The capital company form already announced in the government programme, which is intended to offer innovative start-ups in particular an internationally competitive option in the early stages, has arrived: the "Flexible Kapitalgesellschaft" or "Flexible Company" - FlexKapG or FlexCo for short. It is intended to offer advantages over the GmbH, especially in terms of raising capital.
The ministerial draft of the Company Law Amendment Act 2023 (GesRÄG 2023) was published last week. Part of it is the Flexible Capital Companies Act (FlexKapGG). The review period runs until 7 July, the amendments to the law are to come into force on 1 November.
The focus is also on changes to the share capital. This is an amount determined at the founding stage of a GmbH, which is made up of the sum of the capital contributions taken over by the shareholders, is anchored in the articles of association and is published in the company register. The amount paid into the share capital is not blocked and may be used for business purposes after the company has been founded.
A "regular" GmbH currently has a minimum share capital of 35,000 euros, half of which must be paid in cash prior to formation. After the GesRÄG 2023 comes into force, this amount will be reduced to 10,000 euros for both the GmbH and the new FlexCo, of which 5,000 euros must be paid in cash. This is twice as much as the amount that an expert opinion once commissioned by the government on the new company form then discussed as "Austrian Limited" considered appropriate.
What happens to "foundation-privileged" limited liability companies?
Previously, it was possible to form a so-called "foundation-privileged" GmbH, where foundation-privileged capital contributions were set at only 10,000 euros and 5000 euros were paid in on top of this. However, this relief was limited in time because the difference had to be paid up to the "regular" share capital - usually 35,000 euros - no later than ten years after formation. The planned amendment to the law will now make this GmbH variant obsolete and it is to be abolished. Transitional provisions are envisaged for GmbHs that have already been registered with foundation privileges.
Another change in the law creates a difference between a GmbH and a FlexCo. Whereas in the case of a GmbH, the shareholders' capital contribution must amount to at least 70 euros, a FlexCo's capital contribution of only one euro is to be possible. By stipulation in the articles of association, shareholders of a FlexCo will also have the option of dividing their shares into units with a nominal value of at least one euro. This allows them to hold several shares of the same or different classes and to dispose of them separately. Especially in venture capital financing, it is common to provide for different classes of shares, e.g. shares with different preferential rights.
Irrespective of whether unit shares are issued or not, non-uniform voting will be permissible in the case of a FlexCo, provided that the shareholder is entitled to more than one vote; this has so far been controversial in the case of a GmbH. This should also facilitate trust constructions, because the trustee as direct shareholder will be able to vote differently on resolutions, for example, for the investors behind him as trustors.
For entrepreneurs who operate their business in the form of a GmbH (limited liability company), it could be interesting to convert their GmbH into a FlexCo. The FlexKapGG contains provisions on the conversion of a FlexCo into a GmbH or AG or of a GmbH or AG into a FlexCo, whereby in practice the path from the GmbH to the FlexCo will probably be in the foreground.
Even if not all of the concerns of the start-up scene were taken into account in the ministerial draft, for example because the notarial formal requirements, which are often perceived as unnecessary, were not completely abolished for the FlexCo either, the introduction of the FlexCo sends an important signal for strengthening the business location, which could provide impetus for further reforms of company law. (Andrei Demian,5.6.2023)