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Corporate Law Update: Austria’s Startup Ecosystem Set for Growth – a Look into the Startup Promotion Act and the Flexible Corporations Act (FlexKapGG)


  • After two years of ongoing discussions, the Austrian government has just introduced two major draft laws, the Startup Promotion Act (Start-Up-Förderungsgesetz) and the Flexible Corporation Act (FlexKapGG), with the goal of fostering a robust startup ecosystem in the country.
  • The Startup Promotion Act primarily addresses the issue of employee participation in startups. The new law aims to make share schemes more attractive by adjusting tax rates and conditions for their issuance. In the future, taxes on proceeds from employee share incentive schemes will only be due upon their sale, with 75 % of the value taxed as capital gains at a fixed rate of 27.5%, and the remaining 25% at applicable income tax rates.
  • The Flexible Corporations Act focuses on creating a new type of capital company, known as the “Flexible Capital Company” (FlexKapG), specifically designed to cater to innovative startups and entrepreneurs.
  • FlexCo provides flexibility in areas such as shareholder decision-making and capital measures, with formal easements regarding transfer of shares, reduced capital requirements, and more agile decision-making processes.
  • Both draft laws aim to make Austria a more attractive destination for international venture capital investors and are seen as significant steps towards creating a modern corporate and tax framework for startups. They are currently undergoing the parliamentary process and are expected to enter into force with the beginning of 2024.


In an era where innovation is the key to economic growth, the Austrian government has taken a significant step towards fostering a robust startup ecosystem. The introduction of the Startup Promotion Act (Start-Up-Förderungsgesetz; 275/ME) and the Flexible Corporation Act (Flexible Kapitalgesellschafts-Gesetz, FlexKapGG; Gesellschaftsrechts-Änderungsgesetz 2023 – GesRÄG 2023, Änderung (276/ME)) has the possibility to reshape the corporate framework for Austrian startups and founders. Both draft laws aim to provide a conducive environment for startups, offering benefits such as tax benefits on employee participation, flexible capital structures, lower capital requirements and simplified administrative procedures.

Start-Up Promotion Act (Start-Up-Förderungsgesetz)

The Startup Promotion Act was introduced by the Austrian Ministry of Finance and is an interesting piece of legislation aimed at supporting employee participation schemes in startups.

Historically, startups in Austria keen to involve their employees in company ownership faced significant hurdles. For startup to issue real equity, it had to be valued—an expensive and complicated process—and employees were required to pay taxes upon receipt of their shares, despite not being able to monetize their stake immediately. For this reason, virtual share participation schemes were dominant in the Austrian market, but these structures also had their downsides. For employees, proceeds from virtual shares were usually taxed at once at full income tax rates. Compared to other startup ecosystems, a major disadvantage that would disincentivize high potentials to join an Austrian startup.

The draft law proposes a reform in the taxation of employee shares: From 2024, taxes on employee shares are due only upon their sale. 75 % of the value received from the employee participation program would be taxed as capital gains at a fixed of 27.5 %. The remaining 25 % will be taxed at applicable income tax rates. Compared to the status quo, this new approach makes employee participation schemes much more attractive.

However, participation is tied to certain conditions at company level. The most important requirements for the time of issuance employee shares:

  • The company needs to be incorporated for less than 10 years;
  • there are no more than 100 employees at the company;
  • the company does not generate more than 40 million euros in revenue; and
  • no more than 25% of the shares in the capital or the voting rights in the company are held by companies that are to be included in consolidated financial statements.

For the beneficial tax treatment to actually apply, there are several more technical requirements set forth in the draft law that need to be complied with. Thus, no matter whether you are a founder implementing an employee participation scheme as per the new framework or a employee receiving shares under such scheme, I highly recommend to retain an experienced lawyer or tax advisor to guide you through this process and individually advise you on possibly detrimental acts that may torpedo the beneficial tax treatment.

Flexible Corporations Act (Flexible Kapitalgesellschafts-Gesetz)

In parallel with the Startup Promotion Act, the Flexible Corporations Act (FlexKapGG or FlexCo) – originally conceived over two years ago as the “Austrian Limited” – the primary objective of the FlexKapGG is to create a new type of capital company specifically designed for innovative startups and entrepreneurs.

The FlexCo is the result of a dedicated working group’s efforts, which suggested modifying the existing GmbH form to better cater to the needs of startups. The proposed company, aptly named the “Flexible Capital Company” (FlexKapG), promises greater flexibility in critical areas such as shareholder decision-making and capital measures.

The FlexCo is not a radical departure from the existing limited liability company (GmbH), but rather a thoughtful enhancement. It benefits from the experience of the existing GmbH law and incorporates some provisions from the Stock Corporation Act (Aktiengesetz). The FlexCo is designed to be more attractive to international venture capital investors, a crucial aspect for startups seeking funding.

A significant change compared to the current GmbH is the introduction of more flexible capital measures, some of which are otherwise only found in the Austrian stock corporation (Aktiengesellschaft) and the Societas Europaea (SE). The draft law introduces a framework for employee participation schemes (the corporate side of the Start-Up Promotion Act), allows contingent and authorized capital, sets a framework for the forfeiture of shares as well as the acquisition of own shares by the company under certain conditions. The draft law also covers convertible instruments (Wandeldarlehen) and introduces corporate law requirements for such instruments (the details of which were often discussed in legal literature in the past).

Another key difference between the FlexCo and the current GmbH is the increased flexibility in shareholder decision-making. Consent of all shareholders to pass resolutions in writing is not a mandatory requirement anymore as long as shareholders are able to vote. Also text form for shareholder resolution and split voting is possible. These changes allow for more agile and responsive decision-making processes, a critical factor for startups operating in fast-paced and rapidly evolving markets.

Further changes include formal easements with regard to transfer of shares. In the future, notarial deeds are not required anymore for share transfers, subscription declarations in connection with a capital increase, authorized capital or exercise of pro-rata rights. Instead of the strict notarial deed form, a certificate by a notary or attorney-at-law shall be sufficient.

Another nice-to-have are the reduced capital requirements. For FlexCo and the GmbH, the minimum capital requirement is reduced to EUR 10,000 (without an obligation to increase it to EUR 35,000 as was the case with the current incorporation privilege (Gründungspriviligierung). This also means a reduction in minimum corporation tax,from EUR 1,750 to EUR 500 per year.


Both draft laws are significant steps in the right direction, implementing long-standing requests by the startup ecosystem. By creating a new type of capital company that is more attuned to the needs of startups and attractive to international venture capital investors, simplifying tax structures and reducing bureaucratic hurdles, these bills are a good start towards a modern corporate and tax framework.

The focus now turns to the parliamentary process, with the startup community and its supporters awaiting the enactment of these draft laws. Sign-up for our newsletter to stay up to date on the process.

Sources (possibly credible sources I kind of fact-checked)

Start-Up-Förderungsgesetz (275/ME) – Austrian Parliament

Flexible Kapitalgesellschafts-Gesetz, FlexKapGG; Gesellschaftsrechts-Änderungsgesetz 2023 – GesRÄG 2023, Änderung (276/ME) – Austrian Parliament

My latest reads / listens

#149 Neil Pasricha: Simple Rules for Happiness – The Knowledge Project

The Age of AI has begun – Bill Gates

Quote(s) that sticked to me

“When people are financially invested, they want a return. When people are emotionally invested, they want to contribute.”

— Simon Sinek

Coffee fact (The Art of Grind and Flow)

Crafting the perfect espresso, much like achieving success in business, is a delicate balance of finesse and precision. Conventional wisdom asserts that finely ground coffee beans yield the most flavor, but a study led by chemist Christopher Hendon discovered that excessively fine grounds can clump, disrupting the water flow and leading to inconsistent flavor extraction. A similar principle applies to business: over-processing or over-analyzing can create blockages, preventing smooth workflow and consistent results.

A team at the University of Huddersfield led by William Lee further explored this phenomenon. They created a mathematical model mirroring the dynamics between coffee particles and water. This model revealed the importance of balance between grind size and water flow, a concept that resonates in business as well. Just as too fine a grind can lead to inconsistent coffee flavors, an overly rigid business structure can stifle creativity and hinder progress. Conversely, the right balance can ensure both a perfect espresso and a thriving business environment, promoting efficiency, consistency, and quality in the output.

Disclaimer: While I’m a lawyer, who enjoys re-defining lawyering and operating outside the conventional law firm setting, please always consider that I’m not your lawyer. Nothing presented herein constitutes legal advice or establishes an attorney-client relationship. Blog posts on this website have been prepared for information purposes only. Any information is merely a generalised analysis of certain issues raised by particular events or statutory developments. If you have legal concerns that you wish to have addressed, please contact a lawyer directly so that your specific circumstances can be evaluated. The views expressed in this blog are mine alone.

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