Company Law, Corporate Law, Companies Register
Company and corporate law are among the core fields of expertise of a Civil Law Notary, whether a company or a partnership is to be established, the legal structure changed or the ownership transferred. In all cases a Civil Law Notary is able to assist as an impartial and expert adviser.
A Civil Law Notary will find a made-to-measure solution for entrepreneurs and enterprises, that will persist, weather new challenges, and are flawless regarding both formal requirements and material effects by balancing the respective interests. This is the only way to avoid later uncertainty which can lead to legal conflict and litigation.
Direct access to the company register ensures that a Civil Law Notary is always up-to-date.
He can assist in accessing all the relevant legal data of all entities registered in the company register. As Court Commissioner a Civil Law Notary is able to make certified excerpts form the company register and to confirm the authority of a person to sign for a legal entity.
Branch office or subsidiary?
The following article describes the fundamental differences between the formation of a domestic branch office of a foreign company and the formation of a domestic subsidiary by a foreign parent company. The description given primarily focusses on company law aspects, making no claim to be exhaustive.
First of all, it is necessary to mention that a branch office does not constitute an entity with legal capacity, for this reason it cannot exercise rights and is not subject to obligations. It can neither be contracting party (due to that it cannot be registered with the Land Register), nor can it individually become insolvent.
In contrast to that, a subsidiary constitutes an independent legal entity, having the capacity to also appear as such in legal relations.
For establishing a subsidiary, the general provisions regarding the formation of a company with limited liability (GmbH) in accordance with the Austrian Limited Liability Companies Act (GmbHG) must be observed. In this regard, the provisions on raising the share capital, which needs to amount to at least € 35,000, half of which is payable in cash, particularly apply. Another option is the foundation privilege (Gründungsprivilegierung), for which the share capital also needs to amount to at least €35,000, but the total amount of the initial contributions subject to the foundation privilege only amounts to €10,000, half of which is payable in cash. This option results in significant cost savings in the foundation phase (The foundation privilege must already be used in the course of the formation procedure and will be valid for 10 years only. After this period, the articles of association need to be adapted and the initial contributions are payable pursuant to the general capital raising provisions).
The following documents are required in order to establish a subsidiary:
- execution of articles of association in the form of a notarial deed
- proof of power of representation of the relevant actors of the parent company (for example by submitting a certified companies’ register extract, if necessary translated and apostilled
- shareholders’ resolution on the appointment of managing directors (signatures must be certified)
- specimen signatures of the managing directors (signatures must be certified)
- confirmation on the paid initial contributions, issued by a bank or a Civil Law Notary
- companies’ register entry (signatures must be certified)
Due to the branch office’s absence of legal capacity, provisions on raising the capital do not need to be considered when establishing a branch office. Instead, the branch office’s existence depends on the decisions and the legal fate of the head office, this is why it is not necessary to conclude separate articles of association.
However, the following documents need to be submitted to the Companies’ Register Court within the course of the formation procedure:
- articles of association of the foreign legal entity, if necessary provided with a certified translation and an apostille
- proof of legal existence of the foreign legal entity (e.g. by submitting a certified companies’ register extract, if necessary provided with a certified translation and an apostille
- resolution on the appointment of a “permanent representative” of the domestic branch office
- specimen signatures of the permanent representative and the entities of the head office having power of representation (signatures must be certified)
- clearance certificate issued by the Tax Office, if necessary
- proof of the effective establishment of the branch office (e.g. by submitting a rental agreement of the business premises of the domestic branch office)
Due to the subsidiary’s status of an independent legal entity, relevant amendments to the parent company (in particular amendments to the articles of association) do not have to be taken into account. In contrast to that, with regards to branch offices, any amendment to the articles of association or any change in the managing board of the foreign head office has to be notified by submitting the required documents (again provided with a certified translation or an apostille if needed).
For a limited liability company (GmbH), the accounting provisions of the Austrian Business Code (UGB) apply, for that reason the annual financial statements are to be filed with the Companies’ Register annually within due time. No separate annual financial statements are required for a domestic branch office, however, separate accounting is necessary for the determination of taxable profit and the annual financial statements of the foreign entity must be submitted.
A domestic branch office is terminated by resolution of the head office, only the submission of a tax clearance certificate by application to the companies’ register (signatures must be certified) is required.Terminating a subsidiary slightly involves more effort, as the Austrian Limited Liability Companies Act (GmbHG) stipulates certain form requirements and to some extent tedious procedures, which are to be adhered to.
A direct comparison:.+
|BRANCH OFFICE||SUBSIDIARY (GmbH)|
|No separate legal personality||Independent legal entity|
|No raising of share capital||Usually share capital of €35,000 ; possibility of a foundation privilege (Gründungsprivilegierung) (€10,000, €5,000 of which are immediately payable in cash)|
|Proof that a branch has been established, that business premises exist, etc.||No documentation of business operations required|
|Numerous documents must be submitted to the Companies Register Court, many of which must be translated and notarised||Usually only articles of association required, possibly notarised powers of attorney of the foreign managing directors; digital formation possible from abroad|
|The Austrian companies register rules apply, but in some cases there is “more leeway” with respect to the company name (due to freedom of establishment) GesRZ 2011, 306||The Austrian companies register rules apply|
|Representation by the organ of the foreign legal entity authorised to represent the branch office (e.g. managing director, managing board).
A “permanent representative” (section 107, subsection 2, GmbHG, section 254, subsection 2, AktG) may be appointed for EEA legal entities
|Appointment of a managing director|
|BRANCH OFFICE||SUBSIDIARY (GmbH)|
|BRANCH OFFICE||SUBSIDIARY (GmbH)|
|Any amendment to the articles of association or any change of the managing directors of the legal entity, for instance, must be registered with the Austrian companies register||Only changes concerning the subsidiary itself must be entered in the companies register|
|Despite its lack of legal capacity, a branch is a taxable business (subject to corporation tax).
Annual financial statements of the foreign legal entity in German (considerable translation costs in the case of extensive financial statements) must be submitted, even if the foreign law does not provide for this! Section 280a of the Austrian Business Code (UGB); Vienna Higher Regional Court (OLG) (GES 2006, 20)
Although no separate annual financial statements are required for the branch office, separate accounting is necessary for the determination of taxable profit.
|Accounting and annual financial statements in accordance with the Austrian Business Code (UGB)|
|Generally higher costs for legal advice as foreign law is always involved||In principle, only Austrian law applies (higher legal certainty)|
|Limited tax liability (section 98, Austrian Income Tax Act [EStG]) with corporation tax at 25%, no minimum corporation tax; bear in mind possible DTAs (double tax treaties) with the state in which the company is registered||Independent taxable entity, corporation tax imposed on profits at 25%, corporation tax at 5%, corporation tax of a minimum of €1,750 but unlimited carry-forward; capital gains tax imposed on distributions of profit at 27.5%|
|Operation in accordance with the Austrian Labour Relations Act (ArbVG), including the possibility of a works council (sections 31 and 40, ArbVG)||Operation in accordance with the Austrian Labour Relations Act (ArbVG), including the possibility of a works council (sections 31 and 40, ArbVG)|
|Dissolution/deletion by resolution of the head office.
Unable to file for insolvency for lack of legal personality; if the foreign legal entity becomes insolvent, the insolvency proceedings may be conducted in Austria (see European Insolvency Regulation).
|Dissolution/liquidation in accordance wtih the provisions of the Austrian Limited Liabilities Companies Act (GmbHG)
Required in the event of dissolution, in particular as a result of a shareholders’ resolution: