Employee share plans in Austria: regulatory overview

A Q&A guide to employee share plans law in Austria.

The Q&A gives a high level overview of the key practical issues including, whether share plans are common and can be offered by foreign parent companies, the structure and rules relating to the different types of share option plan, share purchase plan and phantom share plan, taxation, corporate governance guidelines, consultation duties, exchange control regulations, taxation of internationally mobile employees, prospectus requirements, and necessary regulatory consents and filings.

To compare answers across multiple jurisdictions, visit the Employee share plans Country Q&A tool.

This Q&A is part of the multi-jurisdictional guide to employee share plans law. For a full list of jurisdictional Q&As visit www.practicallaw.com/employeeshareplans-mjg.

Georg Schima and Birgit Vogt-Majarek, Kunz Schima Wallentin
Contents

Employee participation

1. Is it common for employees to be offered participation in an employee share plan?

Share options are one of the principal incentive tools used by employers to encourage loyalty in employees. Employee share plans have become more common among larger businesses due to more favourable tax and social security regulations as a result of statutory changes, such as the Capital Market Offensive Act 2001 (Kapitalmarktoffensivegesetz). However, this has changed since April 2009, and from that time tax advantages only apply to options that are non-transferable and that were granted before 1 April 2009 (see Questions 4 to 9).

Employee share plans are not common in small and medium-sized companies, which account for 99.6% of all companies and provide 65% of all jobs in Austria.

Large companies (particularly public limited companies) are increasingly regarding employee share plans as important for reinforcing management's long-term commitment and motivation.

Start-up companies are especially motivated to offer employee share plans to improve their liquidity. Employee share plans are a means of equity financing, and therefore allow companies to obtain funds for investment purposes and to make it easier for them to meet their financial liabilities. Employee share plans are often introduced when a company makes an initial public offering (IPO), either for the management only or for all employees. The plans have differing aims:

  • Management plans aim to create incentives to improve business results and share prices.

  • Plans for all employees aim to promote long-term commitment to the company and provide an additional benefit for employees.

Plans that cover all employees also bring other benefits. For example, employees who participate in the plans generally treat company resources with more care and have more sympathy with certain company decisions, such as reductions in benefits or business-related dismissals.

 
2. Can employees be offered a share plan where the shares to be acquired are in a foreign parent company?

A foreign parent company can offer participation in an employee share plan to an Austrian-resident employee without restriction. Employees are permitted to hold shares on a foreign investment exchange.

 

Share option plans

3. What types of share option plan are operated in your jurisdiction?

Share option plan

Austrian law does not lay down rules for any particular type of share option plan. They need only to comply with the general rules set out in certain statutes, including:

  • The Stock Corporation Act 1965 (Aktiengesetz), which includes the Stock Option Act 2001 (Aktienoptionengesetz).

  • The Income Tax Act 1988 (Einkommensteuergesetz).

No particular types of share option plan have emerged in practice. Instead, companies offer individual plans that are within the scope of existing law. There are tax advantages that only apply to options that are non-transferable and that were granted before 1 April 2009.

Grant

4. What rules apply to the grant of employee share option plans?

Share option plan

Discretionary/all-employee. Share option plans can be granted on a discretionary basis. However, there are certain tax advantages on exercise that only apply where all or certain groups of a company's employees are entitled to the share options (see Question 7).

Non-employee participation. Share option plans can also be granted to non-employees (such as board members).

Maximum value of shares. The total number of company shares that employees, officers and directors of a company or an affiliated company can acquire by exercising share options must not exceed 20% of the company's existing share capital (Article 159, paragraph 5, Stock Corporation Act). This applies only to Austrian-incorporated companies.

Market value. The exercise price does not have to be equivalent to the market value.

 
5. What are the tax/social security implications of the grant of the option?

Share option plan

The tax treatment depends on whether transferable or non-transferable options are granted:

  • Transferable options. Transferable options that are granted as a bonus or at below market value are subject to tax and social security payments at the time of grant. This is because the employees receive a taxable benefit-in-kind from their employment.

    The value of the benefit-in-kind is deemed to be the sum that the employee would have had to pay to acquire the option on the free market. The tax authorities calculate the value of a transferable share option as a lump sum, unless the option is listed on the stock exchange (in which case, the exchange price is used to determine the value).

    This lump-sum valuation leads to higher taxation than is chargeable on a non-transferable option and imposes a tax liability before the employee has realised any benefit from the option. It is therefore not advisable to grant transferable options.

  • Non-transferable options. Under the Austrian tax reform law 2009 (Steuerreformgesetz) there are no tax advantages for non-transferable options granted after 31 March 2009. The following apply to non-transferable options granted before 1 April 2009:

    • tax is not due at the time of grant. This is because they effectively have no market value and are not considered to be assessable business assets. Instead, they are subject to tax at the time of exercise;

    • social security contributions are not payable if the options do not exceed the tax exemption quota (Article 49, paragraph 3, No. 18d, General Social Security Code).

    Favourable tax treatment applies to non-transferable stock options that:

    • were granted before 1 April 2009;

    • were granted in writing to all employees or groups of employees;

    • must be exercised within a certain time limit, which must not exceed ten years;

    • at the time of grant, have shares with a value that does not exceed EUR36,400 per calendar year, per employee.

    The tax relief amounts to 10% for every full year since grant, up to a maximum of 50% (see Question 7).

    Non-transferable options granted after 31 March 2009 are subject to tax and social security payments at the time of grant (see above, Transferable options). This change reflects the critical or even hostile attitude towards share options (especially for executives) that governments not only in Austria but in the whole of Europe and worldwide have adopted as a result of the global financial crisis and the collapse of some major players in the financial sector.

Vesting

6. Can the company specify that the options are only exercisable if certain performance or time-based vesting conditions are met?

Share option plan

A company can specify performance conditions that must be met before an option can be exercised (see Question 4), including:

  • The company's shares reaching a certain market price.

  • The company achieving revenue targets.

  • The company satisfying an exercise hurdle calculated in relation to a share index.

There are no other statutory requirements imposing a minimum waiting period (often referred to as an exercise blocking period, lock-up period or lock-in period) before options can be exercised. However, initial waiting periods are advisable. They should generally be for a minimum of three years, to encourage achievement of the performance target over a longer, sustained period. In practice, options typically vest progressively over a two- to five-year period.

Plans can also specify blocking periods during which an option cannot be exercised. These are designed to prevent option holders from taking advantage of insider knowledge to determine when to exercise the option and sell the shares (such as in the month before the annual report is published). However, this is not required by law.

 
7. What are the tax/social security implications when the performance or time-based vesting conditions are met?

Share option plan

See Question 5.

Exercise

8. What are the tax/social security implications of the exercise of the option?

Share option plan

Under the Austrian tax reform law 2009 there are no tax advantages for non-transferable options granted after 31 March 2009. Tax is not due on the exercise of transferable options because it has already been paid on grant or at vesting. Tax and social security contributions for non-transferable options granted before 1 April 2009 are due on exercise of the option. These contributions must be withheld and paid by the employer. The difference between the value of the shares on the date of grant and the value on the date of exercise is tax-privileged under certain conditions. The financial benefit derived from non-transferable options over shares in the employer's company or a company that is part of the same business group qualifies for a tax advantage if (Article 3, paragraph 1, lit 15c, Income Tax Act):

  • The options are granted to all employees or to certain groups of employees (these groups can be freely chosen provided that the principle of equal treatment is observed).

  • The value of the shares under option at the time of grant does not exceed EUR36,400 per calendar year per employee.

The maximum amount of the benefit that qualifies for a tax advantage is the difference between the:

  • Value of the shares at grant.

  • Value of the shares at exercise.

The amount that is exempt from tax at the time of exercise depends on the time that has lapsed since grant. 10% is exempt from tax for every full year since grant, up to a maximum of 50% for five years or more after grant.

Employees must pay tax on the residual amount at the time of exercise, provided that their employer deposits their shares with (Article 3, paragraph 1, lit 15c, Income Tax Act):

  • An Austrian credit institution.

  • A trustee appointed jointly by the employer and the works council.

If tax is not payable on the time of exercise it is payable on the earlier date of the sale of the shares, the cessation of employment or 31 December of the seventh year after the grant of the options.

The shares must be deposited for each full year for which the 10% tax exemption is sought. Evidence of this deposit must be provided to the employer every year by 31 March. Social security contributions are not payable on the amount exempt from tax. See also Question 12.

Sale

9. What are the tax and social security implications when shares acquired on exercise of the option are sold?

Share option plan

Gains realised when selling the shares are taxed. No social security contributions must be paid.

 

Share acquisition or purchase plans

10. What types of share acquisition or purchase plan are operated in your jurisdiction?

Austrian law does not set out rules for particular types of share acquisition or purchase plans.

Share acquisition plan

Main characteristics. Employee share acquisition plans are the most common form of equity remuneration. This type of plan is most commonly introduced when a company goes public with an IPO, which means the listed company can offer all employees, or certain groups of employees, shares in either:

  • The company that employs them.

  • A company that belongs to the same business group as its employer.

Unlike share option plans, the shares are acquired either immediately or within a short time of the offer. They are usually offered at a special price and under an agreement that specifies a holding period in which they must not be sold to others.

To gain tax advantages the holding period must be at least five years.

The shares give the same rights (including voting rights) as other shares, and dividends are paid regardless of a shareholder's status as an employee. If employees deposit the shares with an Austrian credit institution they qualify for the annual tax-free allowance (see Question 12). The tax-free allowance described for share option plans does not apply (see Question 8).

Types of company. All companies, whether or not they are listed, can offer employee share acquisition plans.

Popularity. Employee share acquisition plans are increasing in popularity among larger businesses, but are not popular in small and medium-sized businesses (see Question 1). Share acquisition plans are more popular than share option plans because of the more favourable tax treatment.

Acquisition or purchase

11. What rules apply to the initial acquisition or purchase of shares?

Share acquisition plan

Discretionary/all-employee. The entitlement to acquire shares does not have to be offered to all employees on the same terms. However, the principle of equal treatment must be considered (see Question 4, Share option plan: Discretionary/all-employee). Taxation is affected if the shares are not granted to all or certain groups of employees (see Question 12).

Non-employee participation. Share acquisition plans can also be offered to non-employees. However, tax advantages are only applicable during an employment relationship (Article 3, paragraph 1, lit 15b and 15c, Income Tax Act).

Maximum value of shares. There are no legal restrictions on the number of shares that employees can acquire.

Payment for shares and price. The company can set whatever price it wishes. Shares can also be transferred to the employee free of charge.

 
12. What are the tax/social security implications of the acquisition or purchase of shares?

Share acquisition plan

Tax/social security. The assignment of shares to employees at no or a reduced cost creates a benefit for the employee, which may be subject to tax and social security contributions. The rate of taxation depends on the income of the employee and therefore cannot be generalised.

Annual allowance. An annual allowance of EUR1,460 that is free from tax and social security contributions applies to these benefits that accrue from employees' direct equity participation in shares, provided that both:

The tax-free allowance does not apply:

  • If the employees' equity participation is not direct (for example, they have an interest in a fund and the fund has an interest in the employer's company).

  • To the grant of shares to former employees.

The annual allowance is only available if the employee has held the shares for at least five years, which begins to run from the end of the calendar year in which the shares are acquired. If the employee sells the shares earlier, the employer must pay taxes on the benefits as soon as it becomes aware of the sale. However, the employer can demand that the employee reimburses the amount of tax paid, on the basis that the employer has fulfilled the employee's obligation. By 31 March of every year, the employee must provide a statement showing that the shares remain on deposit with an Austrian credit institution as evidence to the employer that the required holding period is being maintained.

Dividends. A company that pays dividends is subject to dividend withholding tax on its profit of 25%, which must be withheld from dividends paid. No further tax is payable by employees on receipt of dividends.

Vesting

13. Can the company award the shares subject to restrictions that are only removed when performance or time-based vesting conditions are met?

Share acquisition plan

Employee share acquisition plans usually involve vesting agreements with the aim of increasing employees' long-term loyalty to the company. If the employee leaves the company, either voluntarily or before the specified vesting period, the employer will usually buy the shares back from the employee at the original purchase price, so that the employee gains no benefit from them.

As with share option plans, it is unclear whether the entitlement to acquire shares can expire when the employee leaves the company before the initial waiting period is over if the plan does not specify this (see Question 4).

 
14. What are the tax and social security implications when the performance or time-based vesting conditions are met?

Share acquisition plan

If the shares are non-transferable, the fulfilment of vesting conditions does not trigger tax or social security payments. If the entitlement to acquire shares is transferable (that is, a business asset), tax and social security payments are due on the fulfilment of vesting conditions. The employer must withhold and pay these contributions. The rate of taxation and social security contributions depend on the income of the employee and cannot be generalised (there are no fixed rates for taxation). The assignment of shares to employees at no cost, or at a reduced cost, creates a taxable benefit, though an annual allowance of EUR1,460 applies (see Question 12).

Sale

15. What are the tax and social security implications when the shares are sold?

Share acquisition plan

The annual allowance only applies if the employee has held the shares for at least five years, which begins to run from the end of the calendar year in which the shares are acquired. If the employee transfers the shares earlier, the employer must pay taxes on the tax-free amount as soon as it becomes aware of the sale. The rate of taxation cannot be generalised. By 31 March of every year, the employee must provide a statement showing that the shares remain on deposit with an Austrian credit institution as evidence to the employer that the required holding period is being maintained.

 

Phantom or cash-settled share plans

16. What types of phantom or cash-settled share plan are operated in your jurisdiction?

There are no specific rules regulating phantom or cash-settled share plans, or particular types of plan.

Phantom shares or share appreciation plans

Main characteristics. Phantom or share appreciation rights are commonly granted but are less popular than share option plans or share acquisition plans. They do not offer employees any real equity interest, but instead treat them financially as though they were participating in a traditional share option plan. This means that employees are treated as though they had acquired a certain number of shares at a particular price. They receive as variable cash payments the difference between the price that they nominally paid for the shares and the current, higher price (this is regulated individually in the plan's rules).

Phantom shares are not covered by the Stock Option Act. This means that there are no restrictions on which companies can offer phantom share plans and on which employees they can include, although the principle of equal treatment must be followed (see below, Types of company and Question 4, Share option plan: Discretionary/all-employee). The plan's details can also be freely chosen.

However, the courts may apply some of the provisions in the Stock Option Act to phantom shares by analogy. The Act deals almost exclusively with questions of legal competence for decisions on share-related matters and notification duties. It contains very few provisions on the content or structuring of plans.

Types of company. All companies, whether or not they are listed, can offer phantom or share appreciation plans.

Popularity. Since the goals of long-term loyalty and improving shareholder value can be achieved through these less complex plans, they are quite popular (although no exact statistics on their use are available).

Grant

17. What rules apply to the grant of phantom or cash-settled awards?

Phantom shares or share appreciation plans

Discretionary/all-employee. Awards can be granted on a discretionary basis (subject to the principle of equal treatment).

Non-employee participation. Phantom or cash-settled awards can also be granted to non-employees.

Maximum value of awards. There is no maximum award value.

 
18. What are the tax/social security implications when the award is made?

Phantom shares or share appreciation plans

The award of phantom shares does not trigger tax or social security payments.

Vesting

19. Can phantom or cash-settled awards be made to vest only where performance or time-based vesting conditions are met?

Phantom shares or share appreciation plans

The awards can be subject to performance or time-based vesting conditions.

 
20. What are the tax/social security implications when performance or time-based vesting conditions are met?

Phantom shares or share appreciation plans

No tax or social security obligations are triggered purely by vesting.

Payment

21. What are the tax and social security implications when the phantom or cash-settled award is paid out?

Phantom shares or share appreciation plans

Tax liabilities arise when a cash payment is made under the award, like any other bonus. Phantom shares are classified as profit sharing. The cash payment under phantom shares is subject to a 6% flat tax rate, when the amount of payments resulting from share options and other remunerations (such as holiday or Christmas pay) less an amount of EUR620, is below one sixth of the annual income. Normal tax rates apply to the part of the payment which exceeds one sixth of the annual income.

The employer must withhold and pay taxes and social security contributions.

 

Corporate governance guidelines, market or other guidelines

22. Are there any corporate governance guidelines, market rules or other guidelines that apply to any of the above plans?

Institutional investor guidelines

The Securities Supervision Act (Wertpapieraufsichtsgesetz) sets out rules for investment companies (concerning compliance, treatment of clients, and so on). The Act does not apply to persons who only administrate employee share plans.

Other shareholder guidelines

The Austrian Code of Corporate Governance as amended in July 2012 (Code) provides recommendations for Austrian publicly listed companies regarding the contractual provisions that should be used or avoided (see Question 4). For example, if a share option programme (or a programme for the preferential transfer of shares) is proposed for management board members, it must be linked to measurable, long-term and sustainable criteria (Rule 28, Code). It is therefore not possible to change the criteria later (that is, no repricing is possible). A management board member must hold an appropriate volume of shares in the company for the duration of these programmes, but at the latest until the end of the management board member's function. In the case of a share option programme, a waiting period of at least three years must be fixed.

Joint stock companies may decide not to comply with the Code in its entirety. If they choose to they must then report officially on their compliance (for example, in their annual reports). In that case, if the company deviates from the guidelines, it must report and explain the deviation. 94% of the companies which trade on the Austrian Trading Index (ATX) comply. Non-compliance may mean that investors would be reluctant to buy the company's shares.

Market rules or guidelines

Since share option plans are important decision criteria for members of the capital market, publicly listed companies must publish the report on the granting of share options two weeks before the resolution of the supervisory board. The report must contain information such as the number of share options and their distribution to employees, executives and directors, the main conditions for the share option contracts and so on. The reports can be published in electronic form.

 

Employment law

23. Is consultation or agreement with, or notification to, employee representative bodies required before an employee share plan can be launched?

When the operation of an employee share plan is linked to profits and/or to performance-related pay and bonuses, employers can enter into a relevant works council agreement (Article 97, paragraph 1, figure 16, Labour Constitution Act 1974) (Arbeitsverfassungsgesetz). Although entering into a works council agreement is voluntary, it is advisable for at least the largest groups of employees to be included under the agreement, since it is then easier to make and administer uniform changes. The works council agreement forms part of the individual employment contracts if, instead of referring to profits, the employee share plan operates by reference to, for example, turnover or headcount. It is recommended that this is set out specifically in writing.

The works council's control, intervention, information or consultation rights do not need to be considered for ordinary employee share plans. This is because the works council does not represent company officers (members of the board of directors) or certain groups of senior executives. The employer must only:

  • Inform the works council about issues that affect employees' economic, social, health or cultural interests.

  • Consult with the works council at least once in a quarter about current issues, and the economic and social aspects of general company operations.

However, there is one important right of the works council in relation to employee share plans. The supervisory board must be involved where the company grants share options to board members, as it does when employment contracts are entered into with board members. A remuneration committee of the supervisory board usually takes responsibility for these matters. However, unlike in cases involving employment contracts, the works council has a right to be represented on the remuneration committee when share option plans are being introduced (one-third of the supervisory board members are representatives of the works council).

 
24. Do participants in employee share plans have rights to compensation for loss of options or awards on termination of employment?

Employees who have been offered participation in a share plan bear the risk of losses of options or awards during and also on termination of employment, provided that no explicit commitment of a certain value and/or development has been made.

 

Exchange control

25. How do exchange control regulations affect employees sending money from your jurisdiction to another to purchase shares under an employee share plan?

There are no regulations that generally prevent employees transferring money abroad to purchase shares under an employee share plan, although the Austrian National Bank must be informed about transactions from financial derivates exceeding EUR1 million per month. However, particularly with respect to the transfer of money outside of the EU Austrian banks must comply with regulations on money laundering and terrorism finance.

 
26. Do exchange control regulations permit or require employees to repatriate proceeds derived from selling shares in another jurisdiction?

Employees can repatriate proceeds derived from selling shares outside Austria. For notification see Question 25.

 

Internationally mobile employees

27. What is the tax position when an employee who is tax resident in your jurisdiction at the time of grant of a share option or award leaves your jurisdiction before any taxable event affecting the option or award takes place?

In general, tax is payable when options are exercised in Austria (wherever the employee's residence is). The taxable amount is the difference between the value of the shares on the date of grant and the value on the date of exercise, and varies according to the individual employee's tax situation.

Under the principle of causality, income connected with the exercise of employees' share option rights is generated in the country in which the employee worked (and was tax resident) between the grant and the vesting period.

If share options are granted to an employee who is later sent abroad and becomes resident there, then the income from the option in the year of exercise might not be taxable in Austria. In that event, the Austrian company must prove that the part of the benefit-in-kind that accrues in the foreign jurisdiction is not subject to Austrian tax or is subject to foreign tax. If the Austrian company cannot provide proof of the foreign tax payment, it must withhold income tax on the full amount. In these circumstances, the employee can then later claim an income tax refund from the competent tax authority for the amount of tax which the Austrian company withheld.

 
28. What is the tax position when an employee becomes tax resident in your jurisdiction while holding share options or awards granted abroad and a taxable event occurs?

In principle, anyone who has his residence or habitual abode in Austria is subject to Austrian income tax, no matter which country the income is paid in. However, Austria has concluded double taxation treaties with several countries.

 

Securities laws

29. What are the requirements under securities laws or regulations for the offer of and participation in an employee share plan?

On 17 June 2010 the European Parliament approved the European Commission's proposal for an amendment to Directive 2003/71/EC on the prospectus to be published when securities are offered to the public or admitted to trading (Prospectus Directive). The Prospectus Directive:

  • Aims to make it easier and cheaper for companies to raise capital throughout the EU on the basis of an approval from a competent regulatory authority in one member state.

  • Increases protection for investors by guaranteeing that all prospectuses, wherever in the EU they are issued, provide the clear and comprehensive information investors need to make investment decisions.

A prospectus is a disclosure document, containing key financial and non-financial information that a company makes available to potential investors when it is issuing securities (shares, bonds, derivative securities, and so on) to raise capital and/or when it wants its securities admitted to trading on exchanges.

Amendments to the Capital Market Act (Kapitalmarktgesetz) were implemented in 2012 due to Directive 2010/73/EU amending Directives 2003/71/EC on the prospectus to be published when securities are offered to the public or admitted to trading and 2004/109/EC on the harmonisation of transparency requirements in relation to information about issuers whose securities are admitted to trading on a regulated market (Amendment Directive).

The Capital Market Act currently specifies:

  • Who must publish a prospectus.

  • How the prospectus must be structured.

  • The competent authority for approval of the prospectus.

  • How the prospectus must be made public.

Generally, a public offer of securities requires the publication of a prospectus. Even if the group of people addressed is limited (as is the case with share plans), these offers are generally considered to be public under the Capital Market Act. However, there is an exemption from the requirement to publish a prospectus for employee share plans. This applies when an employer, or an undertaking affiliated with that employer, offers, allots or will allot securities that are already admitted to trading in a regulated market to existing or former directors or employees. The employer or undertaking must make available a document containing information on:

  • The number and nature of the securities.

  • The reason for and details of the offer.

There are two more general exemptions from the requirement to publish a prospectus which may be useful for employee share plans that do not qualify under the above exemption:

  • The offer is addressed to fewer than 150 people in a member state that are not qualified investors.

  • The offer amounts to less than EUR250,000 (calculated over a 12-month period).

Usually, an exemption applies and a prospectus is not obligatory.

 
30. Are there any exemptions from securities laws or regulations for employee share plans? If so, what are the conditions for the exemption(s) to apply?

Exemption(s) for employee share plan offers

There is an exemption from the requirement to publish a prospectus for employee share plans. This applies when an employer, or an undertaking affiliated with that employer, offers, allots or will allot securities that are already admitted to trading in a regulated market to existing or former directors or employees.

There are two more general exemptions from the requirement to publish a prospectus which may be useful for employee share plans that do not qualify under the above exemption:

  • The offer is addressed to fewer than 150 people in a member state that are not qualified investors.

  • The offer amounts to less than EUR100,000 (calculated over a 12-month period).

Usually, an exemption applies and a prospectus is not obligatory.

Conditions for exemptions

The exemption for employee share plans only applies if the employer or undertaking makes available a document containing information on:

  • The number and nature of the securities.

  • The reason for and details of the offer.

Consents or filings

The prospectus must be approved by the Financial Market Authority (Finanzmarktaufsicht) (FMA), which decides within ten banking days (or 20 banking days if the stocks are offered for the first time publicly or have not previously been authorised for trade in the regulated market) if it approves or not. Where the information or documentation is incomplete, the Financial Market Authority may ask for additional information.

 

Other regulatory consents or filings

31. Are there any other regulatory consents and filing requirements and/or other administrative obligations for an offer of and participation in an employee share plan?

Certain market participants with reporting obligations who enter into transactions involving listed shares must anonymously notify these transactions to the FMA on a daily basis (Article 64, Securities Supervision Act 2007) (Wertpapieraufsichtsgesetz). Such market participants are defined as all institutions that must file for registration under Article 64, such as:

  • Credit institutions.

  • Domestic branches of banks.

  • The Austrian National Bank.

  • Investment firms, licensed in third countries.

It is important to review regularly ad hoc and other compulsory notifications (for example, relating to directors' dealings). Together with transaction notifications, these can be used as part of a first assessment in any investigation of potential insider trading. Further triggers for an investigation can be tip-offs from investors, market participants, issuers of securities or the media. The FMA can demand information from all market participants, and particularly from private persons and company officers, if there is a suspicion of (Standard Compliance Code):

  • Abuse of insider information.

  • Market manipulation.

  • Frontrunning (that is, where a party buys or sells shares, share options or other investment products because it is aware that a future transaction involving a third party is likely to affect the market value of the investment).

  • Breaches of the Vienna Stock Exchange's trading rules.

There are no other exchange control restrictions in relation to exercising options.

Directors' dealings

Persons with managerial responsibilities in issuers of financial instruments and those who have a close relationship to them (see below) must report to the FMA without delay (Article 48d, paragraph 4, Stock Exchange Act (Börsegesetz)):

  • All trading on their account in the company's shares or equivalent securities that are listed on a regular market.

  • Any trading in related derivatives.

  • Any trading in relation to affiliated companies, as defined by Article 228, paragraph 3 amendment to the Commercial Code 1987 (Unternehmensgesetzbuch).

Trading with a total value of less than EUR5,000 within one year does not need to be reported or disclosed. When calculating the total value of trading, the transactions of all persons in management positions and those closely related to these persons are aggregated. The disclosure can also be made by the FMA.

Persons with managerial responsibilities at a company are defined as those who either (Article 48, paragraph 1, figure 8, Stock Exchange Act 1989 (Börsegesetz)):

  • Belong to an administrative, management or supervisory body of the company.

  • Are senior executives who are not members of the above bodies, but:

    • regularly have access to inside information relating, directly or indirectly, to the company;

    • have the power to take managerial decisions affecting the company's future developments and business prospects.

There is also a specific definition of those who have a close relationship with persons who have managerial responsibilities at a company issuing financial instruments (Article 48a, paragraph 1, figure 9, Stock Exchange Act). Transactions entered into by those in leadership positions act as indicators or signals for the capital market and the same is true for those who are in close relationship to them.

 
32. Are there any data protection requirements or obligations for an offer of and participation in an employee share plan?

The Austrian Data Protection Act applies, which means an employee's personal data can only be processed if the data subject's rights are not infringed. This will be the case, for example, where the data subject has given his consent (which can be revoked at any time) or the use of the data is necessary to fulfil the employment contract. Data subjects must be fully informed about the circumstances surrounding the use of the data.

 

Formalities

33. What are the applicable legal formalities?

Translation requirements

Prospectuses for share plans must be in English or German.

E-mail or online agreements

Shares can be purchased electronically (using online application forms or e-mail agreements).

Witnesses/notarisation requirements

If the employee share plan is based on an agreement with the works council, it must be in writing. Employee share option plans require the consent of the supervisory board.

Employee consent

Employee share plans can be subject to an agreement with the works council (see Question 22). If the share plan changes the conditions of the employment contract to the employee's detriment, the employee must agree to it.

 

Developments and reform

34. Are there any current trends, developments and reform proposals that have or will affect the operation of employee share plans?

Trends and developments

The Capital Market Offensive Act 2001 and the Stock Option Act 2001 have made share plans more popular in Austria, but only in large companies (see Question 1).

Reform proposals

There was a tax law reform in 2011 regarding the taxation of capital gains on capital assets. No further reforms are currently expected.

 

Online resources

Legal Information System of the Republic of Austria (Das Rechtsinformationssystem des Bundes) (RIS)

W www.ris.bka.gv.at/

Description. This is a computer-assisted information system on Austrian law. It contains all Austrian (federal and federal state) laws and European law (EUR-Lex), as well as published decisions of the (higher) civil, criminal and administrative courts of Austria. It is co-ordinated and operated by the Austrian Federal Chancellery. It contains English versions of some Austrian laws.



Contributor details

Georg Schima

Kunz Schima Wallentin (member of Ius Laboris)

T +43 1 313 74 0
F +43 1 313 74 80
E georg.schima@ksw.at
W www.ksw.at

Qualified. Austria, 1991

Areas of practice. Employment and labour law (including: employment law aspects of corporate restructuring; privatisation; management employment contracts; directors' and officers' liability); banking; finance and capital markets; acquisition and disposition of companies; commercial and corporate law; arbitration; corporate litigation.

Recent transactions

  • Advising and representing companies, as well as executives, in all of their employment and labour law matters.
  • Involved in a considerable number of legal disputes between executives and their employers (amongst them many companies listed on the stock exchange) concerning their diverse mutual claims.
  • Representing Meinl Bank AG in about 3,500 lawsuits filed by private and institutional investors relating to their purchase of shares of former Meinl European Land Ltd (later renamed as Atrium European Real Estate), a Jersey domiciled corporation listed on the Vienna Stock Exchange.

Birgit Vogt-Majarek

Kunz Schima Wallentin (member of Ius Laboris)

T +43 1 313 74 0
F +43 1 313 74 80
E birgit.vogt@ksw.at
W www.ksw.at

Qualified. Austria, 2002

Areas of practice. Employment and labour law (including: aspects of corporate restructuring; privatisation; management employment contracts); establishment, acquisition, and restructuring of companies; banking and capital markets.

Recent transactions

  • Advising and representing companies, as well as executives, in all of their employment and labour law matters.
  • Involved in a considerable number of legal disputes between executives and their employers (amongst them many companies listed on the stock exchange) concerning their diverse mutual claims.

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