Corporate Finance/M&A, Austria updates

Supreme Court rules on exclusion of liability for acquisitions via asset deals
  • Austria
  • August 19 2015

The Supreme Court recently ruled on the requirements for exclusion of liability clauses during an asset deal. In its decision, the court rejected a new theory supported by the appeal court and classified supplementary capital in the form of bank bonds as a business-related legal relationship. The court's decision affirmed the legitimacy of exclusion of liability clauses under the Commercial Code.

Potential implications for M&A community following FMA's moratorium on HETA
  • Austria
  • April 29 2015

The M&A community is awaiting buying opportunities to arise from the dissolution of Austria's bad bank, HETA Asset Resolution AG. However, if the Recovery and Resolution of Banks Act is found to be in breach of the EU Bank Recovery and Resolution Directive, not only will the FMA's decision be on shaky grounds, but also potentially any M&A transaction or sale processes initiated by the FMA on the basis of its decision.

Supreme Court rules on non-codified competence of shareholders
  • Austria
  • February 11 2015

The Supreme Court recently clarified and commented on the Holzm├╝ller doctrine with regard to the unwritten competences of shareholders. While the ruling explicitly carved out the issue of whether the doctrine applies in Austria, it also clarified the legal fate of transactions (in this case, an acquisition of hotels) entered into by a management board without first obtaining shareholder approval.

Legal fate of power of attorney in corporate restructuring
  • Austria
  • December 10 2014

A recent Supreme Court case focused on the legal fate of a power of attorney issued by a particular company and a waiver served under this power of attorney after corporate restructurings took place. The main question before the court was whether the power of attorney was validly transferred in the course of a spin-off and merger.

Enhanced disclosure for stake building in public M&A transactions
  • Austria
  • October 16 2013

As a result of implementing the EU Transparency Directive, the Austrian legislature introduced enhanced disclosure rules for significant shareholdings in stock exchange-listed companies. One main purpose of the enhanced disclosure rules is to reduce the possibilities for hidden stake building in public M&A transactions. However, the new rules leave significant room for interpretation.

New payment regime: considerations for M&A practitioners
  • Austria
  • June 26 2013

Should the parties to a share or asset purchase agreement not stipulate the exact conditions for the payment of consideration, a set of default rules will apply. Following the recent introduction of a new law on late payments, M&A practitioners should take note of the new provisions when evaluating whether it is better to rely on the default rules or whether separate contractual clauses should be drafted.

Supreme Court rules on calculation errors in purchase price mechanisms
  • Austria
  • May 01 2013

Personal differences between shareholders in a limited liability company forced one shareholder to buy out another. However, it later turned out that a mistake by the accountant had led to a retrospective tax payment which had an impact on the company's profits for the financial year in which the sale took place, and thereby on calculation of the purchase price. The court assessed whether the purchaser could reclaim the loss.

Consumer protection in M&A deals
  • Austria
  • February 20 2013

Shareholders and directors of limited liability companies are regarded as consumers unless they can exercise a dominant influence on the company, the Supreme Court recently confirmed. As a consequence, they will benefit from the relevant consumer protection rules. Practitioners should therefore be aware of the consequences which could result from natural persons being a party to transaction agreements.

Court clarifies disclosure requirements in asset deals
  • Austria
  • November 14 2012

Asset deals involving Austrian entities must generally be registered with the Commercial Court. However, the exact documents that must be attached to such filings in order to prove the asset transfers in reasonable detail to the court are not specified. The responsibility for defining these standards is allocated to the courts. Two recently published Higher Regional Court of Vienna decisions clarified the documents required.

Supreme Court clarifies exclusion of purchaser's liability in asset deals
  • Austria
  • July 11 2012

The Supreme Court has clarified a number of questions regarding Article 38 of the Commercial Code, one of the central provisions on asset deals. Should the parties contractually agree on an exclusion of the purchaser's liabilities in relation to certain of the seller's contracts, and decide to notify the exclusion with the Commercial Register, the court stated that there would be good reasons for registration by both parties.

New trends in M&A due diligence process
  • Austria
  • April 25 2012

The only way to uncover structural problems and reveal organisational weaknesses (in particular, in contract management) is by evaluating a company's internal compliance system. In order to serve clients' needs in a timely and cost-efficient manner, M&A lawyers must therefore shift their attention to compliance matters while due diligence is being conducted.

Changes to Foreign Trade Act could become an obstacle to M&A transactions
  • Austria
  • December 14 2011

An unexpected fundamental change to the Foreign Trade Act was recently announced by the National Assembly. Once the changes to the act enter into force, acquiring Austrian undertakings, acquiring shares therein or acquiring a dominant influence in such undertakings will require the prior authorisation of the minister for economy, family and youth, if the target company is active in a field relating to public security and order.

Supreme Court considers recovery provisions in purchase agreements
  • Austria
  • September 14 2011

Share purchase agreements provide that buyers are entitled to compensation for breaches. Most contracts explicitly exclude any other legal remedies, which means that the legal concept under which compensation may be enforced is open to interpretation. A recent Supreme Court judgment highlighted the differences of a contractual representations breach under tort and warranty law.

Tax ruling puts real estate M&A transaction structure at risk
  • Austria
  • March 09 2011

The transfer of real estate located in Austria triggers a tax of 3.5%. This tax is also levied when 100% of the shares in a legal entity holding real estate are transferred to a single purchaser. A recent ruling of the Independent Fiscal Senate deems a very common scheme used to avoid triggering real estate transfer tax to be an "abuse of tax law" according to Article 22 of the Federal Fiscal Code, and thus capable of triggering tax.

Tax law proposal could fundamentally change transaction documentation
  • Austria
  • December 22 2010

A recent proposal by the Federal Ministry of Finance aims to abolish stamp duty for loan and credit agreements and will come into effect early in 2011. Further, stamp duty for security documentation in relation to loan or credit agreements as well as the cession of accounts receivable in connection with factoring agreements will be abolished according to this initiative.

MAC clauses in light of new insolvency regime
  • Austria
  • September 01 2010

A purchaser has the right to walk away from an M&A transaction or to renegotiate it if certain events affect the target enterprise. Besides granting such rights of withdrawal in case of a material adverse change to the target itself, it has become more frequent to stipulate contractual escape clauses relating to alterations in the sphere of a contractual party. New insolvency legislation may affect such clauses relating to insolvencies.

Sellers' obligations of disclosure
  • Austria
  • May 26 2010

The allocation of risks connected with past and future business operations is a predominant issue for every share purchase agreement and asset purchase agreement. In order to obtain information about the target company's business situation, as a general rule, the purchaser will conduct due diligence examinations. However, in doing so, the purchaser largely depends on the seller's assistance.

Measures to help with financing of small and medium-sized businesses
  • Austria
  • March 24 2010

Following the latest financial crisis, the availability of fresh capital on the financial markets has considerably diminished. This is particularly true for small and medium-sized businesses, which are finding it increasingly difficult to borrow money from regular institutions. Thus, Parliament has enacted legislation which aims to enhance opportunities for supplying small and medium-sized businesses with fresh capital.

Austria Jumps to the Aid of Companies in Crisis
  • Austria
  • December 09 2009

In response to the tense situation on the financial markets and a deteriorating commercial environment, the Austrian legislature recently enacted the Act on Strengthening Company Liquidity as a measure to provide financial support to undertakings which have been affected by the financial crisis. Under the act, Austria may assume liability in the form of guarantees for bank loans granted to certain companies.

Is There a Future for Callable Bonds in Austria?
  • Austria
  • October 07 2009

In recent times corporate bonds have proved to be an alternative to traditional bank loans. However, a recent Higher Regional Court of Vienna decision, which is pending before the Supreme Court, may cause callable bonds to disappear as a means of raising money for corporate activity.

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