Austria is witnessing a slowdown of its economy and increased reorganization and restructuring activities – impacting various sectors – while legislative changes introduce a new corporate entity and consider remote court hearings, according to Binder Groesswang Managing Partner Andreas Hable.
“In the past, we experienced a period when there were very few bankruptcy cases in Austria, and insolvency law did not play a significant role,” Hable says. “However, the situation is evolving, and while it would be inaccurate to suggest that there is now a wave of bankruptcies and insolvencies, there is still a noticeable increase in the speed at which these cases are occurring, along with a growing number of bankruptcy cases. Additionally, there is a substantial amount of activity related to reorganization, restructuring, and refinancing that has emerged.” According to him, these dynamics had not been observed in the past few years, which makes for an interesting trend.
“The impact of these developments is being felt across various sectors, including the M&A business, private equity, and venture capital transactions, which have all experienced a slowdown,” Hable continues. “This trend became evident in the latter half of 2022, and it continues into the current year. Notably, this slowdown is not unique to our jurisdiction, as many other countries in the region are facing similar challenges.” He highlights that the broader economy is also experiencing a slowdown, partially attributed to higher interest rates. “Additionally, the development of real estate projects has slowed down, due to the high cost of refinancing, mirroring the trends observed in private equity and venture capital,” he notes.
From a legal perspective, Hable mentions that recent changes in Austrian legislation have introduced two significant initiatives. “Firstly, a new corporate entity known as the ‘flexible company’ has been established, offering enhanced flexibility in areas like shares and share capital to facilitate the formation of start-ups,” he says. “Secondly, a law has been enacted to allow virtual shareholder meetings, providing a permanent solution beyond the temporary measures adopted during the pandemic. Moreover, Austria has aligned with an EU directive to enable the cross-border transfer of corporate seats, promoting mobility and flexibility for companies within the EU, including spinoff possibilities across member states.”
According to Hable, an additional initiative has been released by lawmakers, “focusing on the introduction of dedicated venture capital legislation, aiming to strengthen the venture capital landscape in Austria by enabling an Austrian stock corporation to transition into a dedicated venture capital fund,” he says, adding that this legislation conveys both corporate and regulatory rules.
Finally, Hable draws attention to a noteworthy development in the field of legal proceedings. “A new law is on the horizon, which has the potential to revolutionize the way legal proceedings take place, both in civil law courts and administrative procedures,” he says. “While this law is not yet in force, it is an idea proposed by lawmakers. It envisions the use of videoconferencing systems to conduct court hearings before civil law courts and administrative bodies, which would eliminate the requirement for physical presence. With the introduction of these new techniques, the legal proceedings landscape will undergo significant changes and modernization.”