.

Perfection steps depend, inter alia, on whether the asset is qualified as movable or immovable. If perfection steps are not properly effected, no valid security interest will be created and the lender will be an unsecured creditor.

Perfection Steps


Security interests in shares in limited liability companies (Gesellschaften mit beschränkter Haftung) and partnership interests are perfected by notice to the pledged company/partnership; no acknowledgement of the notification is legally required. Perfection by entry in the commercial/accounting books (Buchvermerk) of the security provider is also possible.


Delivery of inventory to the secured party is usually not practicable/feasible and certain alternative methods are implemented, such as the appointing of a custodian, restricting access of the pledgor to the inventory or the affixing of placards identifying the secured party. As a matter of practice, these often prove difficult to achieve or can be easily compromised by the conduct of the parties, so security over inventory often does not provide a robust security interest.

Bank accounts

Security interests in bank accounts are perfected by notification to the account bank; no acknowledgement of the notification is legally required, but rather is contractually needed for the waiver of bank liens of the account bank. Perfection by entry in the commercial/accounting books and in every list of outstanding receivables (Buchvermerk) – ie, the debtor accounts (Debitorenbuchhaltung) and the open accounts (offene Posten Liste) of the security provider – is also possible.


Security interests in receivables are perfected by notification to third party debtors; no acknowledgement of the notification is legally required. Perfection by entry in the commercial/accounting books and in every list of outstanding receivables (Buchvermerk) – ie, the debtor accounts (Debitorenbuchhaltung) and the open accounts (offene Posten Liste) of the security provider – is also possible.

IP rights

Pledges over patents are perfected upon entry of the pledge into the patent register (Patentregister). For other registered intellectual property rights (such as trade marks), registry in the respective register is usually pursued. There is, however, no established practice and no case law available regarding perfection steps for intellectual property rights other than patents.

Real estate

Registration of the mortgage with the competent Austrian land register (Grundbuch) is required.

Movable assets

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

Austrian Capital Maintenance Rules

Under the Austrian capital maintenance rules, 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. 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) provide for a prohibition on the direct or indirect repayment of share capital to shareholders. All assets are protected; not only the registered share capital must be maintained. This prohibition also applies to partnerships with no natural person as general partner, such as a limited partnership in the form of a GmbH & Co KG.

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. This nullity may also affect a third party lender if it knew or should have known (gross negligence) that the respective transaction is not permitted pursuant to the Austrian capital maintenance rules. In view of the ample jurisprudence of the Austrian Supreme Court in that respect, any lender should be aware of those limitations and that the standard of care is high.

Third Party Test, Operational Needs

The Austrian Supreme Court has held that the issuance of a guarantee or the granting of a security interest for a (direct or indirect) shareholder's or sister company's obligation constitutes a violation of the prohibition on the repayment of share capital and would therefore be null and void, unless:

  • the guarantee/security interest would have been granted to a third party under the same terms and conditions (the third party test – Fremdvergleich); or
  • the granting of the guarantee or security interest is clearly justified by the operational needs of the company providing such guarantee/security interest (betrieblich gerechtfertigt).

In addition, the risk related to the issuance of such guarantee or the granting of such a security interest must be justifiable (das Risiko muss vertretbar sein) for the guarantor/grantor of the security interest. This means that the obligor(s) for which the guarantee/security interest was provided must, in the reasonable opinion of the management of the guarantor/security provider, at all times for as long as the guarantee/security interest is outstanding be in the position to generate sufficient funds to repay the obligations secured by the guarantee/the security interest. However, the assumption of liabilities for a (direct or indirect) shareholder's or sister company's obligation that endangers the guarantor's/security provider's existence (existenzgefährdende Haftungsübernahmen) would never be permitted.

Limitation Language

Guarantees/security agreements often stipulate that, in the case of a violation of the Austrian capital maintenance rules, the guaranteed and/or secured obligations shall be deemed substituted by obligations of a reduced amount, which are in accordance with the Austrian capital maintenance rules (so-called limitation language). The effect of these limitations could be that the guaranteed or secured amounts are reduced to zero. No case law is available to confirm and it is thus not certain whether such limitation language would be valid and enforceable under Austrian law and achieve the desired effect of legally preserving the guarantees and security interests to the extent possible, or whether the guarantees and/or security interests could be deemed null and void in their entirety.

Under the Austrian Stock Corporation Act (Aktiengesetz), the granting of a loan or security by a stock corporation to another party for the purpose of acquiring shares in said stock corporation or its parent is prohibited financial assistance. No "whitewash" procedure is available.

Please see 5.4 Restrictions on Upstream Security.

In addition, articles of association or by-laws may limit/prohibit the creation of security interests.


A secured party is entitled to enforce security upon:

  • the non-payment of any of the secured obligations when due (Pfandreife), whether at stated maturity or following acceleration (Fälligstellung);
  • the dispatch of an enforcement notice by the secured party; and
  • the lapse of seven (in the case of entrepreneurs) or 30 (in the case of consumers) calendar days following the receipt of such enforcement notice.

In some instances, the seven-day notice period can be revoked by agreement and, if so agreed, does not apply to financial collateral agreements.

Enforcement Process

Security interests can be enforced in court by way of attachment proceedings and/or sequestration, or out of court by way of private sale or public auction. Except for pledges over movable and tangible assets, out-of-court enforcement usually needs to be contractually stipulated. Unless the market value of the collateral assets is established by a stock exchange price, it will need to be determined by an appraiser before any private sale of the collateral may take place.

Other methods/procedures are permitted for financial collateral within the scope of the Austrian law implementation of the Financial Collateral Directive.

Restrictions to Enforcement

An agreement that the secured party may retain the collateral without an obligation to transfer any excess enforcement proceeds to the security provider is prohibited due to debtor protection. Similarly, the stipulation of a predetermined fixed realisation price and realisation at the discretion of the secured party are prohibited and would result in the invalidity of the respective clause.


A validly perfected security interest should not be affected by the opening of insolvency proceedings. However, the assets of an insolvent debtor that are essential for the continuation of the debtor's business cannot be enforced for six months from the opening of insolvency proceedings. Furthermore, default interest (Verzugszinsen) accruing during a period of six months from the opening of insolvency proceedings will not be effectively secured by the pledges.

Enforcement steps will depend on whether the collateral assets are in the possession of the secured party or the insolvency administrator/insolvent party. If the secured party is already in possession of the collateral assets, the enforcement procedure remains as stated above. If the insolvency administrator is in possession of the collateral assets, enforcement is effected by the insolvency administrator, who commonly enforces in court but could also opt for out-of-court enforcement.

Austrian law recognises two types of guarantee.

  • Surety (Bürgschaft) – the guarantor undertakes to pay certain obligations of the debtor in the event of the latter's default to effect payment when due (section 1346 of the Austrian Civil Code (Allgemeines bürgerliches Gesetzbuch – ABGB)). A surety is accessory (akzessorisch) to the underlying legal relationship between the beneficiary as creditor and the debtor. It is dependent on the debtor's default and the valid and existing underlying debtor obligation. The guarantor can raise objections from the underlying legal relationship.
  • Abstract guarantee (Garantie) – the guarantor undertakes to pay upon a beneficiary's formal request (upon first demand) without reviewing the merits of the request (section 880a of the Austrian Civil Code). The guarantor's payment obligation is abstract and therefore independent from the underlying legal relationship between the beneficiary as creditor and the debtor. Thus, the guarantor cannot raise objections from the underlying legal relationship and may only allege an abuse of rights by the beneficiary.

Sureties and abstract guarantees are treated differently under the Austrian Stamp Duty Act (Gebührengesetz); see 8.1 Stamp Taxes for more details.

The granting of guarantees on a commercial basis in Austria qualifies as banking business pursuant to section 1 (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 they are granted solely for the obligations and liabilities of group companies with a view to achieving a group's overriding other commercial goals.

In addition, please refer to 5.4 Restrictions on Upstream Security and 5.6 Other Restrictions.

To enhance the robustness of the guarantee, the parties often agree on the payment of a guarantee fee to the guarantor.

Under the Austrian Equity Capital Replacement Act (Eigenkapitalersatz-Gesetz – EKEG), a loan provided by a major shareholder to a borrower during the status of a crisis (Krise) of the borrower is considered as substituting equity. As a consequence, the borrower is prohibited to repay the loan to the lending shareholder as long as the crisis subsists.

The lender is considered a major shareholder if it is a direct or indirect shareholder of the borrower, holding 25% or more of the share capital of the borrower. Furthermore, if the lender has extensive control of the borrower or has entered into any formal or informal arrangement to become a direct or indirect shareholder (in connection with granting a loan) of the borrower, such lender will be considered a major shareholder.

A debtor is considered to be in a crisis if it is in a situation of:

  • 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).

See 7.2 Claw-Back Risk for more details on insolvency.

As a general rule, the provisions of the EKEG only apply if a loan was granted during the borrower's status of a crisis and not if a crisis occurred at a later point in time. Nevertheless, a case-by-case assessment is advisable as certain types of amendments of existing debt might qualify as a new loan, depending on the structure used.

In insolvency proceedings, the insolvency administrator can void and reverse legal actions and legal transactions concerning the debtor's assets that have taken place within certain suspect periods prior to the opening of insolvency proceedings.

General Requirements

The general requirements for avoidance under the Austrian Insolvency Act are as follows:

  • the avoidance must result in an increase of the insolvent's estate (Befriedigungstauglichkeit);
  • the challenged legal action or challenged legal transaction must have caused direct or indirect discrimination to the other creditors (Gläubigerbenachteiligung); and
  • the avoidance claim must be filed by the insolvency administrator within one year after the opening of the insolvency proceedings; the insolvency administrator and the relevant creditor may agree to extend such period for three months.

Grounds for Avoidance

The grounds for avoidance under the Austrian Insolvency Act are as follows:

  • avoidance due to intent to discriminate (Anfechtung wegen Benachteiligungsabsicht);
  • avoidance due to squandering of assets (Anfechtung wegen Vermögensverschleuderung);
  • avoidance of dispositions with no considerations and analogous transactions (Anfechtung unentgeltlicher Verfügungen und ihnen gleichgestellter Verfügungen);
  • avoidance due to preferential treatment (Anfechtung wegen Begünstigung); or
  • avoidance due to knowledge of insolvency (Anfechtung wegen Kenntnis der Zahlungsunfähigkeit).

Insolvency in this context means illiquidity (Zahlungsunfähigkeit) or over-indebtedness in terms of insolvency law (insolvenzrechtliche Überschuldung). A debtor is considered to be illiquid (zahlungsunfähig) if it is unable to pay its debts in due time (ie, when they fall due), and is not in a position to acquire the necessary funds to satisfy those due liabilities (ie, liabilities that are due at that very point in time) within a reasonable period of time. The debtor company is considered to be over-indebted in terms of insolvency law if its liabilities exceed its assets and the company has a negative prospect (negative Fortbestehensprognose).

Pursuant to the Austrian Stamp Duty Act (Gebührengesetz), Austrian stamp duty applies to certain transactions (eg, the assignments of receivables, sureties, mortgages) if a document is drawn up evidencing the transaction and an Austrian nexus exists. Care has to be taken in relation to several finance documents commonly used in acquisition financings/LBOs.

A facility agreement as such is not subject to stamp duty but it may refer to other agreements that are subject to stamp duty. The document referred to forms part of the (in this case) facility agreement for stamp duty purposes. As a result, the execution of a finance document within Austria or any other action that establishes an Austrian nexus may trigger Austrian stamp duty (if, for example, the finance document contains a stampable guarantee/surety).

An Austrian nexus exists 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. A personal domestic reference means that all contracting parties have their domicile/management/place of business in Austria, while a factual domestic reference exists if the legal transaction concerns a domestic object or has a domestic place of performance. References to any finance documents that contain stampable transactions or make reference to stampable transactions in another written document (in particular, by naming the parties and the stamp duty sensitive legal transaction) may also trigger stamp duty (substitute documentation – Ersatzbeurkundung). Referenced legal transactions thus become the content of the written document for stamp duty purposes. A mere reference in any form (eg, letter, paper, e-mail, fax) is sufficient to trigger that risk.

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

Risk Mitigation Measures

In order to avoid triggering stamp duty (or to at least reduce stamp duty risk), legally permissible avoidance mechanisms exist. The most important avoidance mechanism regarding finance transactions is to avoid an Austrian nexus by utilising documentation abroad (Auslandsbeurkundung). 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.

In relation to guarantees, there are two ways to mitigate the risk of triggering Austrian stamp duty:

  • by 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
  • by limiting the guaranteed obligations to obligations and liabilities under the facility agreement (as opposed to all finance documents).

The first alternative is generally preferred for lenders, while the second is preferable for obligors.

Penalty Fine

If stamp duty is not duly paid, the tax authorities may impose a penalty of up to 100% of the amount of the stamp duty.

In general, interest paid by an Austrian borrower to an Austrian or foreign lender is generally not subject to withholding tax deduction in Austria, except for 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).

Tax treaties may provide for further exemptions from or reductions on withholding tax on interest. 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 is no applicable information on thin-capitalisation rules in Austria.

Foreign Direct Investments (FDI)

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) at a national level, which has been in force since 2020. Investment screening requires an authorisation for the acquisition of an Austrian undertaking, a part of it, or a share or controlling interest in it by natural persons or legal entities of third state origin (outside of the EU, the European Economic Area or Switzerland), under certain conditions.

This FDI screening only concerns acquisitions of undertakings in critical infrastructure sectors clearly defined by law, which include the following:

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

Any non-European Economic Area/non-Swiss investors must notify the following:

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

Such acquisition in Austrian companies must be notified to the Minister of Digital and Economic Affairs, and may close only 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 notification requirement or the closing prohibition can trigger both criminal and administrative sanctions, both within and outside of Austria. Such sanctions can be applied with extraterritorial effect – ie, not only for actions within Austria, but also for actions that take place entirely outside of Austria.

Credit Institutions

The decision to acquire or increase a direct/indirect qualifying holding in an Austrian credit institution has to be notified 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 that reaches other relevant thresholds (20%, 30% or 50%). Notification requirements also apply to persons acting in concert. Obtaining rights to appoint the (majority of) the management board or other means of providing significant influence over the management of the credit institution is also considered a qualifying holding. The European Central Bank assesses the acquisition of qualifying holdings in credit institutions to ensure 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 notification requirements.

Listed Targets

Major shareholder notification requirements pursuant to the Austrian Stock Exchange Act 2018 (Börsegesetz 2018) apply for listed targets. Any person who – directly or indirectly – reaches, exceeds or falls below the thresholds prescribed 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 at the latest within two trading days.

The Austrian Takeover Act (Übernahmegesetz – ÜbG) also provides for the possibility of the target company to lower the takeover threshold that triggers the notification obligations. Notification requirements also apply if certain financial instruments are acquired or sold, or if the person is able to exercise or influence the exercise of voting rights without being the owner of such instruments.

Public Takeovers

Public takeover bids are regulated under the ÜbG, provided that the target is a joint stock corporation (Aktiengesellschaft) based 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 but 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 and the ÜbG provisions 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 provisions regarding the tender offer content and tender offer proceedings apply.

Offer Types

Austrian law recognises mandatory offers, voluntary offers and voluntary offers aimed at control:

  • mandatory offers are triggered if a controlling shareholding (shareholding of 30% or higher) is acquired; a mandatory offer is subject to minimum pricing rules, must not be made conditional (except for legal conditions like regulatory approvals) and requires a cash offer, but can also have a paper alternative;
  • voluntary offers (ie, offers that do not lead to a controlling shareholding or are launched by an already controlling shareholder) have no restriction in pricing, the consideration may be in cash or securities, and the offer may be subject to justified conditions including minimum or maximum acceptance thresholds of shares which the bidder is willing to acquire; and
  • voluntary offers aimed at control are triggered if a non-controlling shareholder (ie, with a shareholding of less than 30%) makes an offer aimed at control; such offers are subject to the rules on mandatory bids, particularly on cash offers and minimum price.


The bidder must disclose the valuation methods used for the determination of the consideration and information regarding its liquidity in the offer document. Furthermore, the bidder is obliged to appoint an independent expert to issue a separate report on the completeness of the offer and the correctness of the valuation methods (outlining the valuation parameters in greater detail), and to confirm in the report that the bidder can finance the offer. Accordingly, the bidder needs to demonstrate that sufficient financing for the complete cash consideration offered is available to it.

There are no further considerations that are important to acquisition finance practice in Austria.

Schoenherr Attorneys at Law

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Law and Practice in Austria


Schoenherr is a leading full-service law firm in Central Europe. Operating in a rapidly evolving environment, it is a dynamic and innovative firm with an effective blend of experienced lawyers and young talent. As one of the first international law firms to move into CEE/SEE, Schoenherr has grown to be one of the largest firms in the region, with 15 offices and several country desks. Its comprehensive coverage of the region means the firm can offer solutions that perfectly fit the given industry, jurisdiction and company.