Austria introduces a new company form for startups

FlexCo, the new legal entity established within the context of the Austrian Flexible Company Act (FlexKapGG) strengthens the international competitiveness of the business location and makes Aus-tria even more attractive for startup founders.

The new company form represents a hybrid form of the limited liability company (GmbH) and a bit of the stock corporation (AG). Most of the regulations relating to the Flexible Company are essentially based on the Austrian Limited Liability Companies Act, whose rules also apply via subsidiary applica-tion, and also include a few provisions from the Austrian Stock Corporation Act. In addition to simplify-ing and streamlining the relevant stipulations, the new law also focuses on enabling employees to par-ticipate in the success of the company. This is particularly important to young companies which aim to win the loyalty of highly sought-after skilled workers but are frequently unable to compete with the sal-aries offered by larger, existing companies. The FlexCo offers companies the possibility to incentivize employees by offering them equity interests (company value shares).

Compared to the GmbH, the capital requirements of the startup are significantly reduced in the initial phase. The stipulated minimum share capital consisting of the capital contributions of the shareholders equals € 10,000, of which only half must be paid in cash. After the founding of the company, the amount of paid-in share capital can be used for business purposes. The minimum corporate income tax to be paid when no profits are generated in the given fiscal year is € 500. This tax can be offset against taxes imposed on future profits.

The acquisition of own shares is permissible up to the maximum of one third of the share capital. This will allow the company to have shares ready for future investors. Furthermore, the new regulations al-low for flexible capital-raising measures such as the contingent capital increase for the purpose of granting subscription rights or share options to employees, as well as authorized capital for the issu-ance of new shares. Shareholders can also participate in the FlexCo with a capital contribution of € 1.