Global Share Option Plans
Austria
Securities laws and regulation
Exchange control
Company law
Employment law
Plan communications
Data protection
Governing law
Tax treatment
Non-employee options
Other
Securities laws and regulation
Red flags
What are the key securities laws and regulatory obligations or restrictions in relation to granting options, exercising options, selling resulting shares or other relevant events? For example, would a prospectus or any filings be required?
Response
Securities law filings: There are no general securities law filing requirements for the grant or exercise of options or the selling of resulting shares, provided these are not offered to the public but rather to a predetermined group of employees only.
Prospectus: No prospectus is required where securities are offered, allotted, or are to be allotted to current or former employees or executives by their employer or an affiliated company.
In particular, a prospectus disclosing key figures and information on the company must be approved by the Financial Market Authority (FMA) and published if the company were to make any public offers.
Regulatory: Employee share schemes are exempt from most key financial regulations.
Exchange control
Red flags
Are there any exchange control restrictions, notification/filing, or approval requirements related to the exercise of options or sale of shares?
Response
There are no Austrian exchange controls in relation to the grant or exercise of options or sale of the resulting shares.
Company law
Red flags
Are there any red flag company law and corporate governance considerations, for example, shareholder approval requirements or financial assistance restrictions?
Response
The requirements will depend on the type of company seeking to grant options:
- For a joint-stock company, the approval of the Supervisory Board is required to grant options over shares in that company to employees and senior executives of the company or an affiliated company as well as to members of the Management Board or Supervisory Board of affiliated companies. A joint-stock company may acquire its own shares, but these must be offered to its own employees for acquisition within 30 months.
- For a limited liability company, there are generally no options. As an alternative, limited liability companies may offer virtual forms of participation, such as virtual employee share ownership (VSOP). Employees are given largely the same economic status as a genuine shareholder by contractual agreement. However, they are not able to actually participate in the company's share capital. The beneficiaries under a VSOP retain control over the company and the option holders will not become shareholders – the VSOP is satisfied by only providing a share in the exit proceeds.
- For a flexible capital company, employees may participate in the company's growth through enterprise value shares to be issued based on a shareholders’ resolution as an alternative to share options. Under this arrangement, the enterprise value shareholders are generally entitled to their share of the balance sheet and liquidation profit. Enterprise value shareholders have no voting rights at the General Meeting and no right to contest or annul shareholder resolutions. No notarial deed is required to implement the arrangement – a written agreement is sufficient for the acquisition and transfer. The flexible capital company must keep a share register because the individual company value shares are not entered in the company register.
Certain consents or approvals may be required, subject to the company's constitutional documents and/or any agreement with shareholders/investors.
Employment law
Red flags
Are there any material employment law issues to be aware of, for example, the requirement to consult employees?
Response
There are generally no employment law issues related to granting options to Austrian employees.
There is no general requirement to consult employees or any employee representatives on the terms of employee share schemes.
A works council agreement is optional.
Companies may grant and administer options for Austrian employees on a discretionary basis, provided such discretion is not applied in a discriminatory manner.
According to mandatory employment law, employees are entitled to a pro-rated share of the grant if employment ends before the end of the reference period for the grant of options. This means that any provisions in an option plan that make the grant of options conditional on continuous employment or certain leaver provisions may not be (fully) enforceable.
Plan communications
Red flags
Are there any requirements for the communications, for example, a translation into any language(s), and if so, which?
Response
There are no legal requirements to provide a document or information in a language other than English. There is no need to provide documents in the local language (ie German).
Data protection
Red flags
What are the key data protection requirements, if any?
Response
Employees should be informed of how their personal information is collected, processed and disclosed, in connection with an employee share plan. A privacy notice should be provided, or a plan should include details on how to access a company's privacy notice.
Governing law
Red flags
Will governing law and jurisdiction clauses be effective?
Response
The governing law and jurisdiction clauses are typically effective.
Irrespective of the choice of law, certain mandatory provisions of Austrian law cannot be deviated from to the detriment of employees.
Tax treatment
Red flags
What is the tax and social security treatment (including other employee and employer levies)? Are there any red flag issues, for example, tax on grant, filings or notifications?
Response
Tax on grant: The grant of options to Austrian employees does not normally give rise to Austrian income tax for the Austrian employees if the exercise price is set at the fair market value of the underlying option shares at the time of grant. This assumes the options are not transferable.
Tax on exercise: The exercise of options (or the vesting depending on the prevailing circumstances) by Austrian employees will generally be seen as a taxable event. Any increase in value between the fair market value of the option shares on such date and the exercise price will generally become subject to Austrian income tax and be treated as part of the employee’s employment income.
In most instances, the benefit will be subject to the employee’s individual progressive income tax rates (assuming that the special flat rate is not fully or partly available). Income tax on employment income is generally levied by way of wage withholding tax by the Austrian employer.
Furthermore, there may also be an obligation to account for Austrian social security and ancillary wage taxes.
Tax-favoured plans: Although Austrian tax law provides tax incentives for specific types of employee incentive programmes, share options do not technically qualify for specific tax benefits. However, in certain circumstances, share options may be structured or fall within a tax-incentivised regime.
Non-employee options
Red flags
Are there any issues with granting options to non-group employees, eg advisers/consultants or PEO employees?
Response
Option grants to non-employees should be considered carefully as a tax liability can arise on the grant of options, the exercise of the options, or on vesting, depending on the circumstances and value of the options.
Tax-incentivised benefits targeting employee arrangements will generally not be available for non-employees.
VAT liabilities may also arise.
Other
Red flags
Are there any other red flags, for example, is a sub-plan required?
Response
It is advisable, but not required, to prepare an Austrian sub-plan for employees, especially in the case of a complex employee structure and for Austrian-specific tax reasons.
