Structure and process, legal regulation and consentsStructure
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.