Conversion of a GmbH to a FlexCo

The Austrian Flexible Company Act (FlexKapGG) was published in January 2024. Since then, it has been possible to convert an existing limited liability company (Gesellschaft mit beschränkter Haftung, hereafter: GmbH) into a flexible company (Flexible Kapitalgesellschaft, hereafter: FlexCo). This article provides an overview of the possible reasons for such a change as well as the procedures to be complied with.

The FlexCo has several special features in contrast to the GmbH. In quite a few situations, they can be seen as advantages and can serve as good reasons for the shareholders of an existing GmbH to convert the company into a FlexCo. This particularly applies to the following aspects:

1. Issuance of company value shares to employees

As opposed to a GmbH, the FlexCo offers the possibility to issue so-called company value shares (Unternehmenswertanteile). This share class is particularly suited as an instrument for employee participation in the company’s success. The company value shares enable employees to participate in the balance sheet profit but without conferring voting rights at shareholder meetings. In contrast, employee profit-sharing in a GmbH is a comparatively complex matter.

2. Facilitated raising of capital  

A FlexCo can take advantage of greater flexibility in financing. Certain forms of financing such as the conditional capital increase (bedingte Kapitalerhöhung) or the issuance of authorised capital (genehmigtes Kapital) are available to FlexCo shareholders but not to a GmbH. Moreover, the FlexCo can also issue no-par value shares (Stückanteile), thus enabling the company to have diverse share classes. In turn, this results in some improvements which facilitate financing rounds for startups.

3. Simplified transfer of share ownership

Ownership of shares in a FlexCo can be transferred without a notarial deed (Notariatsakt) or acquired within the context of a capital increase. It is sufficient for share transfers to be documented by a corresponding private deed issued by an attorney or notary. This represents a simplification in contrast to the transfer of share ownership in a GmbH, which requires a notarial deed.

4. Elimination of certain formal requirements

The memorandum of association (Gesellschaftsvertrag) for a FlexCo can eliminate certain existing formal requirements applying to a GmbH. In particular, it is possible to enable resolutions to be passed in writing via a circular resolution without requiring the approval of all shareholders. In contrast, the GmbH must convene a shareholders’ meeting if a shareholder rejects the written resolution. Moreover, it is admissible for votes to be cast by text form within the context of a written vote, e.g., by e-mail.

The GmbH and FlexCo represent two different legal forms of business. A conversion to the other type of company is possible. For example, existing GmbHs can be transformed into FlexCos. For this purpose, the shareholders’ meeting of a GmbH must approve a resolution to convert the company into a FlexCo. The required majority to pass the resolution stems from the memorandum of association. Shareholders whose rights originally stipulated in the memorandum of association are limited by the conversion, must agree to the change in any case. The conversion first legally takes effect when it is entered into the Commercial Register. Special measures designed to protect creditors (e.g., a formation audit) are not necessary.

The results of converting a GmbH into a FlexCo should be regularly quite practicable. Shareholders of a GmbH who in the past identified the lack of flexibility arising from the points mentioned above should reflect upon this.