Austria: Innovative market, straightforward investment

Austria is, even in times of European economic challenges, an innovation driven market which offers a lot of possibilities for far-sighted investors. Thanks to an investment treaty signed in 2001, investors from India and Austria enjoy equal legal treatment.

Small to medium-sized companies, which are mostly family owned or run, are the core of Austria’s economy and investors are welcome to help them expand.

Few limitations

Foreign investors who intend to buy an Austrian company require clearance from the Department of Commerce only in cases where the target is involved with the defence industry, energy or water supply, or public utility infrastructure.

Clearance from the department must also be obtained for investments in banks, companies quoted on the stock exchange, companies which deal with games of chance, and private broadcasting services. Another sensitive topic is the employment of foreign personnel. This is regulated by a special act, which allows relaxations for key employees who have special knowledge or experience.

When it comes finding the right object for an investment, the Austrian Chamber of Commerce and special consultants can provide helpful information and contacts.

Legal issues

As elsewhere, the purchase of a company may be designed as a share or asset deal.

The sale of shares of a limited company, called GmbH, must be acknowledged and published in the commercial register. In a share deal, to enjoy the advantages of keeping up the contractual relationships, contracts need to be checked to see if they contain “change of control clauses” or if the share deal itself could be grounds for the contract partner to terminate the agreement.

In an asset deal, the buyer will face multiple liability regulations, under different acts. Some of these liabilities can be shifted by contract but most are compulsory. According to the civil code, contractual partners must generally approve the succession when the intention is to keep up the business.

Employment contracts also must be transferred to the new entity. Under Austrian labour law, terminating an employment relationship can be costly and time consuming.

Gautam Khurana is the managing partner at India Law Offices. Markus Leitner is a partner at F|A|M Frimmel Anetter Maiditsch Rechtsanwälte GmbH. The firms are members of the Warwick Legal Network and collaborate for market entry and other legal assistance for Indian and Austrian companies in both markets.