AUSTRIA Law and Practice

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

rate. This, in turn, increases the capital costs for Austrian companies.

2. Documentation

2.1 Governing Law

In general, the choice of a foreign law as applicable contract law is permissible, even if the contract is to be enforced in Austria; in terms of market practice this might apply to (English or German law-governed) loan agreements.

In cross-border large-volume acquisition financing transactions, English law is usually chosen for the transaction documentation. However, due to Brexit, German law has become more important for transactions with respect to an Austrian target. German law could become the second market standard. Small acquisition financings are usually governed by Austrian law. The basis for such smaller financing transactions are usually standardised loan agreements as used by the respective credit institutions.

However, regarding the granting and perfection of security rights, there are restrictions, which, depending on the type of security, are in most instances governed by local (Austrian) law. This would apply among others to pledges over shares in Austrian companies, pledges or security assignments of Austrian law governed receivables and the creation of pledges or mortgages over Austrian real properties. Therefore, it is a common market practice that security rights over assets located in Austria or provided by Austrian domiciled transferors or pledgers are documented in Austrian law-governed security documentation.

2.2 Use of Loan Market Agreements (LMAs) or Other Standard Loans

The recommended LMA forms are usually used for international loan syndicates or large-volume domestic syndicate transactions. However, for smaller domestic transactions, shorter contract documents are typically used.

The financing documentation used for Austrian financial transactions therefore varies considerably depending on the type of transaction and the parties involved.

2.3 Language

The transaction language chosen in acquisition financing transactions also varies considerably depending on the parties involved. For crossborder transactions, English is usually chosen as the transaction language. Domestic transactions, in which the borrower is a less internationally-oriented company with little international exposure, are usually documented in German. However, it is evident that domestic lenders are increasingly tending to document transactions in English, which also increases flexibility in connection with syndications.

2.4 Opinions

A legal opinion regularly states the existence of a legal relationship, eg, the legality, effectiveness and enforceability of a contract.

In financing transactions, the typical content of a legal opinion relates on the one hand to the transaction documents and collateral, and on the other hand to the legal status of the borrower or guarantors and security providers. The issuance of one or more legal opinions is usually a precondition for the disbursement of funds in connection with a financing transaction.