The EU Reorganisation Act (EU UmgrG) came into force on 1 August 2023. However, the EU Reorganisation Act does not fundamentally change Austrian reorganisation law. The previous legal system was only changed to the extent necessary to implement Directive (EU) 2019/2121 ("Mobility Directive").

Area of application

Based on the Mobility Directive, the law regulates cross-border reorganisations of corporations (Stock corporation, limited liability company, SE) with registered offices in different member states. It covers cross-border mergers, conversions (transfers of registered offices) and divisions within the EU or the EEA area. All three types of cross-border reorganisations are now regulated in a standardised manner.

The EU Merger Act (EU-VerschG), which has been in force since 2007, expired on 31 July 2023. Cross-border mergers are now regulated in a separate section of the EU Reorganisation Act (Sections 26 et seq.).

In the case of cross-border conversions, which are now regulated by law, the registered office of a corporation is transferred from one member state (departure member state) to another member state (arrival member state). The legal personality is retained, only the applicable company law is changed. The law differentiates between the "outward conversion" and the "inward conversion", depending on whether Austria is the departure member state or the arrival member state. The same system is also found in the law for cross-border mergers and divisions, whereby the cross-border division for absorption was deliberately not regulated by law. 

Key regulatory contents

The regulatory content for all three types of cross-border reorganisations are essentially

1. the documents to be prepared during the reorganisation process and their disclosure: The core element is the form and content of the conversion, merger or division plan, in each case from an Austrian perspective.
2. informing the shareholders and employees: The respective management body of the company must prepare a report in which the legal and economic aspects of the cross-border reorganisation are presented and justified and their effects on the employees are explained.
3. the decision-making process and the company register procedure: The respective management body of the company must file the intended reorganisation for registration with the court in whose district the company has its registered office. The competent company register court must check compliance with the statutory provisions - in-cluding the regulations on employee participation.
4. The protection of shareholders and creditors is supplemented by regulations on cash compensation and its review as well as the provision of security.

The EU Transformation Act directive-related provides for stricter regulations (e.g. longer deadlines and stricter disclosure requirements) than national merger, divisions and conversion law. In the case of a company with a single shareholder or if all shareholders waive certain provisions, simplified provisions apply (e.g. no review of the reorganisation by an external auditor and by the supervisory board, no submission of documents).

Abuse control

An innovation under EU law is the abuse control regulated in § 27 para. 7 of the EU Reorganisation Act, which in future must be carried out by the competent authority of the departure member state (in Austria: by the commercial register court) for all three types of cross-border reorganisations. Based on the circumstances of the individual case, the court must examine whether the reorganisation serves, for example, to circumvent national employee rights, social security payments, tax obligations, creditor claims or for criminal purposes. However, if there are no concrete indications from the application and the information submitted, the court can generally assume that there is no abuse; it is then not required to carry out any further investigative steps. The court must decide on the application within 3 months. However, this does not constitute a presumption of authorisation if the court does not make a decision within this period.

Outlook

It is to be expected that the new standardised legal framework and the strengthening of the protection of employees, creditors and minority shareholders of the companies involved will lead to increased mobility of corporations within the EU.