The principal forms of corporate/business organisations in Austria are described below.
Limited Liability Company (Gesellschaft mit beschränkter Haftung (GmbH))
The limited liability company (GmbH) is one of the most popular forms of business organisations in Austria. It can be established by one or more individuals as well as by legal entities, resident or non-resident, Austrian or foreign citizens. Shareholder liabilities are restricted to their subscribed share capital. Generally, the minimum share capital of a GmbH is EUR35,000.
The capital contribution of each shareholder must be at least EUR70; non-cash contributions are also possible. Each shareholder can only hold one share in a GmbH.
A GmbH is legally established when it is registered with the companies register (Firmenbuch), a procedure which primarily requires the preceding notarisation of the articles of association (Gesellschaftsvertrag).
At least one managing director is needed and is appointed by the shareholders.
Under certain circumstances, a supervisory board consisting of at least three board members must also be appointed (eg, if the share capital exceeds EUR70,000 and there are more than 50 shareholders, if the average number of employees exceeds 300, etc).
A supervisory board may also be established voluntarily.
Joint-Stock Corporation (Aktiengesellschaft)
A joint-stock corporation (Aktiengesellschaft (AG)) can be established by one or more shareholders. The minimum share capital is EUR70,000. Contributions in kind are also possible. Shareholders may be individuals or companies. The liability is restricted to the equity capital subscribed by each member. The AG comes into legal existence at the time of its registration in the companies register. The shares of an AG may be listed on a stock exchange. The share capital can be divided either in par-value or non-par-value shares. Each par-value share must have at least a nominal value of EUR1 or a multiple of it. The structure of an AG consists of an executive board (Vorstand), appointed by a non-executive, separate supervisory board (Aufsichtsrat), whose main role is to supervise the executive board. The supervisory board is generally elected by the shareholders' meeting (Hauptversammlung). The AG's employees have the right to delegate their members to the supervisory board (generally a third of the supervisory board's members) due to co-determination rights.
Societas Europaea (SE)
A so-called 'European Company' or 'Societas Europaea' (SE) is a type of joint-stock corporation regulated by EU law. The minimum capital of an SE is EUR120,000. The organisational structure is more flexible than that of an Austrian AG, as the board can be organised following a single-tier or a two-tier system. The shares of an SE may be listed on a stock exchange.
An SE is incorporated in one EU member state and may have branches in other member states. The fact that an SE can operate more easily under a single legal entity facilitates cross-border transactions; the ability to move freely within the EU also has the benefit of permitting companies to move their headquarters with a minimum of formalities.
A partnership (Personengesellschaft) can be established by at least two parties agreeing on a certain legal objective. In general, the partnership agreement does not need to be in written or notarised form, but written contracts are common. There are different types of partnerships, as follows.
General partnership (OG)
A general partnership can be established for any legal purpose by at least two shareholders, individuals or legal entities. The shareholders are personally, directly and jointly liable without limitation for any debts of the company, extending to their entire private assets. The OG must be registered in the companies register to be established. Every shareholder is individually authorised to manage and represent the OG (except as agreed otherwise between the shareholders).
Limited partnership (KG)
A limited partnership consists of at least two partners, at least one limited partner (Kommanditist) and at least one general partner (Komplementär). The general partner has unlimited liability for the partnership's debts like a shareholder of an OG, whereas the limited partner is liable only up to their contractually agreed amount of liability which is registered in the companies register (Haftsumme). The power of representation and management of the KG only applies to the general partner(s), whereas the limited partner is generally excluded from the management of the partnership.
A quite common legal form of an Austrian business organisation is a hybrid between a limited partnership and a private limited company, the so-called 'GmbH & Co KG', whereby the general partner is a limited liability company (GmbH).
Civil-Law partnership (GesbR)
A civil-law partnership can be founded between two or more shareholders. In practice they are often used for single-project joint ventures. The GesbR has no separate legal entity and is not registered in the companies register. A GesbR that exceeds a yearly turnover of EUR700,000 in two subsequent fiscal years or EUR1 million in a single fiscal year must be registered in the companies register as a general partnership or a limited partnership.
Sole Proprietorship (Einzelunternehmer)
Sole proprietorship is the easiest way to establish a business and the most common legal form in Austria. Approximately 70-80 % of all businesses in Austria are sole proprietorships.
A sole proprietor is a natural person who operates the business in their own name and account (with full personal liability). Any person holding Austrian, Swiss or EEA state citizenship can create a sole proprietorship. Persons from other (non-EEA) countries will need individual permission to conduct trade in Austria.
Branch Office (Zweigniederlassung)
A non-resident business organisation can do business in Austria either through a local subsidiary (GmbH or AG) or through a branch office. Austrian branch offices of foreign legal entities are required to register with the Austrian companies register. Evidence of the existence of the foreign legal entity must be provided by means of an official document.
In contrast to a subsidiary there are no capital requirements for a branch office (except in certain sectors, like banking or insurance).
An Austrian branch office has no separate legal personality, liability or share capital. Therefore, the activities of branch offices are not separated from the activities of its corporate headquarters, which remains fully liable for the debts caused by the branch.
Companies with a registered office outside the EU/EEA (European Economic Area) need to appoint a 'local representative' for their Austrian branch.
Unless otherwise stated, the term 'company' refers to limited liability companies, joint-stock corporations as well as SEs, as these companies are the most relevant to corporate governance.
The principal sources of corporate governance requirements for companies in Austria are described below.
Regulations on the internal organisation of the company, corporate structure, duties and liabilities of management board members and supervisory boards are governed by:
Further relevant legislation includes
Listed companies are also subject to:
Company's Constitutional Documents
The articles of association as well as the bylaws for the management board and the supervisory board also contain regulations on corporate governance.
Austrian Corporate Governance Code 2002 (as last revised in January 2018)
The Austrian Corporate Governance Code supplements the statutory framework as outlined above, providing Austrian corporations with a framework for the management and control of enterprises. It covers the standards of good corporate management common in international business practice as well as the most important provisions of Austrian corporate law relevant in this context.
It aims to establish a system of management and control of companies and groups that is accountable and is geared to creating sustainable, long-term value.
While the Code is addressed primarily to Austrian listed companies, it is also recommended that companies not listed on a stock exchange follow it to the extent that the rules are applicable.
The Code is based on the provisions of Austrian corporation law, securities law and capital markets law, the EU recommendations on the tasks of supervisory board members and on the remuneration of directors, as well as on the principles set out in the OECD Principles of Corporate Governance.
Companies voluntarily undertake to adhere to the principles set out in the Austrian Corporate Governance Code.
All Austrian listed companies are therefore called upon to make a public declaration of their commitment to the Code. A declaration of commitment to the Austrian Corporate Governance Code is mandatory for Austrian companies that want to be admitted to the Prime Market of the Vienna Stock Exchange.
Companies that are subject to the company law of another EU member state or EEA member state and are listed on the Vienna Stock Exchange are called on to commit themselves to adhere to a corporate governance code recognised in this economic area and to publish this commitment, including a reference to the code complied with, on their websites. Companies that are subject to the company law of a country that is not a member of the EU or EEA and are listed on the Vienna Stock Exchange are called on to commit themselves to comply with the Austrian Corporate Governance Code. The non-mandatory L rules of the Code (see below) are in this case interpreted as C rules.
Notes to the Code
In addition to the most important statutory requirements under Austrian law, the Code also contains rules which are considered common international practice. Non-compliance with these rules must be explained and the reasons stated. The Code also contains rules that go beyond these requirements and should be applied on a voluntary basis.
The Code defines the following categories of rules:
In addition, relevant case law also forms part of the regulatory framework relating to corporate governance and directors' duties.
See 1.2 Sources of Corporate Governance Requirements, above.
As to specific corporate governance requirements for listed companies, see sections 3-7, below.
There are no other key corporate governance rules or requirements to be drawn out in Austria over and above those issues addressed below.
The Shareholders' Rights Directive (EU) 2017/828 of 17 May 2017 (EU Official Journal L-132/1) ('SRD II'), aiming at "the encouragement of long-term shareholder engagement", is the key topical issue – or key recent development – in relation to corporate governance in Austria.
This objective is to be achieved by enhancing transparency and the investor's influence on processes in the company.
The SRD II essentially comprises measures in the following four areas:
The deadline for implementing the SRD II into national law is 10 June 2019. It will lead to changes in Austrian law and the Austrian Corporate Governance Code.
Limited Liability Company
The principal bodies involved in the governance and management of a limited liability company are the managing director(s) (Geschäftsführer) and the general shareholders' assembly (Generalversammlung). Under certain circumstances, a supervisory board (Aufsichtsrat) must be established (see 1.1 Forms of Corporate/Business Organisations, above).
The principal bodies involved in the governance and management of a joint-stock corporation are the management board (Vorstand), the supervisory board (Aufsichtsrat) and the GSM (Hauptversammlung).
Regarding the organisation of an SE, a choice can be made between a dualistic and a monistic system. Common to both systems is the GSM as the body responsible for specific matters set out in the legal provisions. Such competences essentially correspond to the competences of the GSM of a joint-stock corporation. In the monistic system, there is only one administrative body. The dualistic system largely follows the model of the joint-stock corporation and consists of a management body and a supervisory body.
Limited Liability Company
A limited liability company is represented by its managing directors. In addition to representing the company (externally), the managing directors are also responsible for internal management, ie for taking measures of an organisational, commercial, technical and personnel nature which are necessary to fulfil the purpose of the company. The managing directors are obliged to comply with restrictions in their activity set out by the articles of association or shareholder resolutions (such as rules of procedure).
The general shareholders' assembly is the highest decision-making body of the limited liability company and is formed by all shareholders. It is responsible for all matters which are not removed from its competence by law or the articles of association or which fall within the competence of another body. Certain items require a resolution by the shareholder(s), such as the approval of the annual financial statements, the decision whether to grant proxy (Prokura), the assertion of compensation claims against the managing directors or the approval of major investments in a certain amount.
If a supervisory board is to be set up or has been set up voluntarily, it has the task of monitoring the management with regard to legality, appropriateness and economic efficiency. Certain transactions listed in the law may only be carried out with the consent of the supervisory board.
A joint-stock corporation is managed by a management board without instructions and under its own responsibility in such a way as is required for the benefit of the company, considering the interests of shareholders and employees, creditors and the public interest. The management board is the decision-making body of the joint-stock corporation and acts without instructions from the shareholders. The management board is responsible for the implementation of the decisions it makes and takes the measures to secure compliance with any laws of relevance to the company. In addition to management, the management board is responsible for representing the joint-stock corporation externally.
The management board is appointed by a supervisory board, whose main task is to monitor the management with regard to legality, appropriateness and economic efficiency. While the supervisory board may not issue any instructions to the management board, the management board must obtain its approval for certain management measures.
In addition, certain transactions require the approval of the GSM (eg mergers, transfer of the company's entire assets, agreements on a profit pooling arrangement, implementation of certain structural measures). In such cases, the approval of the GSM is required for the transaction to be effective. Without approval, such agreements are invalid.
Managing Directors of a Limited Liability Company
If more than one managing director is appointed, the managing directors manage the business of the limited liability company jointly, so that no actions pertaining to the management can be carried out by any one managing director on their own. According to the legal rule, unanimous resolutions are required. The articles of association may – and in practice mostly do – provide for a different management competence. Detailed provisions on the management of the company may also be set out in the bylaws for the managing directors.
General Shareholders' Assembly of a Limited Liability Company
Shareholders of a limited liability company can pass resolutions either by resolution in the general shareholders' assembly or by resolution outside the general shareholders' assembly, for example in the form of a written circular resolution. Certain matters require the passing of a resolution in the general shareholders' assembly, such as all resolutions amending the articles of association. Resolutions will be passed by a simple majority of the votes cast, unless the law or the articles of association provide otherwise. Certain resolutions require a majority of three quarters.
Management Board of a Joint-Stock Corporation
If more than one member of the management board is appointed, the members of the management board manage the business of the joint-stock corporation jointly, so that no actions belonging to the management can be carried out by a single member of the management board on their own. The articles of association may provide for a different management competence. The law does not provide for any provisions on the meetings of the management board. Usually, provisions regarding the frequency and the decision-making process are set out in the bylaws for the management board.
General Shareholders' Meeting of a Joint-Stock Corporation
The decision-making process of the shareholders is based on resolutions adopted in the GSM and recorded by a notary public (see 5.3 Shareholder Meetings, below).
Resolutions of the supervisory board (of a limited liability company or a joint-stock corporation) are passed by vote at the supervisory board meeting. Resolutions also may be passed outside meetings by written vote, provided that no member of the supervisory board objects to this procedure.
Limited Liability Company
A limited liability company must have at least one managing director. A higher minimum number can be provided for in special laws or in the articles of association. A legal entity or partnership may not be appointed as a managing director.
The management board may consist of one or more persons. Special laws may stipulate a certain minimum number. The number of board members is to be included in the articles of association, in which a certain range can be determined. A legal entity or partnership may not be appointed as a member of the management board. If several persons are appointed as members of the management board, one of them may be appointed as chairman.
Limited Liability Company
The duties of the managing directors may be divided between the managing directors in the articles of association or by shareholders' resolution (by implementing bylaws for the managing directors). However, an allocation of competences between several managing directors does not mean that the managing directors may restrict themselves to the respective competence. Even in the case of an allocation of responsibilities, each managing director is obliged to supervise the others. In addition, all managing directors are responsible for those areas for which overall responsibility is mandatory (bookkeeping, preparation of annual financial statements, filing for insolvency).
If several management board members are appointed, they generally manage the business jointly according to the principle of majority voting. However, the articles of association may also allow individual management powers. Responsibilities may also be allocated between the members of the management board. It should be noted, however, that certain tasks and actions of the management board are not transferable and are always the responsibility of the management board as a whole (bookkeeping, preparation of annual financial statements, filing for insolvency).
Unless otherwise stipulated in the articles of association, the vote of the chairman of the management board is decisive in the event of a tie. The chairman may also be granted a sole decision-making right or veto right in the articles of association.
There are no special requirements regarding the composition of the managing directors of a limited liability company or of the management board of a joint-stock corporation. A certain minimum number of managing directors/members of the management board may be provided for in special laws (eg, for banks) or in the articles of association.
Composition requirements nevertheless exist for the supervisory board. In general, at least one third of the members of the supervisory board may be appointed by the works council (employee representatives). The other members are appointed by the shareholders (capital representatives).
Limited Liability Company
Managing directors are appointed by shareholder resolution, for which a simple majority is sufficient. The articles of association may provide a different majority.
In principle, managing directors can be recalled at any time and without the existence of an important reason. The articles of association may provide for additional requirements. Managing directors can also declare their resignation or can – in certain cases – be recalled by the court.
The management board is appointed by resolution of the supervisory board. The resolution requires the majority of the capital representatives in the supervisory board and the majority of all supervisory board members. The appointment of a management board member requires acceptance by the management board member in order to be effective. It is limited to five years. A reappointment is possible.
In urgent cases, management board members may be appointed by the court at the request of a party involved.
A member of the management board may only be recalled by the supervisory board before the end of their term in office for important reasons. These reasons include serious breaches of duty, the incapacity to manage the company or the loss of confidence by the GSM. The member of the management board may also resign.
Limited Liability Company
A person cannot be both a managing director and a member of the supervisory board. Based on this principle, a member of the supervisory board may not be a managing director of a subsidiary either.
If the managing director represents the limited liability company when concluding a legal transaction and simultaneously acts in their own name or as an authorised representative of a third party in this transaction, this will constitute a 'self-dealing transaction'. Self-dealing transactions are only admissible if they bring benefits to the company, if there is no risk of damage for the company or if the company agrees to the transaction. Prior to concluding a self-dealing transaction, managing directors must obtain supervisory board approval or, if there is no supervisory board, the approval of all other managing directors, otherwise they will be liable to the limited liability company for the damage arising from the transaction. If there is only one managing director, he or she must obtain the consent of the shareholders.
The managing directors are subject to a statutory non-competition clause and may not, without the consent of the company, do business in the company's field of business, participate as personally liable partners in a company in the same field of business or hold a position in the management or supervisory board of another company.
A person cannot be both a member of the management board and a member of the supervisory board. Based on this principle, a member of the supervisory board may not be a member of the management board of a subsidiary either.
All transactions between the company or a group company and the members of the management board or any persons or companies with whom the management board members have a close relationship must be in line with common business practice. The transactions and their conditions must be approved in advance by the supervisory board, except for routine daily business transactions.
Without the approval of the supervisory board, members of the management board will not be permitted to operate a business or assume a mandate on the supervisory board of another company, unless this company belongs to the group or is associated by a business interest in such a company. Neither will members of the management board be permitted to engage in business dealings in the same branch of the company on their own account or on the account of third parties, or to own other business enterprises as a personally liable partner, without the approval of the supervisory board.
A member of the supervisory board cannot be a member of the management board of another company, if a member of the management board of the other company is a supervisory board member in the first company (no interlocking), except among associated companies.
The managing directors/members of the management board are obliged vis-à-vis the company to exercise due managerial diligence in the conduct of their business. Managing directors/members of the management board are required to manage the company in compliance with all relevant laws, to always obtain an accurate picture of the company's situation and to take all measures to avoid damage to third parties. In accordance with the statutory Business Judgement Rule, a managing director/member of the management board must not be motivated by unrelated interests and may only act on the basis of appropriate information for the benefit of the company.
Limited Liability Company
Managing directors who violate their duties are generally jointly and severally liable to the company, but not to the individual shareholders, for the resulting damage. If the actions of the managing directors are based on a shareholders' resolution, they are generally not liable for any resulting damage.
Members of the management board who violate their duties are generally jointly and severally liable to the company, but not to the individual shareholders, for the resulting damage. If the actions of the members of the management board are based on a resolution of the general meeting, they are not liable for any resulting damage towards the company, but only to the company's creditors.
Limited Liability Company
A shareholder resolution is required for the assertion of claims for damages and for the appointment of a representative to conduct litigation if the company cannot be represented by a managing director or the supervisory board. In addition to the assertion of claims for damages, the managing director may be recalled. See also 5.4 Shareholder Claims, below.
The company's claims against members of the management board must be asserted if the GSM resolves to this effect by a simple majority of the votes cast. The same will apply if a minority whose shares together amount to 10% of the share capital demands the assertion of a claim. In general, the supervisory board is authorised to conduct the legal dispute. However, the GSM may also appoint a special representative. See also 5.4 Shareholder Claims, below.
In certain exceptional cases, the managing directors/members of the management board may be liable to creditors of the company (eg, false or delayed registrations to the company register, liability for taxes and social security contributions if the managing directors have negligently breached their duties). The personal liability of a managing director/member of the management board may also arise from general tort law. The managing director/member of the management board may be liable if, for example, they violate a law for the protection of creditors and thereby cause damage.
The remuneration of the managing directors of a limited liability company is determined by the shareholders.
The remuneration of the members of the management board of a joint-stock corporation is determined by the supervisory board. Under current law, shareholders have no co-determination rights regarding the remuneration.
Regarding listed joint-stock corporations, the Austrian Corporate Governance Code contains detailed provisions on payments to members of the management board.
The supervisory board will ensure that the total remuneration of the members of the management board (salaries, shares in profits, expense reimbursements, insurance premiums, commissions, incentive-linked remuneration commitments and any other type of payments) are commensurate with the tasks and performance of each individual member of the management board, the situation of the company and the usual level of remuneration, and must also take measures to create incentives to promote behaviour supportive of the long-term development of the company. This will apply accordingly to pension payments, survivor's pensions and similar income.
When concluding management board contracts, the remuneration must contain fixed and variable components (the latter of which will be linked, above all, to sustainable, long-term and multi-year performance criteria), must include non-financial criteria, and must not entice persons to take unreasonable risks. For the variable remuneration components, measurable performance criteria will be fixed in advance as well as maximum limits for amounts or as a percentage of the fixed remuneration components. Precautions must be taken to ensure that the company can reclaim variable remuneration components if it becomes clear that these were paid out only based on obviously false data.
When concluding contracts with management board members, care must be taken that severance payments in the case of premature termination of a contract with a management board member without a material breach do not exceed more than two years' annual salary and that not more than the remaining term of the employment contract is remunerated. In the case of premature termination of a management contract for material reasons for which a management board member is responsible, no severance payment will be made.
If a stock option programme or a programme for the preferential transfer of stocks is proposed for management board members, such programmes must be linked to measurable, long-term and sustainable criteria. For the duration of such programmes, but at the latest until the end of the management board member's function on the management board, the management board member will hold an appropriate volume of shares in the company. In the case of a stock option programme, a waiting period of at least three years must be fixed.
The implementation of the SRD II will introduce the right to vote at the annual GSM on the remuneration of members (remuneration policy and remuneration report) of the company's management board and supervisory board (say on pay).
For listed joint-stock corporations, provisions on the disclosure of payments to members of the management board are included in the Austrian Corporate Governance Code.
The total remuneration of the management board for a business year must be reported in the notes to the financial statements. The Corporate Governance Report will contain the total remuneration of each individual member of the management board and disclose the principles governing remuneration policy.
In addition to the information required by law, the Corporate Governance Report will contain further information on the renumeration (information on the principles applied by the company for granting the management board variable remuneration, the ratio of the fixed components to the variable components of the total compensation, the principles of the company retirement plan for the management board and the conditions, principles applicable to eligibility and claims of the management board in the event of termination of function, the existence of a D&O insurance, and if the costs are borne by the company).
The implementation of the SRD II will introduce an obligation to publish the remuneration policy and the remuneration report as well as certain related party transactions on the company's website.
A shareholder's position can be described as 'membership' and is characterised by certain rights and obligations. Besides this corporate relationship between a shareholder and the company, there may also be other legal relations between them, for instance under contract or in tort.
The rights of a shareholder can broadly be divided into governing rights and monetary rights. The former comprise first and foremost the voting right as well as information and control rights more generally. Monetary rights basically correspond to the right to dividends and liquidation proceeds. The obligations of a shareholder encompass the obligation to pay up the share capital and the fiduciary duty towards the company. Fiduciary duties are not defined under statutory law but have evolved in case law. Basically, shareholders must refrain from harming the company and must consider the interests of the company and other shareholders.
A corporation's relationship with its shareholders is characterised by the separation principle. This means that the company is a legal entity on its own and its shareholders cannot be held liable for the company's obligations. A second fundamental principle is the precept of equal treatment of shareholders, which prescribes that shareholders can be treated differently only based on objective justification.
The corporate veil is pierced, and a shareholder can be liable to creditors, if the company is severely undercapitalised, if the monetary spheres of the company and a shareholder are blurred or if a shareholder is running the company as if they were a managing director.
Under the SRD II, listed companies will be allowed to identify their shareholders through notification requirements of intermediaries (if any).
The GSM of a joint-stock corporation is the corporate body in which the shareholders of a joint-stock corporation or of an SE can exercise their rights, as well as the forum that enables the collective decision-making process among shareholders. It is not, however, a superior corporate body that can directly influence the management of the company.
Resolutions on changes to the articles and transformation measures, such as mergers or demergers, are generally passed by a 75% majority (based on the represented share capital). This should apply mutatis mutandis to management decisions that entail significant structural changes of the company.
The GSM is not competent to decide questions of the company's management, except if the managing directors or the supervisory board brings a matter to a GSM vote. The influence of the GSM on the company is basically limited to the appointment and recall of supervisory board members, who in turn appoint the managing directors. A minority of 10% (based on nominal share capital) can request the recall of a supervisory board member for cause by the court. The GSM can also vote on a loss of confidence in a managing director, which could give the supervisory board a right to recall the director for cause.
The general shareholders' assembly is the supreme corporate body of the limited liability company. Unlike in a joint-stock corporation, the general shareholders' assembly may give instructions to the managing directors. In practice, many resolutions are passed as circular resolutions in writing.
Joint-Stock Corporation (and SE)
At least once a year, a GSM must be held at the latest eight months after the end of the preceding financial year. In practice, the annual GSM takes place mostly between the fourth and sixth month after the close of the financial year. The purpose of the annual GSM is to present the annual financial statements, a resolution on the appropriation of earnings, the discharge of managing directors and supervisory board members. A minority of 10% of the share capital can reschedule the annual GSM if they disagree with certain sections of the annual financial statements.
An extraordinary GSM may be convened at any time by the management board, the supervisory board or a minority of shareholders owning 5% of the shares. The convocation of the annual GSM must be published at the latest on the 28th day before the meeting, while that of an extraordinary GSM must be published at the latest on the 21st day. The announcement convening the meeting must be published in the Austrian daily newspaper Wiener Zeitung. The company's articles can lower the threshold of a minority entitled to convene a GSM, extend the term between convocation and meeting, and provide for different forms of the announcement. For listed companies, the announcement must also be published via an appropriate medium – publication via Thomson Reuters, Bloomberg or Dow Jones Newswire is in any event sufficient. By the 21st day before the GSM, the proposals for resolutions of the management board and/or supervisory board must be provided at the company's seat for inspection. Listed companies must also publish these documents, the convocation and a draft voting power of attorney on their website by that date.
A minority of 5% (based on nominal share capital) has the right to add items to the agenda of a GSM, these being supported by a resolution proposal and reasoning. The articles can lower this 5% threshold. The request must be sent to the company at the latest on the 21st day before an annual GSM or on the 19th day before any other GSM.
The right of a shareholder to participate in the GSM of a listed company is determined by the holding of the share (in case of bearer shares) or by registration in the share ledger (for registered shares), in each case by close of business of the tenth day prior to the GSM (cut-off date). The bearer of a share must prove its shareholding by a confirmation from the custodian bank. The registration for participation and the confirmation of the custodian bank must be sent to the company at the latest on the third business day before the GSM.
A shareholder's right to participate in the GSM of a non-listed company is determined by registration in the share ledger at the beginning of the GSM. If a shareholder registers for participation by the third business day prior to the GSM, they must be admitted. The articles can refer to the tenth day before the GSM as the cut-off date instead and provide for a more flexible registration deadline.
Every shareholder also has the right to be represented by written power of attorney. In the case of a proxy assigned to the custodian bank, confirmation of the bank is sufficient. Anonymous participation via a 'third-party owner' is not permitted. A managing director or supervisory board member of a listed company can only be authorised as a proxy if the power of attorney includes specific instructions on how to exercise the voting right in each case.
Implementing the (first) Shareholder Rights Directive, the articles of a company may permit a GSM to take place simultaneously at different locations within the country or abroad (satellite general meetings) or permit shareholders to take part via an acoustic and, if applicable, optical two-way communication line, and to vote electronically. Apart from electronic voting, the articles may also permit voting by mail. The invitation for the GSM must contain detailed information on the different forms of participation. Finally, the articles can provide that a GSM be broadcast to shareholders or, in case of a listed company, be broadcast publicly.
In a listed company, a minority of 1% (based on nominal share capital) has the right to have its proposals for resolutions published on the company's website; the articles can further lower this threshold. The articles of a non-listed company can also foresee such right to publication. Nevertheless, counterproposals to resolutions under the agenda items can still be put forward at the GSM. For elections to the supervisory board, the proposed candidates must be presented on the company's website at the latest on the fifth day before the GSM.
The chairman of the supervisory board or the chairman's deputy chairs the GSM. The other members of the supervisory board as well as the managing directors should also participate in the meeting. After a vote, the chairman holds if a motion has been passed or rejected. The chairman also decides on the order by which different motions to an agenda item are brought to a vote and on the method of counting the votes, in each case unless the articles provide otherwise.
Shareholders have the right to ask questions and to submit motions for approval regarding all items on the agenda at the GSM. If the managing directors answer inadequately or refuse to give answers, a resolution may become challengeable. Regarding the discharge of managing directors and supervisory board members from liability, a motion for a special audit may be requested. If such a motion is rejected, a minority of 10% can apply for a special audit with the competent court.
Unless the articles set forth otherwise, the GSM has a quorum if at least one shareholder is present. Basically, the GSM decides by a simple majority of the votes cast. The law prohibits shares with more than one voting right. A joint-stock corporation can, however, issue preferred shares, for which the voting rights are suspended as long as preferred dividends are paid out in full (including any subsequent payments). The articles may also limit the maximum voting rights that a single shareholder can exercise, regardless of the percentage of shares held. Lately, there is a trend towards returning to the 'one share – one vote' principle.
At the annual GSM the managing directors submit the motion to distribute the profits as approved by the supervisory board. The shareholders are bound by the net profit reported on the balance sheet; hence, the management board and the supervisory board ultimately have control over the dividend policy. If the articles so provide, the GSM may resolve to carry forward part of the net profit to a new account.
The discharge of the managing directors and the members of the supervisory board is merely an expression of trust but does not release the board members from potential liability. The GSM further elects the members of the supervisory board and the auditor of the annual financial statements.
The implementation of the SRD II will require intermediaries to facilitate the exercise of shareholders' rights either by ensuring the shareholder's own exercise or the exercise by the intermediary as proxy.
Limited Liability Company
The annual general shareholders' assembly must be held within the first eight months of a financial year for the preceding one, in order to adopt the annual financial statements, to resolve upon the appropriation of earnings as well as to discharge the managing directors and, if any, supervisory board members. Such annual general shareholders' assembly is mostly replaced by circular resolution.
Whereas the general shareholders' assembly has no right to represent the company vis-à-vis third parties, it can instruct the managing directors to act in a certain way. It also appoints and recalls managing directors and approves extraordinary transactions or structural measures of the company and changes of the articles. The articles can set forth a list of matters that require prior consent of the general shareholders' assembly.
The general shareholders' assembly is convened by the managing directors, who must do so if the total assets of the company have fallen short of half of the company's nominal share capital, if certain critical financial ratios are triggered or if requested by a minority of 10% of shareholders (based on nominal share capital). Also, the supervisory board, if there one is in place, can convene a general shareholders' assembly. The form of the convocation is typically set forth in the articles; if not, the shareholders must be invited by registered mail with at least seven days' notice. The invitation must contain the agenda for the meeting. Again, a minority of 10% can add items to the agenda.
Unless set forth otherwise in the articles, each EUR10 of nominal share capital grants one vote. Representation by a written power of attorney is possible. In case of a conflict of interest (eg, a resolution on a transaction of the company with a shareholder) the voting right of a shareholder is excluded.
The general shareholders' assembly is quorate if at least 10% of the share capital is represented (unless set forth otherwise in the articles). There is no statutory rule on who chairs the general shareholders' assembly, so this can either be set out in the articles or decided ad hoc in the meeting. Resolutions are typically passed by simple majority. Certain resolutions, such as changes to the articles or restructurings, require a 75% majority. A minority of 10% can further apply for a special audit with the competent court.
Shareholders may in general have claims against the company only for dividends and proceeds from the decrease of share capital or liquidation.
Managing directors and supervisory board members are liable towards the company for negligent and wilful actions or omissions that harm the company. Whether claims are enforced is decided by the GSM/shareholders' meeting. A joint-stock corporation or an SE is represented by the supervisory board (or a special representative), a limited liability company by the managing directors or the supervisory board (or a special representative) when enforcing claims against members of corporate bodies. A minority of 10% of the share capital can initiate such enforcement in a company.
Shareholders could have a direct claim against the company, its managing directors or supervisory board members under tort law or in case of a violation of so-called protective laws (Schutzgesetze), which include certain disclosure obligations under capital market laws and criminal offences.
Anyone acquiring or selling shares in a listed company must notify the Austrian regulator (Financial Market Authority), the stock exchange and the company within two trading days at the latest, if they hit, exceed or fall below one of the following thresholds: 4%, 5%, 10%, 15%, 20%, 25%, 30%, 35%, 40%, 45%, 50%, 75%, 90%. Companies can additionally set 3% as the relevant threshold in their articles. The notice obligation applies to holders of derivatives and other financial instruments, too, if these instruments lead to a possible exercise of voting rights. A failure to notify leads to a suspension of voting rights.
Under the Public Takeover Act, bidders must disclose their considerations, intentions or decisions regarding a mandatory or voluntary public takeover.
Additional disclosure requirements for institutional investors (and asset managers) regarding their engagement policy and investment strategy will enter into force with the implementation of the SRD II.
Companies must draw up annual financial statements of the previous year in accordance with Austrian GAAP within the first five months of a financial year. Such statements must be signed by all managing directors and generally include the balance sheets, a profit and loss statement, notes to the annual accounts and a management report. Depending on the legal form and size of a company, certain reliefs regarding the notes and the management report apply.
Listed parent companies must also draw up consolidated annual financial statements in accordance with IFRS/IAS. Other parent companies can draw up statements in accordance with IFRS/IAS, or otherwise under Austrian GAAP.
The drawing-up of financial statements is the responsibility of the managing directors. In joint-stock corporations and SEs, the supervisory board has to audit the financial statements (also on a consolidated level, if applicable) and provide a written report to the GSM. By endorsing the statements, the supervisory board adopts them as final. In a limited liability company, the shareholders' meeting is responsible for adopting the financial statements.
Further to disclosure obligations relating to inside information and managers' dealings under the Market Abuse Regulation (MAR), the Stock Exchange Act requires listed companies to disclose the annual financial report (including the consolidated financial statements) by the latest four months after the close of the financial year. Listed companies also have to publish a half-year report within three months after the end of each period. They must further publish reports on the granting of stock options to managing directors, supervisory board members or employees as well as stock repurchase programmes.
In Q1/2019, the Vienna Stock Exchange abolished its requirement for listed companies to publish quarterly reports.
Listed companies must further publish a corporate governance report that states which corporate governance code they comply with, why and to what extent they deviate from it or, if they do not apply such a code, why not. Additionally, the report must include the composition of the management board, the supervisory board and its committees, measures taken to promote women in such bodies or in management positions, details of a diversity concept relating to the management board and supervisory board (if applicable) as well as the total remuneration of each managing director and the principles of the remuneration policy. The report must be drawn up within the first five months of the financial year.
Furthermore, listed companies must include certain details on corporate governance in the management report, including their capital structure, known voting or transfer restrictions, shareholdings in the company of at least 10%, special veto, control or nomination rights of shareholders, and poison pill arrangements.
Large companies and public-interest companies that are active in the extractive industry or the logging of primary forests must issue within the first five months of a financial year a report on payments made to governments.
The implementation of the SRD II will introduce an obligation to publish the remuneration policy and the remuneration report on the company's website as well as certain related party transactions via an appropriate medium (Thomson Reuters, Bloomberg or Dow Jones Newswire).
The adopted annual financial statements must be filed with the companies register within nine months of the balance sheet date, at the latest. This also includes the corporate governance report, the report on payments made to governments, the auditor's opinion, the supervisory board's report and the resolution on the appropriation of earnings, each as applicable. Consolidated annual financial statements likewise must be filed. A large joint-stock corporation must further publish the annual financial statements including the auditor's opinion in the Wiener Zeitung. Small limited liability companies must only file the balance sheets and the notes, micro companies only the balance sheets. For both, certain simplifications apply regarding the structure and content of the filed balance sheets. For medium-sized limited liability companies and for small and medium-sized joint-stock corporations, certain simplifications also apply regarding the filed balance sheets.
Companies' annual financial statements (also on a consolidated level, if applicable) must be audited prior to their adoption. Exemptions apply for small limited liability companies.
The auditor is appointed by the shareholders' meeting or GSM, respectively, during the financial year. If there is a supervisory board, it must propose a shortlist of auditors and agree on the engagement (including appropriate fees) with the appointed auditor. Otherwise the managing directors conclude the engagement with the auditor. The managing directors, the supervisory board, a minority of shareholders representing at least 5% of votes or share capital or holding at least EUR350,000 or the auditors' regulator may apply to the competent court for the appointment of a different auditor for good cause.
Auditors cannot be appointed if they have a conflict of interest or are otherwise exempt under statutory law from accepting an appointment. The auditor can terminate the engagement only for cause; the company cannot terminate the engagement.
The auditor must issue a report on its audit and an opinion on the compliance of the financial statements with applicable laws and whether they present a true and fair view of the company's assets, liabilities and earnings under applicable GAAP. The opinion can be unqualified, qualified or negative. The auditor is liable towards the company for negligence and wilful misconduct. For negligence, a statutory liability cap, staggered by the size of the company, applies.
Managing directors must implement an internal control system, based on the size, industry and specific situation of the company. An internal control system is understood as the methods and measures to safeguard the assets, to ensure the accuracy and reliability of bookkeeping data and to comply with corporate policies. For non-listed companies, there is no specific legal duty to implement a compliance management system or a risk management system that detects and controls risks beyond those addressed in the internal control system. Management should decide based on a cost-benefit analysis whether and to what extent to introduce such systems.
Listed companies must disclose in the management report material risks and uncertainties as well as the key features of the internal control and risk management system with respect to the accounting process.