AUSTRIA Law and Practice

Contributed by: Markus Fellner, Florian Kranebitter and Mario Burger, Fellner Wratzfeld & Partners

According to Section 4 (1) of the Austrian Banking Act, the banking licence has to be issued by the Austrian regulator (the Financial Markets Authority – FMA) for lending business (ie, the provision of financing to borrowers on a commercial basis). Notified licences of a credit institution domiciled in another European Economic Area (EEA) jurisdiction (based on the home member state concept) will be held equivalent for this purpose. The same applies to the acquisition of (loan) receivables on a commercial basis (ie, factoring), which in principle prevents workaround structures, such as the disbursement of a loan by an Austrian “fronting bank” and immediate acquisition of the loan by a foreign, non-licensed lender. Limited exceptions to this principle apply, inter alia, to insurance companies granting loans for the purpose of creating a reserved asset base regarding their insured persons or customers.

Crowdfunding has recently been regulated in statutory law and provides for exceptions from both the banking licence and capital markets prospectus requirements, if and to the extent that the financing does not exceed certain thresholds.

1.2 Corporates and LBOs

Luxembourg-based CPI Property Group paid EUR403.5 million to acquire a 12.7% stake in Austria’s Immofinanz AG in 2022. This was thus the largest transaction involving Austrian companies; the second-largest deal was the purchase of the British-American packaging manufacturer Essentra Packaging by the Austrian Mayr-Melnhof AG for EUR363.5 million.

1.3 Geopolitical and Global Health Considerations

In order to mitigate the economic effects of the COVID-19 crisis, in particular those arising from lockdowns, the Austrian government applied several economic measures to stabilise companies affected by the lockdowns such as issuing bridge guarantees for up to 100% of the credit value applied for banks as well as the granting of fixed-cost subsidies. These legal (and economic) measures provided by the Austrian government led to a significant decrease in the insolvency rate. Most of these support measures have since ceased. At present, the number of insolvency proceedings is almost back to the pre-crisis level. The substantial increase of the insolvency rate predictably has materialised and has an impact on the number of corporate transactions in Austria.

With the war in the Ukraine, a new geopolitical crisis factor has arisen, which has a significant impact on business, both directly and indirectly.

The sanctions imposed by the EU and the USA have led to disruptions in direct business relations of Austrian companies with Russia and Belarus. The sanctions restrict the import and export of goods and services (military goods embargo, sectoral and goods and service-related restrictions, but also luxury goods) as well as the access to capital and financial markets and the implementation of payment transactions. These immediate effects had a massive impact on companies, particularly with regard to business relations with sanctioned companies in Russia and Belarus.

Austrian companies are also affected by the indirect effects of a deterioration in the overall economic situation, which manifests itself in significant price increases in a wide variety of areas, triggered primarily by rising energy prices. Austria is heavily dependent on Russian gas. The inflation rate is steadily increasing and has led to the European Central Bank to raise the base