Lawyers of Arzinger (Ukraine) and Binder Grösswang (Austria) told about legal and practical aspects of corporate structuring and doing business in Austria
On November 8, 2012 the press center LigaBusinessInform hosted the seminar on “Corporate Restructuring with the application of foreign holding jurisdictions: Legal and practical aspects of corporate structuring and doing business in Austria,” organized by the Arzinger Law Office (Ukraine), Binder Grösswang (Austria) and the Austrian and Ukrainian Association of Lawyers.
The continuing economic crisis and the complexity of the business environment in Ukraine have forced many owners to review their existing structures to find better solutions in the area of property relations and corporate governance as well as new mechanisms for financing business and optimizing the tax burden.
The majority of Ukrainian companies still show an unbalanced ownership structure, a lack of a legal link between the management system and the ownership structure as well as the inability to apply effective business assessment criteria. Therefore, companies are exposed to certain problems in their operation or when selling their business, in particular: Hostile overtakes; Inability to identify the real value of their business when selling it to a strategic investor, or a significant reduction in the sale price; risks for the structure of ownership due to a terminated friendship or relationship; Financial losses due to the lack of effective asset management and control; increased business operation costs; reduced competitiveness; inability to attract a partner or debt financing; risks related to antimonopoly regulation; mixing of personal and business assets, etc.
To address the above and further problems many Ukrainian companies chose to set up corporate structures in foreign jurisdictions, including Austria, which offers excellent conditions for international investors, has a developed holding legislation, is a member of most international conventions and has a developed network of bilateral agreements on the protection and promotion of investment as well as on elimination of double taxation. Arzinger has years of experience in advising on various areas of business restructuring, both companies from Austria and Ukrainian ones interested in doing business in Austria, as well as experience in attracting Austrian investors, entry to IPO, etc.,” the Managing Partner Timur Bondaryev noted.
In particular, Timur Bondaryev and his fellow Partner Pavlo Khodakovsky spoke about the benefits, areas, components and stages of restructuring, the choice of jurisdictions for foreign holdings. Their presentations were supported with practical examples.
Thus, restructuring offers a number of benefits, or «added values», in selling business (a more competitive offer by reducing the risks for the buyer and providing him with a better idea of the business; a shorter term for preparing and implementing the transaction; an increase in the sale price), when raising finance for business (increasing the value of the transaction in the eyes of the investor), when optimizing processes and reducing business expenses (reducing the number of legal entities in the group as well as of decision-making centers, and saving on the “scale effect”, tax optimization), as well as in protecting business assets (risk-sharing between companies, minimizing the “entry points” for hostile third parties, obtaining additional legal safeguards for business).
According to the lawyers, when choosing a jurisdiction for foreign holdings, the following factors should be considered: whether there is an agreement on avoiding double taxation; an agreement on the mutual recognition and protection of investment; clear and transparent system of taxation; the minimum taxation of inbound and outbound dividends; income in the form of capital gains; transactions to enlarge share capital, regulatory issues (disclosure, actions, etc.); registration and management costs; the type of business; jurisdiction of activity.
The next to take the floor was Dr. Andreas Hable, Partner at Binder Grösswang. He delivered a presentation on the advantages of Austria as a favorable jurisdiction for doing business, with opportunities for international structuring with the use of Austrian corporate structures, including the business nuances and the legal environment, the conditions for setting up companies in Austria, corporate taxation, etc. In addition, he told about the procedure for obtaining Austrian citizenship, the taxation conditions for individuals, and bank secrecy in Austria.
On his part, Dr. Tibor Fabian, Partner at Binder Grösswang, introduced the audience to the features of the Austrian real estate law, including different types of property, land registry, permits and clearances, lease terms and commercial leasing, sales contracts, etc.
In addition, according to Binder Grösswang, the Vienna Stock Exchange is an important element making the Austrian jurisdiction attractive for companies in Central-Eastern Europe in terms of international structuring and doing business. In particular, the statistics says that 90% of “blue chips” at the stock exchange are trading in Central-Eastern Europe, whereas 13% of companies trading on the stock exchange are major international companies.
Summing up the results of the workshop, the organizers reiterated the advantages and opportunities in choosing exactly the jurisdiction of Austria as an attractive market for doing business and international structuring.
During the seminar, participants had the opportunity to ask questions to Ukrainian and Austrian experts, who gave comprehensive and integrated responses.
Information support for the workshop was provided by the legal portal “Yurliga”, the Ukrainian Lawyers’ Association, the Bar Association of Ukraine, “Jurydychna Gazeta”, the Professional Association of Corporate Governance (PACG) and the Ukrainian Institute of Corporate Governance.