Austrian start-ups have recently repeatedly called for more flexible solutions, particularly in connection with investor and employee participation. With the introduction of the Flexible Company (FlexKapG or FlexCo for short) and the Act on Flexible Companies (FlexKappGG) having come into force on January 1, 2024, this became a bit more reality and a new, internationally hopefully competitive form of a corporation was created.
The FlexCo is a hybrid form between an Austrian stock corporation (AG) and a limited liability company (GmbH), which is intended to meet the specific needs of start-ups. In the course of formation, the shareholders must raise a share capital of € 10,000. This amount is also the new minimum share capital for Austrian GmbHs as of January 1, 2024. At least € 5,000 of this amount must be paid up upon formation in cash. This means that the minimum capital requirements remain affordable for founders. In future, it will be possible to provide for “smaller” shareholdings, as the minimum share capital contribution for a FlexCo is only € 1, instead of € 70, as is the case with the GmbH. In addition, a FlexCo can generally be set up by means of simplified electronic incorporation, in line with advancing digitalization.
Probably the biggest innovation, however, is the introduction of an additional form of participation of shareholders, the so-called company value shares. These are available in addition to the traditional shares and are mainly designed for employee participation, since this has become increasingly important in recent years. Employees that hold company value shares in a FlexCo have a special position as shareholders. Although such employees participate in the net profit and liquidation proceeds, they cannot, with a few exceptions, participate in the decision-making process of the company, as they only have the right to participate but not the right to vote at the Annual General Meeting. In addition, they have only a limited right to information and a limited right to inspect the books. The employees concerned must be informed about their rights and the risks beforehand.
It should be noted that the company value shares may only be issued up to a maximum of under 25% of the share capital. It is also worth noting that the lowest permissible share capital contribution for company value shares is just 1 cent, allowing for a large number of shareholdings. The company value shareholders are not listed individually in the commercial register, but a list of names and a list of shareholdings must be submitted.
A significant innovation that has long been demanded in practice is the transfer of shares. Instead of the notarial deed that is still required for the transfer of shares of a GmbH, the transfer of traditional shares now only requires a deed to be drawn up by a lawyer or notary; they must check the admissibility of the transfer and instruct the parties accordingly. The transfer of company value shares, on the other hand, only requires a written agreement between the parties concerned. Another significant innovation is the partial admissibility of the acquisition of own shares by a FlexCo itself. A shareholder who is entitled to more than one vote can now, contrary to the regulations for the GmbH, exercise their voting right in a non-uniform manner. The shareholders can generally pass their resolutions in writing. A supervisory board must be appointed as soon as a FlexCo is at least medium-sized within the meaning of the Austrian Commercial Code (UGB).
The introduction of a FlexCo gives rise to a number of changes that are significant in practice. It remains to be seen whether these changes are now “flexible” enough to meet the requirements of the start-up scene.