Structure and process, legal regulation and consents

Structure

How are acquisitions and disposals of privately owned companies, businesses or assets structured in your jurisdiction? What might a typical transaction process involve and how long does it usually take?

The cornerstone of a transaction is normally the (share or asset) sale and purchase agreement that is entered into between a seller and a buyer. Depending on the nature of the transaction and the complexity of the matter, customary ancillary documentation may relate to financing (including collateral), carve-outs or new employment, and management agreements to be entered into during the course of an acquisition. Transfer deeds are customary in asset-purchase transactions involving real estate or trademarks to avoid a need to translate into German (and disclose) often more complex framework agreements for submission to the relevant Austrian registers.

A typical transaction process will depend on whether a more formal auction process is set up or whether one-on-one negotiations are conducted. In the former case, an information memorandum will be prepared on the basis of which indicative offers will normally be sought. On this basis, a shortlist of potential buyers will be admitted to conduct due diligence (often divided into ‘green’ and ‘red’ file phases, with the latter restricted to a small group of bidders remaining towards the very end of the process or only the winning bidder). Following due diligence, binding offers normally need to be submitted together with mark-ups to draft purchase agreements, which are then negotiated. On average, an auction sale may take between three and six months.

In a privately negotiated transaction, timelines are often less stringent. A deal may take more time, but may also be completed faster, with the main drivers often being how fast due diligence can be conducted (ie, how much time is needed to prepare a data room and how much time a buyer takes for due diligence) and whether merger control is required (with Phase 1 proceedings in Austria taking four weeks).

Legal regulation

Which laws regulate private acquisitions and disposals in your jurisdiction? Must the acquisition of shares in a company, a business or assets be governed by local law?

The most important Austrian statutes are the Austrian Act on Limited Liability Companies, the Austrian Stock Corporation Act, the Austrian Commercial Code and the Austrian General Civil Code.

Typically, transactions involving a sale of companies with their corporate seat in Austria will be governed by Austrian law. However, except for mandatory provisions of Austrian law (see question 12), it is possible that, for example, a share sale and purchase agreement is governed by foreign law. In the case of an acquisition of assets or a business, the application of foreign laws is even rarer, as Austrian law formalities governing the transfer of assets and liabilities must be complied with.

Legal title

What legal title to shares in a company, a business or assets does a buyer acquire? Is this legal title prescribed by law or can the level of assurance be negotiated by a buyer? Does legal title to shares in a company, a business or assets transfer automatically by operation of law? Is there a difference between legal and beneficial title?

In a sale and purchase of shares or assets, a buyer acquires ownership title, which transfers upon completion of the transaction. The rights (and duties) encompassed in ownership title are prescribed by law.

Beneficial ownership is a known concept in Austrian law and most commonly refers to a form of economic rights rather than full ownership title. If shares are held by a trustee, for instance, the trustor would hold beneficial title but, from a (civil) law perspective, the trustee would be the (legal) owner of the shares.

Multiple sellers

Specifically in relation to the acquisition or disposal of shares in a company, where there are multiple sellers, must everyone agree to sell for the buyer to acquire all shares? If not, how can minority sellers that refuse to sell be squeezed out or dragged along by a buyer?

If 90 per cent of the shares of a company are owned by one shareholder (alone or together with affiliates that must, however, have been affiliated for at least one year), upon the request of such core shareholder, the shareholders’ meeting may resolve to squeeze out the remaining minority shareholders. The minority shareholders are entitled to adequate cash compensation.

In addition, in the case of limited liability companies, articles often contain drag-along or tag-along provisions, or both.

Exclusion of assets or liabilities

Specifically in relation to the acquisition or disposal of a business, are there any assets or liabilities that cannot be excluded from the transaction by agreement between the parties? Are there any consents commonly required to be obtained or notifications to be made in order to effect the transfer of assets or liabilities in a business transfer?

Pursuant to the Commercial Code, legal relationships pertaining to a business (or business unit), including liabilities relating thereto, transfer automatically to the buyer unless the seller and the buyer agree otherwise. Third parties have a right to object to such automatic transfer within three months after having been notified of the transaction in writing. In principle, a buyer will also become liable for legal relationships it does not acquire, but the seller and the buyer may agree to deviate from this rule. The General Civil Code, however, contains a (separate and mandatory) joint and several liability of a buyer of assets or a business that cannot be excluded with effect towards third parties. It is customary to address this by requesting an indemnity from the seller or an affiliate of the seller for liabilities not taken over by the buyer.

If a transfer constitutes a transfer of business within the meaning of the Austrian Transfer of Undertakings (Protection of Employment) Regulations 2006 (as amended) (TUPE) equivalent, special protection is also afforded to the employees working (at least predominantly) in the business (unit) concerned. Their employment relationships will transfer automatically, and the termination of employees on account of a business transfer is not permitted.

Consents

Are there any legal, regulatory or governmental restrictions on the transfer of shares in a company, a business or assets in your jurisdiction? Do transactions in particular industries require consent from specific regulators or a governmental body? Are transactions commonly subject to any public or national interest considerations?

Transactions may be subject to merger control clearance by the Austrian competition authorities under the Austrian Cartel Act. A mandatory notification requirement is triggered if:

  • the combined worldwide turnover of undertakings concerned is greater than €300 million;
  • the combined Austrian turnover of undertakings concerned is greater than €30 million; and
  • the worldwide turnover of each of at least two of the undertakings concerned is greater than €5 million.

The above applies unless only one undertaking concerned has a domestic turnover of greater than €5 million, and the combined worldwide turnover of the other undertakings is less than €30 million.

In addition and even if the above criteria are not met, a transaction requires pre-merger approval provided the following four cumulative conditions are fulfilled:

  • the combined worldwide turnover of the undertakings is greater than €300 million;
  • the combined Austrian turnover of the undertakings is greater than €15 million;
  • the value of consideration for the transaction is greater than €200 million; and
  • the target has significant activities in Austria (local nexus).

The Austrian Competition Authority (together with the German Federal Cartel Office) has issued guidelines on the application of this new transaction value threshold.

A mandatory notification to the European Commission will be required in respect of transactions meeting the turnover thresholds set out in the EU Merger Regulation (but no separate filing will then be required in Austria).

Ownership restrictions are rare in Austria, but approval requirements may be triggered if an acquisition (or long-term lease) of real estate is involved (in particular in certain sensitive regions of Austria); and in sectors of national importance, where the acquisition of a stake of 25 per cent or more by a non-EU buyer triggers a need for regulatory approval. Under a proposal published in spring 2019, this threshold is intended to be lowered to 10 per cent. This new Investment Control Act will enter into force during 2019.

Are any other third-party consents commonly required?

Typically, articles of association of an Austrian limited liability company (GmbH) may contain pre-emption or consent requirements of shareholders resulting in a need to obtain waiver or consent declarations for a share transfer. In the case of a transfer of business, the Commercial Code in principle provides for an automatic transfer of legal relationships pertaining to the business (see question 5), subject to counterparty objection rights. For lease agreements subject to the Austrian Landlord and Tenancy Act, a statutory change of control provision applies that entitles the landlord to raise the rent to market level if the current rent is below market level (but no statutory termination right applies). In cases where a company owns real estate, in certain parts of Austria, approval by the competent (regional) Land Transfer Authority may be required.

Regulatory filings

Must regulatory filings be made or registration (or other official) fees paid to acquire shares in a company, a business or assets in your jurisdiction?

A transfer of shares in a limited liability company must be registered in the Austrian companies register. The registration is only declaratory. Stock corporations that are not listed must issue registered shares. Thus, companies must be informed of a share transfer with a view to updating the share ledger.

A transfer of a business (unit) must equally be filed with the Austrian companies register. Again, the filing is only declaratory. If the parties agree to exclude the buyer’s liability for all or certain historical liabilities pursuant to the Commercial Code (see question 5), this liability exclusion must be registered in the Austrian companies register within six months from completion.

Advisers, negotiation and documentation

Appointed advisers

In addition to external lawyers, which advisers might a buyer or a seller customarily appoint to assist with a transaction? Are there any typical terms of appointment of such advisers?

A buyer will almost always appoint an accounting firm to assist with financial and tax due diligence and tax structuring, unless the chosen legal adviser is equally equipped to provide tax advice (a handful of law firms in Austria also provide high quality tax advice). Financial advisers will typically be appointed in an auction process to assist on valuation (on the buyer’s side), and respectively to steer the process (on the sell side). Other consultants may be engaged depending on the nature of the business and the transaction (eg, in cases where specialist industry knowledge is required, for environmental due diligence).

Most advisers request to be mandated on their standard terms of engagement, which typically must be entered into before work can commence. Fees will normally depend on the monetary value of the deal, the complexity of the issues, the timetable for the transaction and the nature of any required work product. In aggregate, fees of external advisers may amount to several percentage points of the monetary value of the deal.

Duty of good faith

Is there a duty to negotiate in good faith? Are the parties subject to any other duties when negotiating a transaction?

While there is no general duty to negotiate in good faith, a failure by a party to inform the other side of circumstances relevant for the transaction may impose a risk of claims for violation of pre-contractual duties (culpa in contrahendo), or entitle the other party to a claim invalidation or adjustment of an agreement based on claims of error, or both.

The directors of a company acting as a party to a transaction are under an obligation to ensure that the actions taken on behalf of the company are in the company’s best interest. They may be held personally liable for a violation of their duties, but since the beginning of 2016, a business judgment rule has been formally introduced into Austrian law. It establishes a ‘safe harbour’ for management and supervisory boards from liability for their actions when taking business decisions, provided that certain conditions are met.

Documentation

What documentation do buyers and sellers customarily enter into when acquiring shares or a business or assets? Are there differences between the documents used for acquiring shares as opposed to a business or assets?

Parties to a transaction will almost always enter into a confidentiality or non-disclosure agreement as the first step in a potential transaction. Depending on the transaction setup (ie, auction process, one-on-one negotiations), further typical documents may include indicative and binding offers, respectively a letter of intent or (typically non-binding) term sheet as well as exclusivity agreements. The core document is the (share or business) sale and purchase agreement, which may be encompassed by ancillary transaction documents such as transitional services agreements, or separate transfer deeds for, inter alia, real estate or trademarks. Depending on the circumstances of the transaction, very often management will also enter into new employment agreements as part of (and a condition to) a transaction.

Are there formalities for executing documents? Are digital signatures enforceable?

Agreements on the sale or acquisition of shares in a GmbH must be concluded in the form of an Austrian notarial deed. This is a special certification requirement that requires the involvement of an Austrian notary public. Austrian law distinguishes between entering into the obligation to sell shares and the actual transfer of the shares. The notarial deed form requirement applies to both steps of a transaction. While both steps may be part of one and the same agreement, they may also be split up (eg, in a share sale and purchase agreement and a separate transfer deed to be drawn up at completion). In the latter case, both instruments must meet the notarial deed form requirement for the transfer of shares to be valid. Notary fees depend on the value of the consideration, but in general, for high value deals, a fixed fee can be pre-agreed with the notary.

A transfer of certain assets (eg, real property, trademarks) requires notarial certification of the authenticity of signatures on the transfer deed (which is, for this reason, sometimes carved out into a separate document from the main asset purchase agreement). In addition, (certified) German translations may be required.

Digital signatures are enforceable subject to compliance with general civil law requirements, but in practice are never used in M&A transactions.

Due diligence and disclosure

Scope of due diligence

What is the typical scope of due diligence in your jurisdiction? Do sellers usually provide due diligence reports to prospective buyers? Can buyers usually rely on due diligence reports produced for the seller?

Buy-side due diligence typically covers financial, tax, legal, commercial and operational matters, and, depending on the nature of the target’s business and the parties involved, may be expanded to strategic or special operational matters, or both (eg, environmental or technical due diligence). Unless a legal fact book is prepared by a seller in preparation for a transaction (which is typically done by private equity sellers in preparation for an auction sale process), due diligence reports are not disclosed to potential buyers. If a disclosure is made, it is always on a non-reliance basis.

Liability for statements

Can a seller be liable for pre-contractual or misleading statements? Can any such liability be excluded by agreement between the parties?

If a seller fails to inform a potential buyer about circumstances relevant to the transaction, it may incur liability for violation of pre-contractual duties or be exposed to a claim of the buyer for invalidation or adjustment of an agreement based on claims of error, or both (see question 10). It is customary to exclude such liability in the final sale and purchase agreement. However, such an exclusion of claims may in itself be subject to challenge if the party acted with wilful misconduct.

Publicly available information

What information is publicly available on private companies and their assets? What searches of such information might a buyer customarily carry out before entering into an agreement?

Publicly available data are limited to information disclosed in the companies register, the land register and Ediktsdatei, the insolvency database.

The companies register provides information on, inter alia, shareholders of a GmbH, its managing directors, supervisory board members and annual accounts, and contains copies of the articles of association and other important corporate records (eg, on capital increases, mergers and de-mergers, etc). In the case of a stock corporation, information on shareholders can be obtained from the companies register only if there is one single shareholder, which must then be registered or (of more limited value) by reference to the most recent list of participants of the annual general meeting, which must be filed together with the minutes of that meeting. In addition, certain entries in the companies register are only declaratory, in particular as regards shareholders of a GmbH, so no reliance can be placed on them. In line with EU law, as regards disclosure of annual accounts, Austrian generally accepted accounting principles allow for limited disclosure in the case of small and medium-sized companies.

The land register shows who owns a certain plot of land and whether any encumbrances have been registered (eg, mortgages or easements). Searches in the land register by information on the owner only are strictly limited and are only permitted in very narrow circumstances. Thus, research as regards property ownership of a company needs to be backed up by due diligence information.

The insolvency database contains a record of whether and when insolvency proceedings have been opened against a person or company. It does not, however, provide a record of a filing for the opening of insolvency proceedings having been made, so a certain potential time lag needs to be taken into account.

Impact of deemed or actual knowledge

What impact might a buyer’s actual or deemed knowledge have on claims it may seek to bring against a seller relating to a transaction?

Except if otherwise agreed in a purchase agreement or in the case of an indemnity, a buyer’s knowledge of a defect would generally prevent the buyer from raising a claim for the relevant matter under Austrian civil law.

It is customary, however, that this statutory concept is amended or specified in private M&A transactions by the share or business purchase agreement (eg, by defining specifically that only the actual knowledge of the buyer and its relevant advisers about matters fairly disclosed during due diligence will exclude claims).

Pricing, consideration and financing

Determing pricing

How is pricing customarily determined? Is the use of closing accounts or a locked-box structure more common?

Both locked-box structures and closing accounts are commonly used. However, in an auction process or a one-on-one negotiation situation where the seller is or believes itself to be in a strong position, typically it will push for a locked-box structure.

Form of consideration

What form does consideration normally take? Is there any overriding obligation to pay multiple sellers the same consideration?

Cash is the most common form of consideration. Exceptions may apply in transactions involving start-up companies where, for example, a re-investment at favourable terms might be used as part of an incentive package for at least the seller’s management to continue in their positions.

Different treatment of the sellers of shares (provided they sell the same class of shares) is almost never seen in practice. However, it may result where, for example, individual sellers have provided shareholder loans or other forms of support to a target company.

Earn-outs, deposits and escrows

Are earn-outs, deposits and escrows used?

Earn-outs, deposits and escrows are very commonly used in private Austrian M&A transactions. In the case of deposits and escrows, typically an Austrian notary public rather than a bank will act as escrow agent. From a transaction timing perspective, it needs to be factored in that the know your customer process in connection with setting up an escrow account may easily take two to three weeks.

Financing

How are acquisitions financed? How is assurance provided that financing will be available?

Acquisitions in Austria are predominantly financed by equity and bank financing. In light of regulatory constraints (commercial lending requires a banking licence in Austria), the availability of alternative forms of financing is somewhat limited, and lending by, for example, funds has been seen only in some very limited instances.

Certainty on financing is obtained either by an equity commitment letter (in a private equity context) or, in other deals, a bank or parent guarantee or letter of comfort. In cases where a special purpose vehicle is used as the buying entity, sellers will typically require that a group company with sufficient financial means at its disposal accedes to the purchase agreement as guarantor.

Limitations on financing structure

Are there any limitations that impact the financing structure? Is a seller restricted from giving financial assistance to a buyer in connection with a transaction?

Under Austrian capital maintenance rules, the granting of up-stream or side-stream guarantees or security interests is subject to limitations. The direct or indirect repayment of share capital to shareholders is prohibited, and shareholders must not claim more than the net profit as evidenced in the latest annual financial statements of the company. Any transfer of corporate assets (in the broadest sense, including benefits such as granting of guarantees or other securities) in violation of the capital maintenance rules is null and void.

Furthermore, the acquisition of own shares is not permitted for Austrian limited liability companies, and is restricted for non-listed stock corporations.

Conditions, pre-closing covenants and termination rights

Closing conditions

Are transactions normally subject to closing conditions? Describe those closing conditions that are customarily acceptable to a seller and any other conditions a buyer may seek to include in the agreement.

The most commonly seen condition is merger control clearance, which, if required, is a mandatory condition. Other regulatory approvals may be required, for example in the event of a contemplated acquisition of land by foreigners or in certain industries (eg, telecoms, healthcare). As to general foreign investment control, see question 6.

Buyers may in addition seek to include conditions relating to a seller’s warranties being true and correct at closing or to address certain specific due diligence findings (eg, third-party approvals under material contracts). It very much depends on the specific circumstances of the individual case whether and to what extent a seller will be prepared to accept such conditions. As a general rule, financing conditions and outstanding internal approvals are only very rarely accepted as conditions, and if they are, such conditions will often be combined with break fee provisions.

Material adverse change conditions are still relatively rare in private M&A transactions in Austria.

What typical obligations are placed on a buyer or a seller to satisfy closing conditions? Does the strength of these obligations customarily vary depending on the subject matter of the condition?

Typically, a party is not under an obligation to guarantee that a condition is fulfilled but only undertakes its (reasonable) best efforts to achieve fulfilment of a condition. A different standard often applies when it comes to merger control clearance, where sellers, in particular in an auction process, will very often try to impose an obligation on the buyer to agree to whatever remedies the competition authority may request in order to obtain clearance (within the shortest possible period of time). It is equally customary, however, for buyers to push back and not to accept such requests.

Pre-closing covenants

Are pre-closing covenants normally agreed by parties? If so, what is the usual scope of those covenants and the remedy for any breach?

Pre-closing covenants are a standard feature of private M&A transactions in Austria. Normally, at the least, they comprise the undertaking of the seller to ensure that the business of the target continues to be conducted in the ordinary course. This may be specified to varying degrees of detail, depending in particular on whether merger control clearance is required. The level of detail may reach certain (types of) business measures (such as hiring or dismissing of employees, investments, capital expenditure), if permissible. Changes to the target’s articles of association, including capital measures, and the pursuing of alternative transactions, are almost always prohibited.

The standard remedy for a breach of such covenants is normally a claim for damages or indemnification, which typically is not subject to de minimis, threshold or cap limitations as to amount.

Termination rights

Can the parties typically terminate the transaction after signing? If so, in what circumstances?

A right to terminate a share or business sale transaction after signing is normally limited to very narrow circumstances, the most common one being a termination right if closing has not occurred on or before an agreed long-stop date. Other circumstances generally foresee a termination right only if a condition is not fulfilled or if the purchase price is not paid when due.

Are break-up fees and reverse break-up fees common in your jurisdiction? If so, what are the typical terms? Are there any applicable restrictions on paying break-up fees?

Break fees are increasingly seen in Austrian private M&A deals, taking the form of liquidated (contractual) penalties payable by the buyer to the seller, or vice versa under certain circumstances. The most relevant occurrence is in auction processes if, for example, a buyer is selected as the winning bidder, which carries certain merger control clearance risks.

Representations, warranties, indemnities and post-closing covenants

Scope of representations, warranties and indemnities

Does a seller typically give representations, warranties and indemnities to a buyer? If so, what is the usual scope of those representations, warranties and indemnities? Are there legal distinctions between representations, warranties and indemnities?

A seller typically gives representations and warranties, and may in addition provide indemnities to a buyer. Representations and warranties are generally given on fundamental and business matters covering a scope comparable to M&A transactions in other jurisdictions. The exact scope will depend on the negotiating position of the parties. Generally, representations and warranties covering capacity and authority and (unencumbered) title to the shares or assets will not be capped, or will at most be capped at 100 per cent of the consideration payable. Claims under representations and warranties are generally irrespective of fault of the seller and subject only to limitations specifically agreed in the purchase contract. Under statutory Austrian civil law, the amount of a claim for breach of representations and warranties would be calculated by comparing the value of the (acquired) asset taking into account the defect with the value disregarding such defect. This is typically considered a cumbersome and inadequate methodology for M&A transactions, and thus parties generally agree on a computation of claims on a euro-for-euro basis. It is a matter of negotiation whether lost profit, indirect and consequential damages are recoverable.

Indemnities will normally be provided to address specific matters of which the parties are aware at the time of the transaction and for which the buyer wishes to seek protection or compensation (most importantly, historical tax exposure, but also the outcome of a particular litigation, environmental risk, etc).

Limitations on liability

What are the customary limitations on a seller’s liability under a sale and purchase agreement?

A seller’s liability is typically limited both in amounts and in time. This means that the parties generally agree that claims under business warranties can only be brought during a period of between 12 and 24 months following closing, whereas the limitation periods for fundamental warranties relating to, inter alia, title to shares, capacity and authority normally last much longer (up to 10 years). It is not uncommon that, depending on the nature of the business and key deal drivers, individual business representations (or areas of business representations) are subject to (considerably) longer limitation periods. Claims relating to taxes are often tied to statutory limitation periods, or at least benefit from extended time limitations (between five and 10 years is customary).

As regards limitations in amounts, it is customary for purchase agreements to foresee that claims cannot be brought unless they reach or exceed a certain de minimis amount, and even if they do, they will be recoverable only if all claims together in addition exceed a certain threshold. It is a matter of negotiation whether in such case only amounts exceeding the threshold or the entire amount can be claimed. A general liability cap for claims arising from business warranties in a range between 10 per cent and 30 per cent of the consideration paid is also common. Fundamental warranties and indemnities are typically not subject to limitations in amounts, and pre-closing covenants are also generally exempt from these limitations (see also question 24).

Other customary limitations include an exclusion of claims (relating to business warranties) for matters fairly disclosed by the seller during due diligence, knowledge qualification and provisions governing the conduct of claims by the buyer and the target company following closing.

Transaction insurance

Is transaction insurance in respect of representation, warranty and indemnity claims common in your jurisdiction? If so, does a buyer or a seller customarily put the insurance in place and what are the customary terms?

Warranty and indemnity (W&I) insurance is increasingly seen in Austria, in particular in transactions involving a private equity seller. Given the sometimes comparatively small deal size of transactions on the Austrian market, parties need to be aware that, in particular, in smaller transactions, the cost of insurance and the related process implications (both cost and timing wise) may work as a bit of a deterrent to implementing W&I insurance but given the competitive prices offered by W&I insurance providers, this is increasingly less of an issue. The decision on whether to implement W&I insurance needs to be taken on a case-by-case basis. Insurance is quite common in real estate transactions and, more generally, auction processes. However, in technology driven transactions, experience shows that the insurance products often only provide limited coverage (in particular when software is involved) and parties are well-advised to consider this early during a process to avoid disappointment and stranded costs.

The rate on line is often around 1 per cent of the policy limit with a certain minor percentage of the deal value as retention amount. Special elements such as a synthetic tax indemnity or a protection against environmental exposure will be separately priced and will add to the cost. For small transactions, insurers will typically request a minimum fee or reimbursement of expenses of their advisers, or both, in particular if ultimately no policy is obtained.

Post-closing covenants

Do parties typically agree to post-closing covenants? If so, what is the usual scope of such covenants?

Typical post-closing covenants comprise non-compete and non-solicitation undertakings of the seller, certain document retention and, for example, the conduct of claims undertakings by the buyer to the extent these relate to pre-closing periods and may result in claims against the seller under the transaction. Non-compete covenants must be limited in scope to what is required to allow the buyer to derive the full value from the acquired business. In general, this is deemed to be the case if the restrictions are put in place for a period of two years from closing in the geographical area in which the target company was active at closing. Three years may be justified if know how is transferred and such longer period is necessary to derive the full value of such know how.

Tax

Transfer taxes

Are transfer taxes payable on the transfers of shares in a company, a business or assets? If so, what is the rate of such transfer tax and which party customarily bears the cost?

There is no special share or business transfer tax. However, Austrian real estate transfer tax (RETT) may be triggered in the case of an acquisition of Austrian real estate directly; at least 95 per cent of the shares of a real estate holding company being consolidated in one hand or in a tax group; or transfers of at least 95 per cent of the shares in a partnership owning Austrian real estate over a five-year period. RETT on direct acquisitions of real estate is generally 3.5 per cent of the purchase price (in addition, 1.1 per cent land register fees apply). RETT on indirect acquisitions (via a real estate holding company or partnership) is 0.5 per cent of a specific tax value, which is generally lower than the market value of the real estate.

In the case of a transfer of a business or assets, certain transactions (eg, assignments of rights and receivables or sureties) may be subject to Austrian stamp duty if a written document evidencing the transaction is drawn up and Austrian nexus exists.

Regarding RETT and stamp duty, both parties may generally be held liable towards the tax authorities. However, it is customary to agree that the purchaser will have to bear any transfer taxes.

Corporate and other taxes

Are corporate taxes or other taxes payable on transactions involving the transfers of shares in a company, a business or assets? If so, what is the rate of such transfer tax and which party customarily bears the cost?

Corporations are subject to corporate income tax of 25 per cent on capital gains realised on the sale of shares, a business or assets. Austrian corporations may enjoy tax-exempt capital gains on shares based on a special participation privilege if:

  • shares in a foreign corporation are sold;
  • the shareholding is at least 10 per cent;
  • the shares are held for more than 12 months;
  • the foreign corporation did not generate passive income in low-tax jurisdictions; and
  • the Austrian corporation did not opt for the shareholding being tax effective.

In cross-border situations, corporations may be exempt from Austrian corporate income tax on capital gains based on a double taxation treaty.

Business or asset deals are generally subject to value added tax (VAT), while a sale of shares is exempt from VAT. The applicable VAT rate depends on the assets being transferred. Most assets (including goodwill) are subject to the standard 20 per cent rate, while certain assets are subject to a reduced 13 or 10 per cent rate. VAT (if any) is generally borne by the purchaser.

Employees, pensions and benefits

Transfer of employees

Are the employees of a target company automatically transferred when a buyer acquires the shares in the target company? Is the same true when a buyer acquires a business or assets from the target company?

In the case of a share transfer, the employment relationships of employees of the target company are not affected and their employer does not change. It is customary market practice that employees are informed of a transaction upon public announcement before closing.

In the case of a transfer of a business (unit), under the Austrian equivalent of the TUPE regulations, the employment relationships of those employees working in the transferred business (unit) transfer automatically to the buyer. Termination of employees on account of a business transfer is not permitted. Transferring employees have no general objection right in the case of a business transfer, but veto rights may arise if certain special rights or entitlements are not taken over by a buyer.

Notification and consultation of employees

Are there obligations to notify or consult with employees or employee representatives in connection with an acquisition of shares in a company, a business or assets?

There is no obligation to notify employees in the case of a share deal, although a communication upon completion (a ‘town hall’ meeting) is customary. In the case of a transfer of a business (unit), the works council, or if no works council is established, the affected employees, must be informed in writing in advance of the transfer. The Austrian rules do not set forth a specific time period when such information must be provided. In practice, information is typically provided in a way and at a time that ensures transaction confidentiality (eg, upon signing and prior to closing).

Transfer of pensions and benefits

Do pensions and other benefits automatically transfer with the employees of a target company? Must filings be made or consent obtained relating to employee benefits where there is the acquisition of a company or business?

Company-based pensions (if any) and other benefits remain with the target company in the case of a share deal unless expressly agreed otherwise. In the case of a transfer of a business (unit), they generally transfer to the buyer unless the buyer objects to such transfer. An objection by a buyer to accept a transfer of a company-based pension would entitle the employee concerned to veto the transfer of his or her employment relationship to the buyer.

Under Austrian social security regulations, in the case of a change of employer (ie, in particular in a business transfer), a re-registration of employees with their new employer is required. This must be done without delay immediately upon the transfer.

Update and trends

Key developments

What are the most significant legal, regulatory and market practice developments and trends in private M&A transactions during the past 12 months in your jurisdiction?

Key developments36 What are the most significant legal, regulatory and market practice developments and trends in private M&A transactions during the past 12 months in your jurisdiction?

The past 12 months were very active on the Austrian private M&A market and participants saw a number of high-profile and high-value transactions, including the US$3.25 billion acquisition of GE’s Distributed Power business (now INNIO) by Advent International, the €881 million acquisition by Daikin Europe of AHT Cooling or the US$2.5 billion acquisition of a 15 per cent stake in the Abu Dhabi National Oil Company by OMV. Other noticeable private M&A deals, for instance, included the acquisition of a minority stake in Austria’s largest daily paper, Kronen Zeitung, by SIGNA Holding (via a partnership with FUNKE Medien). In addition, the traditionally strong mid-market saw ample activity. On the distressed side, the insolvencies of Kika/Leiner, Waagner-Biró, Charles Vögele and Rosenberger resulted in notable deal flow.