Regulation of Private Investment in Austria

This article examines the main issues related to the regulation of private investment in Austria. The country conducts the entire spectrum of private equity transactions, from seed capital to buybacks. There is also an increase in the activity of specialized debt funds. If you intend to start investing in the EU, you may find this overview useful.

Acquisition of direct investments in Austria

A private equity fund acquires shares or assets through a special purpose vehicle that is funded by a combination of equity and debt.

Debt transactions are structured similarly to bank lending transactions, with rather limited specifics in loan documentation in the case of capital growth transactions.

Additional obligations apply whenever there is an M&A transaction in Austria.

A typical private equity transaction involves a voluntary takeover bid followed by a minority buyout and delisting.

In the case of stocks traded on a free market, delisting is cleared by notification to the SEC. At the same time, for shares traded on the official market, such operations cannot be performed.

Private Participation Transaction Timing

The full transaction can take up to six months.

Both public and private transactions include:

• carrying out due diligence of a merger in Austria;
• obtaining antimonopoly and regulatory approval;
• obtaining third party approval.

If you intend to start a business in Austria, please note that taxation is critical in concluding private equity transactions. It is in the investor's interest to structure the transaction in a tax-favorable light. In addition, when acquiring Austrian companies, consider factors such as:

• ways of distributing dividends;
• possible future exit strategies.

Minority shareholders

When entering the capital of another business in Austria, it is worthwhile to correctly approach the method of acquiring shares and the size of the block of shares in order to protect yourself, as the owner of a part of the company, from claims from other shareholders.

It is possible to become a minority shareholder through private placement.

The initiator of the private placement is usually the selling company itself, or rather, its owner. As a rule, an investment bank is involved in the implementation of this project, which advises the company on the feasibility and timeliness of raising capital through a private placement, the most likely placement price, the need to restructure the business before the placement and conduct a high-quality and comprehensive audit. The consultants also prepare an investment memorandum detailing the company's business and prospects and distribute it to institutional investors. After that, negotiations are held with interested investors on the terms of the transaction, and an order book is formed. Finally, the transaction itself takes place. 

This usually involves the conclusion of a shareholder agreement on minority investments. Among the mandatory provisions included in the shareholders' agreement are the following:

• composition of the management board and supervisory board and the right to appoint them;
• veto power, which requires the prior consent of the investor;
• a liquidation or exit transaction mechanism;
• the right of a private joint stock company to request the commencement of a trade or IPO process;
• requirements for management and annual reporting, budget.

In practice, this term "minority shareholder" means an investor who owns a stake less than the controlling one (50% +). For corporations, the legal protection of minority shareholders includes:

1. the right to convene a  shareholders meeting;
2. voting on the main issues.