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Articles of Association in Austria: what you should know
by Mona Schmaldienst
If a business consisting of at least two people is established in Austria, it is considered to be a company. The rights and duties of the individual partners, for example the management, profit and loss sharing, agreements in the case of the death or retirement of a partner or the dissolution of the company are regulated in the memorandum and articles of association.
However, depending on the specific legal form, there are different contractual and content-related requirements which should be taken in to account when drawing up the memorandum and articles of association.
When and why do I need articles of association when setting up a company?
In contrast to a business partnership, in which a verbal agreement is also sufficient, a "Gesellschaftsvetrag" which consists of the memorandum and articles of association (hereafter: articles of association) and which is certified by a notary public is legally required when a corporation is founded (limited liability company - GmbH or public limited company - AG). The legal stipulations pertaining to the contents of the articles of association can be complemented by individual provisions agreed upon by the founders. There are a large number of sample articles of association available on the Internet. Nevertheless, it is recommended to employ a lawyer specialising in contract or corporate law in order to review the articles of association and to ensure that any supplementary provisions are legally watertight.
The legal form of the company and the articles of association
There is a large range of legal forms in Austria which people can choose from when establishing a company. In this regard, the selection of the right legal form is always dependent upon the size and the business purpose or object of the company as well as the number of founders. According to the Austrian Commercial Code, the following legal forms are possible in Austria:
- The sole proprietorship (with or without a corresponding entry in the Commercial Register)
- The general partnership (German abbreviation: OG)
- The limited partnership (KG)
- The civil law partnership (GesbR)
- The silent partnership
- The limited liability company (GmbH)
- The limited liability company and limited partnership (GmbH & Co KG)
- The public limited company (AG)
The sole proprietorship and the articles of association
In light of the fact that a sole proprietorship can be set up by one person, this legal form does not require articles of association.
The business partnership and the articles of association
When it comes to business partnerships such as the general partnership (Offenen Gesellschaft or OG) and the limited partnership (Kommanditgesellschaft or KG), articles of association are not legally prescribed, However, it is always recommended to regulate the rights and obligations of the partners. No particular form is stipulated for doing so, and the contents can be freely formulated.
The civil law partnership and the articles of association
Articles of association are not prescribed for a civil law partnership. Nevertheless, it is principally advised to draw up articles of association. Every partner is authorised to represent in a civil law partnership, and all partners are personally and jointly liable. For this reason, every partner is liable for the entire liabilities of the civil law partnership up to the full value of his assets.
The silent partnership and the articles of association
A silent partnership is not considered to be a legal entity on its own. For this reason, it can do without the articles of association. Nevertheless, contractual safeguards are also recommended in this case, usually in the interest of the silent partner.
The limited liability company and the articles of association
As a corporation, the limited liability company is the most popular legal form chosen in establishing a company in Austria. Accordingly, articles of association are legally required for this legal form, and they have to be certified by a notary public. The following contents are mandated by law:
- Name of the company, including the registered office and the address of the company
- The business purpose (object) of the company (description of business activities)
- The amount of the share capital
- Breakdown of the initial capital contributions and a detailed description of the individual amounts contributed by each shareholder to the share capital.
In addition to the legally stipulated contents of the articles of association for a limited liability company, other elements can also be included in the agreement, for example:
- Claiming entitlement to the privileged limited liability company (gründungprivilegierte GmbH)
- Stipulations pertaining to the management and representation of the limited liability company
- Obligations on holding a general meeting
- Additional information and provisions pertaining to resolutions passed by shareholders
- Decisions and disclosures on the appropriate of profits
- Stipulations pertaining to purchase rights relating to shares in the company
- Rights of non-controlling interests in the limited liability company
The privileged limited liability company and the articles of association
Articles of association must also be drawn up for companies taking advantage of the foundation privilege. The most important difference between this legal form and the traditional limited liability company is that the share capital can be limited to EUR 10,000 instead of the prescribed amount of EUR 35,000. Nevertheless, this reduced amount must be increased to the normal level of EUR 35,000 within a period of ten years. For this reason, the privileged limited liability company is the preferred legal form utilised by start-ups. It offers low start-up costs and also remains the right legal form, even if the company grows.
The foundation privilege does not have to be included in the company name. However, it must be specified in both the articles of association as well as in the entry in the Commercial Register.
The public limited company and the articles of association
The articles of association of a public limited company comprise the statutes and represent the most extensive articles of association of all legal forms of incorporation. The articles of association are legally required for a public limited company (AG) and must be certified by a notary public. In addition, the founders of the company have to acquire the initial shares, specify the governing bodies of the public limited company and prepare a formation report. Moreover, the formation report must be reviewed by the managing board and supervisory board and the founders have to make their stipulated contributions to the public limited company. The share capital must amount to at least EUR 70,000. Then the company is officially entered into the Commercial Register.
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