Ines Krausler from Frotz Riedl, the Austrian law firm in our network is currently on secondment with us at Wallace LLP in London. In this guest post, she unveils her insight into the differences between setting up a business in Austria vs the UK. Is Austria the answer to your Brexit conundrum?
New “Easy-GmbH” for tech start-ups in Austria
You may have heard of Runtastic, Shpock or Bitmovin – three examples of successful start-ups in Austria. In the last few years, the number of incubators, accelerators and business angels has grown in Austria. This has created a more attractive environment for start-ups. In 2016, the government passed a start-up support programme worth about €185 million. It included the introduction of a digital one-stop-shop for start-up founders.
Since 1 January 2018, it has been possible to set up a limited liability company online without involving a notary. According to the Austrian parliament, the new procedure for an “Easy-GmbH” should reduce incorporation time and costs. It will particularly benefit start-ups and entrepreneurs. So far so good!
But – there’s always a but – the new procedure only allows a limited liability company with one single natural person as shareholder. This shareholder also needs to be the only director of the company. There is no such restriction in the UK.
Limited content of articles of association
The new process has a restricted set of model articles of association. Articles of association set out the basic management and administrative structure of the company. The model articles contain the statutory minimum provisions. These are company name, registered office, objects of the company and amount of share capital. Another mandatory provision is the appointment of the founder as director. A founder only has limited scope to include a few other provisions, for example the requirement of an annual shareholder resolution for the distribution of profits. If you want broader provisions, you would have to change the articles after you’ve set up the “Easy-GmbH” or use the conventional route to set up a company. Again, the UK is not so restrictive.
Same share capital
The minimum share capital of a GmbH in Austria has to be €35,000, of which at least €17,500 needs to paid upfront in cash. Or, founders may make use of the “incorporation privilege”. It allows a reduced minimum share capital of €10,000, of which at least €5,000 has to be paid up in cash. This is no simpler for the founder of the new “Easy-GmbH”. The UK system, in contrast, does not require a minimum share capital.
Greater involvement of banks
Although you can set-up a new “Easy-GmbH” without turning to a notary, you still need the participation of the bank. In Austria, the bank has to confirm the receipt of the minimum paid-up share capital of €17,500 or €5,000 into the company’s newly created bank account. The new process provides that the bank also has to verify the identity of the founder and submit a copy of their photo ID and sample signature to the companies register. Again, setting up a UK company neither requires a bank confirmation nor include an identity check.
Switch to Austria after Brexit?
Even though the online procedure saves notary fees, it has a limited scope. Furthermore, it neither reduces the minimum share capital nor the time it takes to actually register. The bank will probably take as long as the notary anyway. The average time is currently around 5 days compared to a registration within 24 hours in the UK.
We wait to see whether home-grown start-ups and entrepreneurs will actually make use of the new Austrian Easy-GmbH. In any event, it still isn’t as easy as the equivalent in the UK. Nevertheless, for all its restrictions, Austria might still be a good place to set up your EU business after Brexit.
Questions? Email Ines direct.