Enterprising Changes: Reform of the Commercial Code - International Law Office

Concept of 'Entrepreneur'
Creation of Company Names
Partnerships
Registration in Commercial Register
Accounting
Other Changes

On January 1 2007 a comprehensive modernization of the Commercial Code came into force. The name of Commercial Code - which previously could be translated literally as the Merchant Code - has been changed to the Enterprise Code. This update considers the key changes.

Concept of 'Entrepreneur'

Previously, Sections 1 to 7 of the Commercial Code set out a complicated system distinguishing between several types of merchant, in particular between "full merchants" and "small merchants". Under the new code this outdated classification in different categories has been abolished. The new code is applicable to all 'entrepreneurs' (ie, all persons operating an enterprise).

In accordance with the definition already contained in the Consumer Protection Act, an 'enterprise' is described as an independent economic activity intended to be performed permanently in an organized manner, even if profit is not the aim. As the definition of an enterprise is independent of its size, in principle the provisions of the new code also apply to small enterprises.

In addition, the following entities automatically qualify as entrepreneurs due to their legal form:

• stock corporations;



• limited liability companies;



• certain cooperative societies;



• mutual insurance companies;



• saving banks;



• European economic interest groupings;



• European companies; and



• European cooperative societies.

Furthermore, all persons incorrectly registered in the Commercial Register and acting under the company name will be regarded as entrepreneurs, even if they do not operate an enterprise.

The new code is only partially applicable to members of the liberal professions (eg, lawyers, notaries and doctors) and companies carrying out agricultural or forestry activities.

Creation of Company Names

The new code liberalizes and simplifies the rules governing the creation and use of company names. According to the new code, a company name must:

• sufficiently identify and individualize the company;
  
  
• have a distinctive character as compared to other company names and clearly differentiate the company from other companies in the same place or municipality; and
  
  
• not mislead the public about the company's main business activities.

Subject to these restrictions, the company name may be derived from the family name of the partners or shareholders or the company's principal business activities, or may even consist exclusively of invented names including, but not limited to, registered trademarks of the company.

The company name must also include a reference to the legal form of the company (eg, Gesellschaft mit beschränkter Haftung or GmbH for a limited liability company), which provides information on the scope of the company's liability and/or its shareholders.

These rules do not apply to persons conducting a business or trade who are not registered in the Commercial Register. Additional rules apply to the registered names of, among others, lawyers, notaries and doctors.

Partnerships

The previous law distinguished between (i) open or limited partnerships, which are restricted in their activities and may not be used by, for example, the liberal professions, and (ii) registered open or limited partnerships, which were introduced by a separate law to overcome some of these restrictions. As the new code provides that a general or limited partnership may be used for all business-related matters or other purposes, this differentiation is now obsolete and has been abolished.

The legal capacity of general and limited partnerships has been widely disputed; therefore, the new law clarifies that such partnerships have legal capacity. However, all partners of an open partnership and the general partners of a limited partnership remain personally accountable for the liabilities of the partnership.

Registration in the Commercial Register

Under the new code open and limited partnerships may come into existence only on registration in the Commercial Register - that is, for such partnerships registration in the Commercial Register is constitutive.

Sole traders may apply for registration in the Commercial Register on a voluntary basis. However, if they are natural persons and achieve yearly sales revenues of more than €400,000 they are - with the exception of the liberal professions and entrepreneurs conducting agricultural or forestry business - obliged to apply for registration in the Commercial Register.

Furthermore, persons operating an enterprise as a civil law association that achieves yearly sales revenues of more than €400,000 are also obliged to register the company in the Commercial Register as an open or limited partnership.

Accounting

Under the previous code only full merchants (and not small merchants) had to adhere to the code's accounting provisions. This differentiation between full and small merchants has disappeared with the new code.

However, the legislature did not intend to submit all entrepreneurs to the detailed and complex accounting provisions of the Commercial Code. Therefore, under the new code the only bodies subject to the code's accounting provisions are:

• corporate entities;
  
  
• partnerships conducting an enterprise without natural persons as general partners; and
  
  
• all other entrepreneurs whose respective enterprises achieves sales revenues of more than €400,000 in a business year.

Members of the liberal professions and entrepreneurs conducting agricultural or forestry business are exempt from the code's accounting provisions, unless their enterprise is organized as a corporate entity or a partnership without natural persons as general partners.

Other Changes

The new code has amended various provisions concerning the rules for business transactions. The general provisions previously contained in the Commercial Code which are not specifically related to business matters have been transferred to the Civil Code and vice versa.

Furthermore, the Fourth Introductory Regulation to the Commercial Code, under which certain provisions of the German Commercial Code were implemented in Austria, has been abolished as a separate law. Some of its provisions have been transferred to the new code or, as the case may be, to the Civil Code.

For further information on this topic please contact Hellwig Torggler or Markus Schifferl at Schönherr Rechtsanwälte GmbH by telephone (+43 1 53 43 70) or by fax (+43 1 53 43 76100) or by email (h.torggler@schoenherr.at or m.schifferl@schoenherr.at).