Selecting the appropriate legal structure is crucial for a company's success. For founders in Austria and Germany, the Flexible Kapitalgesellschaft (FlexKapG or FlexCo) and the Unternehmergesellschaft (haftungsbeschränkt) (UG) offer attractive options. But what are the key differences? This article examines the most important aspects that entrepreneurs should consider in addition to location when making their decision.
Business Entities for Founders
In today's world, adaptability is a key factor for entrepreneurial success. To address this, the Austrian legislature introduced a new legal form this year with the FlexKapGG, which aims to provide founders with greater flexibility.
The FlexCo is often seen as a hybrid between a GmbH and an AG, as it combines the advantages of both legal forms, making it particularly appealing for companies with high growth potential. The FlexKapGG consists of only 26 relevant paragraphs, with the GmbH law also applying. Therefore, the FlexCo is much closer to a GmbH than an AG.
The Unternehmergesellschaft (haftungsbeschränkt), or UG, is a special form of the Gesellschaft mit beschränkter Haftung (GmbH) in Germany. Introduced in 2008, it provides a cost-effective way for founders with limited start-up capital to establish a corporation. The UG was introduced by the German legislature in response to the increasing number of English Limited company formations (“Private Company limited by Shares”). The UG is governed by § 5a of the German GmbHG.
FlexCo vs UG: Capital Requirements and Liability
The minimum capital required to establish a FlexCo is 10,000 euros, of which 5,000 euros must be paid in cash. Additionally, the FlexCo offers numerous options for capital increases through additional contributions, enhancing adaptability to market conditions. Shareholder liability is limited to the company’s assets.
In contrast, the UG in Germany can be established with a share capital of just one euro, making it particularly attractive for founders with limited start-up capital. However, the UG is required to allocate a portion of its annual surplus to a statutory reserve until the share capital reaches 25,000 euros, equivalent to that of a GmbH. This serves creditor protection purposes. Liability is also limited to the company's assets.
Simplified Formation Requirements for the FlexCo
Both legal forms generally require a notarized articles of association for establishment. Under certain conditions, a FlexCo can be founded without involving a notary, simplifying the incorporation process. Such simplified formation is not available for the UG.
The transfer of shares is simpler for FlexCo shareholders compared to UG shareholders. While FlexCo shares can be transferred via a private attorney’s certificate, the transfer of UG shares requires notarization. This also applies to the acquisition of shares during capital increase measures, thereby simplifying these processes for the FlexCo.
Flexibility: Which Legal Form Offers More?
One of the major strengths of the FlexCo is its high flexibility in capital and corporate structure design. Simplified capital increase measures allow shareholders to quickly and easily adjust the capital structure to market needs.
The UG, however, is somewhat restricted by the obligation to increase capital until the minimum capital of a GmbH is reached. This statutory reserve promotes long-term company stability but may limit flexibility in the early years.
Another key feature of the FlexCo is the Unternehmenswert-Anteile. These are shares that do not carry voting rights but provide participation in profits and liquidation proceeds. They can account for up to 25% of the share capital and are particularly attractive for start-ups as they can be used for employee participation programs. The possibility of shares without voting rights is also provided for the UG under § 45(1) of the German GmbHG, if the articles of association are accordingly structured.
Conclusion: FlexCo or UG – Which Legal Form is Right for Your Business?
The comparison shows that both the Austrian FlexCo and the German UG offer unique advantages. The decision between UG and FlexCo should be based on a thorough analysis of your company’s specific needs and circumstances.
For informed decisions and tailored advice, our law firm is here to assist you. We help you choose the optimal legal form for your business and consider all legal and tax aspects.
Do you have further questions about company formation?
Do you have more questions about start-ups or need legal advice in other areas of corporate law? Our attorneys specialize in these and other legal fields. Feel free to contact our law firm at office@geuer.at or by phone at +43-1-4380072. We look forward to your inquiry.