The active participation of the startup scene in the current review phase is an important factor in ensuring that the key points of the package are retained in the parliamentary process and that potential improvements become visible – both for the current process and for the future. It would therefore be desirable for as many startups as possible to submit comments by July 7.


How to submit an opinion?

Opinions can be submitted online via the Parliament’s website. You can also access the opinions of others and support them with your approval. The Startup Package contains 2 different draft laws, that will be reviewed separately from each other – so depending on the content of your opinion, you may want to submit it to both review processes:

New Legal Form

Flexible Capital Company Act (276/ME):

Tax Employee Participation

Start-Up Promotion Act (275/ME):

Our assessment of the new legal structure

Initial situation

  • The Austrian GmbH is not internationally competitive. It offers little flexibility, outdated formal requirements and generally a lot of bureaucracy in raising capital & employee participation. 
  • The Austrian stock corporation requires a high initial capital (€ 70,000), is cost-intensive and has a high organizational complexity. 
  • The Flexible Kapitalgesellschaft brings first improvements to compensate for the lack of flexibility of the GmbH in raising capital and employee participation as well as the cost-intensive complexity of the AG. It is thus a form of company that is somewhat better adapted to modern business needs.


Key Improvements

  • Corporate Value Shares (UW-A) offer employees the option of a separate non-voting share class. Participants in the Corporate Value share class (UW-B) are not liable for any default or obligation to make additional contributions. 
  • The transfer of UW-A shares can be made in writing (no notarial deed). This simplifies vesting programs. UW-B are not registered individually in the Commercial Register, but in a share register of the company. This must be submitted to the commercial register once a year.
  • For the first time, the formal requirements have been relaxed slightly: when shares are transferred, a lawyer can now draw up a private deed instead of a notarial deed. In some cases, this will eliminate the need for a notary. -> Important door opener for further debureaucratization in the future.
  • Circular resolutions can be passed more easily: Participation of a majority of votes is sufficient, as is the use of “digital signatures” via e-mail.
  • The company may also acquire its own shares (previously only permitted in exceptional cases).
  • Shareholders can vote in advance to increase the share capital, which is then carried out under certain conditions (conditional capital increase).
  • The shareholders may authorize the management to increase the share capital in advance for a maximum period of five years (authorized capital increase).
  • The issuance of financial instruments with subsequent subscription or conversion rights is expressly permitted by law.
  • Reduction of the share capital to EUR 10,000. This avoids the cumbersome regulation of the foundation privilege and allows to benefit from a lower minimum corporate income tax for a longer period of time.
  • Reduction of the minimum capital contribution from EUR 70 to EUR 1.


Main points of criticism or wishes for the future 

  • The formation process has not really been de-bureaucratized compared to the GmbH. The formation still requires a notarial deed and numerous certifications (specimen company signature, appointment of directors, registration in the commercial register). A “simplified formation” (without notarial deed) is still only possible for a one-person formation. 
  • 10,000 minimum capital is still quite high by EU standards. Many other EU countries offer comparable legal forms with much lower capital requirements. The European Model Law EMCA recommends no minimum capital.
  • Capital increases have been simplified only to a limited extent. Although a private deed is sufficient for the declaration of acceptance of the shares, a notary is still required for the certification of the resolution on the capital increase and the certification of the registration in the commercial register. The relaxation of formal requirements should be extended to all documents related to the capital increase. 
  • In general, there is still a lot of potential for further steps with regard to formal requirements. In the future, we would like to see more far-reaching reforms in this area, so that one day a lawyer’s certificate will no longer be required and the company registration procedure will be significantly less bureaucratic. 
  • There are some aspects of the new employee share class that unnecessarily restrict private autonomy. At present, the Enterprise Value shares are artificially capped at 25% and there is a statutory tag-along right for Enterprise Value shareholders if more than 50% of the shares of the founding shareholders are sold – this is unusual internationally and could make partial exits more difficult.
  • In order to become more attractive to international founders and investors, it would make sense to allow English-language proceedings in commercial disputes, including the company register, English-language articles of association and model registrations.


Our assessment of employee share ownership for tax purposes

Initial situation

  • Employees play a key role in the success of any company – even more so for startups. In order to attract the brightest minds, it is common practice internationally for startups to give employees an equity stake in the company.
  • This aligns the incentives of founders, investors and employees, and distributes the proceeds of a potential exit more equitably within the company. This promotes team cohesion and makes startups more competitive internationally.
  • In Austria, employee share ownership schemes are currently mostly solved by replicas under the law of obligations (phantom shares, virtual shares), which are associated with high legal costs and effort.
  • Taxation is usually at the full wage tax rate, which makes employee share ownership in Austria unattractive by international standards. 
  • In addition, the timing of taxation and the tax base are often unclear, which can lead to a dry taxation of income. Employees may be subject to tax even though they have not received any cash.


Main improvements

  • The problem of dry income is largely solved. There is a basic deferral of taxation until the inflow to the employee. This also eliminates the valuation problem when the shares are issued.
  • There is a significantly improved flat tax rate – only ¼ is taxed on the basis of wage tax, the remaining ¾ is taxed by means of capital gains tax (27.5%).
  • There are also significant reductions in social security contributions through manageable lump sums. 
  • In the case of employees leaving the company, it is also possible to defer taxation on the termination of the employment relationship if the company is liable for correct taxation in the event of an exit.


Key criticisms and wishes for the future

  • The current draft requires that the shares be held for at least 5 years and the employment relationship be for at least 3 years. These periods do not reflect the reality of startups and are in any case too long. Shorter periods (maximum 2 years minimum holding period & 1-year minimum employment) are more common internationally, so that industries with a faster time to exit and employees who join later are not disadvantaged.
  • Similarly, it does not make sense to limit the benefits to companies with less than 100 employees, less than EUR 40 million turnover and less than 10 years old. Even successful scale-ups need an attractive employee financial participation scheme to survive in the international competition for the brightest minds. 
  • The flat-rate withholding tax is an important step in the right direction, but it is also unnecessarily complicated. It would be more appropriate to apply the 27.5% capital gains tax rate uniformly.



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