Digital GmbH formation

Not Only Formations: Digital Authentication by NHP Notaries

With the entry into force of the 4th COVID-19 Act (4. COVID-19-Gesetz), it is now possible for a large number of notarial authentications to be carried out digitally. That created an alternative to traditional authentication which requires parties to appear in person before the notary to have their signatures certified or a notarial deed drawn up.

Pursuant to section 90a of the Austrian Notaries Act (Notariatsordnung; NO), notarial or other public deeds or officially certified documents may be executed digitally in order to prevent the further spread of COVID-19. The process is basically like that involved in the digital formation of a GmbH within the meaning of section 69b of the Austrian Notaries Act.

As in the case of a digital formation, the notary creates a secure data room where the documents that need to be signed and certified are uploaded. To get access to such a data room, the parties, upon being invited by the notary, have to go through a video identification process (WebID) which must be in compliance with the requirements both pursuant to section 69b, subsection 2, Austrian Notaries Act, and the Austrian Regulation on e-Identification by Notaries (Notar-E-Identifikations-Verordnung; NEIV). The personal data required must be made available to the notary by filling in a personal data form.

As demand is on the rise, it may take up to three days until the web identification process has been completed and access to the data room is activated. We are happy to provide you with further information on the process of web identification upon request once you have been invited to the data room.
Only when all parties involved have access to the data room can the electronic authentication be carried out by the notary by means of a video conference. The parties will be invited to that video conference by the notary in good time before the appointment.

The executed instrument will be in the form of an electronic document only, with no original existing in paper form.
Pursuant to section 69b, subsection 3, Austrian Notaries Act, it is essential that there is a permanent real-time video and audio connection with the notary during authentication. If the connection is temporarily interrupted, the notary shall halt the authentication process and shall not continue before the connection has been fully restored. This does not only apply to the drawing up of notarial deeds but also to mere certifications of signatures during which the notary also has to visually compare the document transmitted to him or her electronically and the signed document in the possession of the party (section 79, subsection 9, Austrian Notaries Act).
Compliance with both the legal provisions and the technical security requirements thus gurarantees that the notary is able to reliably fulfil his or her duties of identification as well as his or her duty to provide all the parties concerned with information and advice. That is why digital authentication by means of applications such as WhatsApp, Signal, etc. is not possible.
Nhp notare was the first notaries office in Austria in October 2019 to carry out a digital formation of a company with limited liability and was thus able to acquire considerable experience in this new field of electronic notary services.
Since the 4th COVID-19 Act and the regulations related thereto have come into effect, the notaries at nhp notare have already assisted their clients with a capital increase of a GmbH during which both the shareholders’ meeting and the declaration of acquisition were executed in the form of a digital notarial deed and a new managing director was appointed (digitally)
In addition, nhp notare have already carried out a digital authentication of the annual general meeting of an unlisted public limited company.

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On 08 October 2019, the first digital GmbH formation was performed by NHP notaries.

Since that time, persons intending to establish a GmbH are no longer required to be physically present at the notary’s office as the necessary steps can now be performed online via video conference with the notary.

Therefore, the prospective founders need to go through an identification process. In order to do so, they receive an invitation via email and mobile phone to register and establish their identity through a process called VideoIdent. NHP Notare then receive the relevant identification data in a virtual data room which was specifically created for establishing the respective GmbH. The digital formation process requires a mobile phone signature which, in case the said signature is not yet available, is created by the virtual data room provider
. The following conversations between founder and notary take place via video conference in the virtual data room. It is crucial that the internet connection is not interrupted during the identification process and the video conference. In a next step, the Articles of Association of the Company are being read out and thereupon executed by the notary by using the mobile phone signature in the virtual data room. The notary renders his official signature by using a particular signature card.

Upon completion of the formation process, an authentic electronic document is created, which is available in its initial digital form, that means it is not necessary to make printouts or scans. The signed documents are subsequently submitted to the companies’ register court in digital form.

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The coming into force of the Elektronische Notariatsform-Gründungsgesetz ENG (Act on Electronic Notarial Form) initially allows the execution of notarial deeds in Austria/ initially allowed for Austrian notarial deeds to be drawn up without requiring the parties involved to be physically present at the notary’s office. Under this Act, founders of a company are able to establish a company by means of a secure video link connecting them with the notary in order to draw up a notarial deed electronically or digitally.

The registration of a company with limited liability with the Companies’ Register requires the conclusion of a written Articles of Association or a declaration of establishment. This document needs to be drawn up in accordance with the formal requirements of a notarial deed pursuant to Section 4 Subsection of the Austrian Act on Companies with Limited Liability.
The purpose of these formal requirements is the shareholders’ protection by the notary’s obligation of advising and instructing.
Drawing up documents in form of a notarial deed also protects the general public because it ensures legal certainty and reliability of business transactions/contracting capacity.

According to the explanatory remarks to the ENG, a reliable identification of the parties by the notary and the verification and due diligence obligations that need to be fulfilled by the notary are not only an essential part of guaranteeing legal certainty, but also crucial for avoiding misuse of the services provided by the notary for the purpose of money laundering and financing terrorism.

The obligation of executing a notarial deed also applies to amendments of the Articles of Association prior to the registration of the company with the Companies’ Register (addendum to the Articles of Association). It is likely that the ENG will also be applicable in that case.
According to the prevailing opinion, the form requirements are given only by the execution of an Austrian notary.
The procedure is facilitated by the digital establishment and provides the founders of a company with easier access to the required form of the notarial deed.

In the detailed remarks to the ENG, it is also stated that in private issues the joint physical presence of all parties involved usually poses few difficulties, but rather raises difficulties in the context of the establishment of companies.

In many cases, a power of attorney is used in the context of establishing a company. The complexity therein is the fulfilment of certain form requirements (authentication, perhaps an additional Apostille) and the fact that the principal of the said power of attorney is not able to personally make use of the advice provided by the notary.

Pursuant to Section 4 Subsection 3 of the Austrian Act on Companies with Limited Liability, powers of attorney for establishing a company are to be based on the relevant power of attorney issued for each business transaction that needs to be attached to the agreement. This often results in challenges for the founding shareholders required to demand a power of attorney signed and certified abroad and to be submitted to the certifying notary in time.

In the draft of the EN it is therefore recommended that the Articles of Association of a company with limited liability may also be executed pursuant to the technical provisions in form of an electronic notarial deed by using electronic means of communication such as audio or video formats.

At the same time, the notary has to fulfil stringent requirements regarding the obligations of identification and due diligence. In case of non-fulfilment of these obligations, the notarial deed must not be drawn up using electronic means of communication.

Consideration is also given to the authentication of signatures required in connection to the establishment of a limited liability company (sample signatures, shareholders’ resolutions, registration with the Companies’ Register, power of attorney, etc.). These authentications may also be rendered digitally by using a secure video link. In such special cases of a required authentication of a handwritten signature, or an electronic signature, the ENG provides the option that the notarisation of the authenticity of the signature, or of electronic signature, rendered by the notary may exceptionally also be performed in case a party is absent.