Flexible corporation (FlexKapG or FlexCo) – the new Austrian corporate form in practice

With the introduction of the FlexCo at the beginning of 2024, the Austrian legislator has created a future-oriented company form that is specifically tailored to the requirements of modern companies and start-ups. The aim of this reform was to make the rigid structure of traditional company forms more flexible while at the same time providing a legally secure basis for entrepreneurial activity.

Here are the most important aspects of the FlexKapG and the FlexCo:

The FlexKapG or FlexCo represents a hybrid corporate form, which is located between the classic models of the limited liability company (GmbH) and the joint-stock company (AG). It combines elements of both legal forms, in particular the limited liability of the shareholders and a flexible capital structure. This opens up the possibility of reacting to volatile market conditions while at the same time ensuring the legal certainty expected by creditors and (venture capital) investors.

Capital structure

The minimum share capital of FlexCo is €10,000, of which €5,000 must be paid up in any case. What is new is that the minimum capital contribution is now €1 instead of €70, whereby company value shares only have to show a minimum nominal amount of €0.01.

Another new feature is the option of providing for different classes of shares. This makes it possible to endow these different shares with different voting rights or rights to profit distributions.

In addition, so-called company value shares can still be provided for up to 25% of the share capital. These are non-voting shares with legally standardised tag-along rights.

Finally, there is the possibility that FlexCo may also hold its own shares under certain circumstances.

Financing

Another major advantage of the FlexCo is the easier access for investors. On the one hand, this includes the instruments ‘conditional capital increase’ and ‘authorised capital’ based on the AG, and on the other hand, the ‘other forms of financing’ contained in Section 22 FlexKapGG. These essentially include convertible bonds and participating bonds, option rights and similar financing instruments.

Simplification of formal requirements

In addition, the formal requirements have been adjusted. Thus, company value shares can be acquired and transferred in writing. Other share transfers and takeover declarations (e.g. in the case of capital increases) no longer necessarily require the form of a notarial deed; instead, a deed drawn up by a lawyer or notary is sufficient. This should speed up the assignment process, but also make it more legally secure, as there is no longer a risk that supposedly small violations in the execution of the notarial deed will lead to the invalidity of the legal transaction.

Simplified decision-making

The decision-making process for shareholders has been simplified to the extent that only text form (e.g. email) is required for voting. It is also easier to pass circular resolutions. Shareholders can no longer object to voting in writing and thus block circular resolutions as long as they are given the opportunity to participate in the vote.

All this makes the FlexCo significantly more attractive for venture capital investors.

Potential disadvantages

Where there is light, there is also shadow. Although the FlexCo offers considerable advantages, its introduction also raises legal questions. The GmbHG is applicable to the FlexCo on a subsidiary basis. This means that a large part of the case law on the GmbH and the AG – with regard to the forms of financing based on the AG – can be used to answer legal questions. However, there is no case law on the newly introduced points and it will take some time before there is certainty as to how the law is to be interpreted.

It should also be mentioned that a supervisory board must be set up as soon as a company reaches a medium-sized corporation (exceeding at least two of the three characteristics: €350,000 in total assets, €700,000 in sales revenues, an average of 10 employees).

Conclusion

The introduction of the FlexCo marks a significant step in the modernisation of Austrian company law. It offers companies increased flexibility, which can be a decisive advantage, particularly for technology-oriented and high-growth companies. At the same time, it remains to be seen how the FlexCo proves itself in practice and which legal questions will arise in the course of its application and to what extent the legislator will tighten up in the event of any deficits that arise.