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FlexCo in action: Successful transition and initial trend signals

27. February 2024

The Austrian Flexible Company Act went into effect on 1 January 2024. This law introduced a new type of incorporated company – the flexible company or FlexCo – which is particularly tailored to the needs of startups and other innovative companies. Initial reports show that this new legal form of business is widely accepted in practice.    

Austria has two legal forms of incorporated companies which enjoy a high reputation both within the country and internationally i.e., the limited liability company (Gesellschaft mit beschränkter Haftung - GmbH) and the joint stock company (Aktiengesellschaft - AG). The FlexoCo fuses elements of the GmbH and AG. It combines the best of both worlds and offers greater flexibility in structuring the company than the previously established legal forms of business.

“FlexCo”: the most frequent company suffix

The exact company name of any FlexCo must include “Flexible Kapitalgesellschaft”, “Flexible Company”, “FlexKapG” or “FlexCo”. An evaluation of the Austrian Commercial Register shows that the “FlexCo” has by far been the most popular suffix indicating this new legal form of incorporated company. At the beginning of March, 66 companies were listed in the Commercial Register with this designation. The abbreviation “FlexKapG” was selected thirteen times. In contrast, the longer versions, namely “Flexible Kapitalgesellschaft” and “Flexible Company”, were far less popular. There were only three entries all in all in the Commercial Register which made use of these two suffixes.

Accordingly, a total of 82 flexible companies were established in Austria in the first two months of 2024. Our analysis also concludes that most of these firms can be found in the eastern part of Austria, primarily in Vienna, Lower Austria, and Upper Austria.  

Initial experiences with the flexible company

The market has reacted very positively to this new legal form of incorporated company. For example, this is reflected in the fact that flexible companies entered into the Commercial Register are not only newly founded firms. In part, existing limited liability companies have been converted into flexible companies to leverage the advantages of the FlexCo. The conversion process is simple. A resolution approved by three quarters of the votes cast at the general meeting of shareholders is required along with the corresponding entry into the Commercial Register.    

The FlexCo offers several advantages compared to the conventional limited liability company. Reasons for deciding upon setting up a flexible company include the following:

  • The FlexCo can issue enterprise value shares (Unternehmenswert-Anteile). These are particularly suited to enable employees to benefit from the company’s success because they allow for participation in the profits and exit of the company but do not entail voting rights. Enterprise value shares can also be issued to third parties e.g., external consultants.
  • The FlexCo has new forms of financing at its disposal such as the conditional capital increase or issuance of shares from authorised capital. In this way, the company can raise capital more quickly.
  • There are fewer formalities. Shares in a FlexCo can be transferred without a notarial deed or within the context of a capital increase.
  • The FlexCo enables faster decision making. Circular resolutions (written resolutions) can now also be passed even if all shareholders do not agree with a written resolution. However, all shareholders must be able to participate in the passing of a resolution. Furthermore, text form is sufficient for votes to be cast. As a result, resolutions can also be approved by email.

In particular, the market praises the simplified approach to shareholder resolutions. In this way, important decisions can be made more quickly. Moreover, selecting the appropriate legal form of business can serve to enhance efficiency. Meanwhile, the commercial courts were well prepared for the new type of company. The founding of flexible companies as well as the conversion from other legal forms were efficiently implemented without any major problems. Due to its increased flexibility, the FlexCo is especially designed for startups. However, the new legal form of business is not limited to startups but is open to all companies, regardless of their size or the sector in which they operate.

Author: Stefan Gutbrunner (LinkedIn), lawyer at CHG Czernich Rechtsanwälte in Vienna. The law firm advises SMEs and start-ups in the areas of Corporate and Business Law/M&A, Private Equity, Venture Capital and New Technologies, amongst other specialties.

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