Restructuring in the strict sense

Combination to form a partnership

With combinations, several persons combine to form a partnership. At least one of the partners transfers an existing activity, a branch of an activity or a partnership share to the new partnership. The transferor receives partnership rights in exchange for the assets transferred.

The transfer is based on a combination contract and a balance sheet must be prepared at the combination date. Combination is always by singular succession.

Division of a partnership

With division, an activity or branch of an activity, or a share in a partnership, is divided among the partners. In most cases, compensation must be paid because the activities do not correspond precisely to the participating interests.

A division balance sheet must be prepared. Division results in transfer by singular succession.

Merger of several corporations

A merger is the combination of at least two corporations into a single corporation.

The various types of merger are as follows:

• Merger by absorption – in this type of merger at least one corporation transfers its assets to an existing corporation. All of the rights and obligations are transferred by universal succession and the transferor company is wound up without liquidation. The shareholders receive shares in the transferee company in exchange.
• Merger by formation of a new company – in this type of merger two or more corporations transfer their assets to a new corporation. This is also a transfer by universal succession and the shareholders in the transferor companies receive shares in the transferee company. The transferor companies are wound up.

A merger decision must be made and a merger contract signed during the merger. Specific shareholder consent requirements must be observed and an extensive reporting obligation must be met.

Division of a corporation

There are two types of division:

• Separation: The transfer of all of a corporation's assets to at least two corporations, resulting in its dissolution.
• Partial division: If e.g. only one branch of activity is transferred to another corporation and the transferor company continues to operate.

All of the rights and obligations are transferred to the transferee legal entity by universal succession.

During division, a division decision must be made and a division plan and division report prepared. An audit report and certain supporting documents are also required.

Transfer of assets (in particular by restructuring of a sole proprietorship or a partnership to a corporation)

In this case, activities or branches of activity of sole proprietors or partnerships or shares in partnerships and certain capital shares in corporations are transferred to a transferee corporation as a contribution in kind. A balance sheet must be prepared at the contribution date and a contribution contract must be signed between the contributing entity and the transferee corporation. The contributing entity receives shares in exchange for the contribution in kind.

There are two basic forms of asset transfer:

• The transfer of an activity or branch of an activity of a sole proprietorship or partnership to a corporation as a contribution in kind by singular succession. The transferor company must be dissolved and liquidated.
• The transfer of all of the shares in a partnership by universal succession through accrual. The transferor company is dissolved without liquidation.

Conversion of a corporation into a sole proprietorship or a partnership

When a corporation is converted into a sole proprietorship or partnership, the transferor corporation is wound up without liquidation provided the statutory conditions are fulfilled.

There are two types of conversion:

• Conversion by establishment of a new company: Shareholders who jointly hold at least 90 per cent of the shares of the corporation to be converted, establish a general partnership or a limited partnership to which the existing business is transferred.
• Conversion by merger: The business is transferred from the corporation to be converted to the main shareholder. Main shareholders are partnerships, natural persons or legal entities which hold at least 90 per cent of the shares. The other shareholders receive compensation in cash.

It is not possible to convert by merger to Austrian private and public limited companies or EU corporations with a registered office in an EU or EEA state.

The conversion transfers all of the rights and obligations to the new legal entity by universal succession.

A conversion decision must be made and a conversion contract signed during conversion; official approval may also be needed and a closing balance sheet must be prepared for the company to be converted; an extensive reporting obligation must also be met.

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Sorry, this content isn't available in English yet.

Not all of our contents and services are available in English yet. We ask for your under­standing and like to assure that we are steadily working on extending our English offer.