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BEIRA Corona Task Force Update

Overview of legal measures to mitigate the financial impact of the Coronavirus crisis on companies (as per 5 May 2020)

The Austrian legislator has continued to react to the "COVID-19" pandemic, in order to, inter alia, restart the operation of courts and administrative authorities. Therefore, thirteen legislative packages, the 6th to 18th COVID-19 Act, were introduced by the government in the National Council on 28 April 2020 and subsequently passed.

Existing measures, which we discussed in our overview of 17 March 2020 and in the updates of 20 March 2020, 27 March 2020 and 10 April 2020, remain in place and are only amended or supplemented by the new COVID-19 Acts. The following is an overview of relevant measures implemented by the new legislative packages.
 

ASSISTANCE MEASURES FOR AFFECTED COMPANIES

COVID-19 Assistance Fund

Within the framework of the 18th COVID-19 Act, the legislator amended, inter alia, the ABBAG Act, stipulating that in connection with financial measures pursuant to Section 2 paragraph 2 number 7 of the ABBAG Act (i.e., guarantees, direct loans or direct grants from the COVID 19 Assistance Fund) (i) non-assignment clauses in favour of the financing bank or funding agency have a binding effect on all third parties and (ii) liabilities assumed by ABBAG or COFAG are not subject to the written form requirement (which otherwise applies to sureties/liabilities).

COVID-19 Aid Audit Act

In addition, within the framework of the 18th COVID-19 Act, the legislator enacted the COVID-19 Aid Audit Act, which regulates in detail the requirements for the tax offices (as appraisers and not as tax authorities) for the subsequent audit of state aid measures received from the COVID 19 Assistance Fund, the COVID-19 Hardship Fund or from short-time work subsidies.

Epidemics Act

Within the framework of the 16th COVID-19 Act, the legislator amended the Epidemics Act, inter alia, by granting the Minister of Health a statutory power to regulate the calculation of the amount of compensation or remuneration for loss of earnings under the Epidemics Act in order to ensure uniform administrative management by the district administrative authorities throughout Austria.

In addition, the legislator attempted to clarify the powers of public authorities in the area of the Epidemics Act, according to which regulations covering the entire territory of Austria are to be issued by the Minister of Health. Conflicting regulations of state governors or district administrative authorities shall then cease to be effective unless otherwise stipulated in the respective regulation by the Minister of Health.

The relevance of this clarification is at least questionable, since it only refers to regulations issued by the Minister of Health under the Epidemics Act, whereas the previous COVID-19 regulations were not issued under the Epidemics Act, but under the specially created COVID 19 Measures Act.
 

PROCEDURES AND DEADLINES

Civil Court Procedures

Within the framework of the 8th COVID-19 Act, the legislator has, inter alia, recast Section 3 of the 1st Act on supporting measures to COVID-19 in the justice system. Now the law provides that until the end of 2020, hearings in civil court procedures can be held without the personal presence of the parties or their representatives by means of suitable technical means of communication for word and image transmission (e.g. by means of video conferences) if the parties consent thereto. However, the parties' consent shall be deemed to have been given if they do not object within a period of time set by the court.

In certain proceedings (hospitalisation, nursing home residence and adult protection cases as well as proceedings under the Tuberculosis Act and the Epidemics Act) the parties' consent is not required at all.

All parties, witnesses, experts, interpreters and other persons to be called upon may also request to participate in the proceedings by suitable technical means of communication if they certify an increased health risk posed by COVID-19 for themselves or for persons with whom they are necessarily in contact, be it privately or professionally.

If a party or a witness does not have suitable technical means of communication at its disposal, such party not represented by an attorney may request adjournment, such party represented by an attorney and such witness may request provisional refrainment from questioning. In any case, according to the legal materials, no person is required to acquire suitable technical means of communication.

The revised provision also regulates some technical matters related to the minutes of the court hearing, the costs and the conclusion of (out-of-court) settlements.

Finally, special provisions are laid down for enforcement and insolvency proceedings, according to which the parties' consent to hold court hearings in such proceedings by way of video conferences is not required; however, persons to be heard or to be present at such hearings may, within one week of service of the summons, certify that they do not have the suitable technical means of communication. This would prevent the holding of a hearing, questioning, creditors' meeting or creditors' committee meeting.

Administrative Procedures

The legislator has laid down similar rules for administrative procedures in the 12th COVID-19 Act, which, inter alia, recasts Section 3 of the COVID-19 Act on supporting measures to COVID-19 in administrative law.

For example, official acts may only be performed in the presence of more than one other person if a distance of at least one meter can be maintained between the persons present. Persons who do not wear a mouth and nose protector can be excluded from official acts. The public authority may also conduct hearings, questionings, inspections, taking of evidence or similar acts using suitable technical means of communication for the transmission of words and images (e.g. by means of video conferences).

The parties and other persons involved, witnesses, experts, interpreters and other persons to be called upon to participate in an official act have to be given the opportunity to participate using suitable technical means of communication. If no suitable technical means of communication are available to them, the official act may be performed in their absence, in which case they shall be given the opportunity to exercise their rights or to participate in establishing the facts of the case in other suitable ways (including the possibility of raising objections at a later date).
 

Our specialists with the respective expertise are at your disposal.

BEIRA Corona Task Force Update

Overview of legal measures to mitigate the financial impact of the Coronavirus crisis on companies (as per 10 April 2020)

The Austrian legislator has continued to react to the "COVID-19" pandemic, in order to, inter alia, mitigate the crisis' impact on companies. Therefore, three legislative packages, the 3rd, 4th and 5th COVID-19 Act, were introduced by the government in parliament on 2 April 2020. They passed the legislative process and were published on 4 April 2020. Existing measures, which we discussed in our overview of 17 March 2020 and in the updates of 20 March 2020 and 27 March 2020, remain in place. The following is an overview of relevant measures implemented by the three new legislative packages.
 

ASSISTANCE MEASURES FOR AFFECTED COMPANIES

Crisis Management Fund

The "COVID-19 Crisis Management Fund", which was set up by the first package of measures at the Federal Minister of Finance to provide the necessary financial resources to cope with the Coronavirus crisis situation (see overview of 17 March 2020), has been increased from 4 billion to 28 billion euros. The fund will continue to provide financial resources for stabilising the liquidity of companies.

Implementation

To implement the COVID-19 Crisis Management Fund, the limited liability company "COVID-19 Finanzierungsagentur des Bundes GmbH" ("COFAG") was established as a subsidiary of the stock company "Abbaubeteiligungsaktiengesellschaft des Bundes" (ABBAG). COFAG will be provided with sufficient financial resources from federal funds. On 8 April 2020, the Federal Ministry of Finance published the "Guidelines on adopting financial measures required to maintain the solvency and bridge liquidity difficulties of companies in connection with the spread of the SARS-CoV-2 pathogen and the economic effects caused by it" as a regulation. The substantive guidelines (the "Guidelines") are set out in the annex to this regulation. The Guidelines stipulate how financial measures in the form of guarantees, direct loans and direct grants are to be implemented to maintain the solvency of enterprises and to bridge their liquidity difficulties caused by economic effects resulting from the spread of COVID-19. They shall apply to financial measures applied for until 31 December 2020.

The Guidelines clarify that only companies which (i) are headquartered or maintain a permanent establishment in Austria and (ii) carry out a significant operational activity in Austria shall be granted financial measures as defined in the Guidelines. Excluded from the granting of financial measures are supervised legal entities in the financial sector, in particular credit institutions pursuant to the Austrian Banking Act (BWG), insurance companies pursuant to the Austrian Insurance Supervision Act 2016 (VAG 2016), investment firms and investment service providers pursuant to the Austrian Securities Supervision Act 2018 (WAG 2018) and pension funds pursuant to the Austrian Pension Fund Act (PKG). Furthermore, financial measures may not be granted to "firms in difficulty". These are companies to which at least one of the following characteristics applies:

  • In the case of a limited liability company (GmbH), if more than half of the subscribed share capital has been lost due to accumulated losses;
  • In the case of entities (partnerships) where at least some partners bear unlimited liability for the debts of the entity, if more than half of the equity capital reported in the company accounts has been lost as a result of accumulated losses;
  • If the company is in ongoing insolvency proceedings or the conditions for the opening of such proceedings are met;
  • If the company has received rescue aid or restructuring aid and the company still has obligations stemming from such aid; or
  • In the case of a company which is not an SME, if in the last two years the company's book value-based debt-equity ratio was more than 7.5 and interest coverage ratio calculated based on its EBITDA was less than 1.0.

There are certain special rules for SMEs that have been in existence for less than three years, or, in the case of risk financing aid, in the seven years following their first commercial sale.

COFAG's choice of financial measures must be based on whether the company is likely able to repay the funds needed to cover its liquidity requirements within a reasonable time during normal course of business. If this is not the case, (only) the financial measure of direct grants is available (see below).

Applications must be submitted to the entity designated by COFAG (such as OeKB or AWS) via the respective principal bank; the relevant forms provided by COFAG must be used.

If financial measures are applied for and granted, the applicant is obliged to, inter alia, ensure that withdrawals by the owner of the company or the distribution of profits to shareholders/owners are in accordance with the economic circumstances during the term of the financial measure. This includes a ban on dividends and profit distributions from 16 March 2020 to 16 March 2021 and a "moderate dividend and profit distribution policy" for the remaining term of the financial measure. The liquidity from the financial measure may not be used for stock/share buybacks or for the payment of bonuses to board members or managing directors.

The financial measures should not be used to repay existing financing (ie debt restructuring), except for the payment of individual loan instalments or interest on their respective due dates as contractually agreed as of the date the COVID-19 Act came into force. However, the exemption does not cover such payments in the case of prepayment, acceleration or at final maturity.

The applications shall be examined by COFAG, which may instruct OeKB, AWS or other authorised representatives to assess the applications and make a recommendation to COFAG. According to the Guidelines, COFAG does not have to justify its decision and there is no legal claim to the granting of financial measures.

Federal Hardship Fund

The Federal Hardship Fund, which was subject to changes in each of the prior measure packages, will be topped up from a maximum amount of 1 billion euros to a maximum amount of 2 billion euros. Its funding will be provided via the COVID-19 Crisis Management Fund. The Federal Hardship Fund is intended to mitigate hardship cases caused by legal and economic consequences of COVID-19 among individual entrepreneurs, freelancers, NPOs and micro-enterprises.

It has now been clarified that so-called "new self-employed persons" fall within the group of recipients of the Federal Hardship Fund. If necessary, the Federal Minister of Finance may channel further funds into the Federal Hardship Fund. The criteria according to which the means are to be distributed are to be laid down in a specific regulation by the Federal Minister of Finance; the Austrian Federal Chamber of Commerce (Wirtschaftskammer Österreich) will continue to process the applications to the Federal Hardship Fund.

Fixed Cost Subsidy

Companies whose revenues declined by at least 40% due to the COVID-19 crisis can receive tax-free and non-repayable subsidies for certain fixed costs, such as rent, insurance premiums, interest expenses, contractual payment obligations (which are non-cancellable/non-reducible and necessary for operations), as well as license, electricity, gas and telecommunications costs. Further, an appropriate entrepreneurial salary in the maximum amount of 2,000 euros per month, as well as a loss in value of perishable/seasonal goods of more than 50%, can be the basis of the fixed cost subsidy.

Eligible are companies whose location and business activities are in Austria, and which operationally incurred the relevant fixed costs in Austria. The companies must have taken all reasonable measures to reduce the fixed costs and maintain jobs in Austria.

The fixed cost subsidy is staggered and depends on the loss of revenue of the company; in case of 40-60% revenue loss, the compensation amounts to 25% of the fixed costs as defined above, in case of 60-80% revenue loss it amounts to 50% and in case of 80-100% revenue loss it amounts to 75% of the relevant fixed costs.

The slump in revenues and the amount of the relevant fixed costs have (subsequently) to be confirmed by a tax consultant or an auditor. After the end of the current fiscal year and determination of the damage, the subsidy is paid out (capped with 90 million euros per company).

Excluded from the fixed cost subsidy are companies that employed more than 250 people as of 31 December 2019 and have laid off employees after the outbreak of the COVID-19 crisis instead of using the option of short-time work. The entire finance and insurance sectors are also excluded.

The fixed cost subsidy does not have to be repaid – subject to the amounts of revenues and fixed costs having been correctly stated. The fixed cost subsidy is not subject to tax but reduces the corresponding deductible expenses for the relevant fiscal year.

Transparency Register

All subsidies such as cash grants, loans, guarantees and contributions in kind are to be entered into the transparency register in accordance with the 3rd COVID-19 Act in order to obtain an overview of the benefits granted in connection with the COVID-19 crisis.
 

CIVIL LAW

Rent

If a tenant of an apartment (in full or partly) fails to pay rent due in the period from 1 April 2020 to 30 June 2020 because his/her economic capacity has been significantly impaired as a result of the COVID-19 pandemic, the landlord may not terminate the lease or demand its annulment under sec 1118 of the Austrian General Civil Code (ABGB) solely because of this payment default. Furthermore, the landlord may neither claim the due but unpaid rent in court until 31 December 2020 nor recover it from a deposit handed over by the tenant.

Any fixed-term residential rental agreement subject to the Austrian Tenancy Act (Mietrechtsgesetz) which expires after 30 March 2020 and before 1 July 2020 may, in deviation from the otherwise applicable minimum contract term, be extended in writing until the end of 31 December 2020 or for a shorter period.

Current Loans of Micro-Enterprises and Consumers

The 2nd Act on supporting measures to COVID-19 in the justice system (as part of the 4th COVID-19 Act) provides, inter alia, for easements to some borrowers. The following measures apply to loan agreements concluded with consumers or micro-enterprises before 15 March 2020:

  • Any claims of the lender for repayment, interest or principal instalments due between 1 April 2020 and 30 June 2020 shall be deferred for a period of three months from the due date, if the borrower, as a result of the exceptional circumstances caused by the spread of the COVID-19 pandemic, suffers a loss of income which makes it unreasonable to expect performance of his/her contractual obligations. It is unreasonable to expect borrowers to perform their contractual obligations if, in particular, their reasonable livelihood or the reasonable livelihood of their dependants is at risk. In the case of micro-enterprises, a precondition is that the enterprise can either not provide the services due to circumstances attributable to the COVID-19 pandemic at all or would not be able to provide the services without jeopardising the economic basis of its business.
  • Termination by the lender due to late payment or significant deterioration of the borrower's financial situation is excluded until the deferral expires. The parties may not deviate from this rule to the detriment of the consumer.
  • Any term after which expiry the utilisation of collateral provided for the deferred obligation is no longer permitted will be extended for such a period that the lender may utilise the collateral after the last due date of the secured obligations for a period that corresponds to the initial contractual arrangements.

Insofar as deviations to the detriment of the borrower are not excluded by law, the parties to the contract may agree to deviate from the above, in particular with regard to partial payments, adjustments of interest and/or repayment instalments or debt restructuring. The lender should offer the borrower a discussion about the possibility of a mutual agreement and about available support measures. If no mutual agreement is reached for the period after 30 June 2020, the term of the agreement shall be extended by three months. The respective due dates of contractual obligations will be postponed by this period.

Default Interest, Collection Costs, Contractual Penalties

For all contractual relations, default interest on payments due in the period from 1 April 2020 to 30 June 2020 shall be limited in amount to the statutory interest rate in accordance with sec 1000 para 1 of the Austrian General Civil Code (ABGB) (ie 4%, unless otherwise provided for by law) if a debtor (fully or partly) fails to make such payment  because his/her economic capacity is significantly impaired as a result of the COVID-19 pandemic. In addition, the debtor is not obliged to reimburse the costs of any extrajudicial collection or recovery measures.

The meaning of "for all contractual relations" (as mentioned above) remains unclear. According to the legislative documents, above provision applies to all types of contracts (ie, does not refer to specific types of contracts as in the case of the above-mentioned rules on residential rental agreements or loan agreements). However, the precondition of a significant impairment of the debtor's economic capacity as a result of the COVID-19 pandemic raises the question as to whether the legislator wanted to limit the applicability of this provision to contracts with consumers or micro-enterprises as well. Neither the 4th COVID-19 Act nor the respective explanatory notes provide a compelling answer to this question.

Additionally, contractual penalties need not be paid if, as a result of the COVID-19 pandemic, the debtor is either significantly impaired in his/her economic capacity or is unable to perform the underlying obligation due to restrictions on the working life.
 

TAXES AND STAMP DUTIES

COVID-19 Grants and Bonus Payments

The Austrian Income Tax Act (Einkommenssteuergesetz) now expressly clarifies that grants from the COVID-19 Crisis Management Fund or the Hardship Fund as well as comparable grants from the states, municipalities or statutory interest groups made to overcome the COVID-19 crisis are tax-free. However, certain refunds (such as the fixed cost subsidy) reduce the deductible expenses in the financial year in question.

Bonuses or supplements granted to employees for their work during the COVID-19 crisis are tax-free up to an amount of 3,000 euros in the calendar year 2020, but only if the bonuses or supplements are paid exclusively because of the COVID-19 crisis, ie if they were not granted before.

The allowance for commuters will be continued to be granted, even if the employee is temporarily working from home or is on temporary short-time work.

Stamp Duties

The (first) COVID-19 Act introduced an exemption from stamp duties for all writings and official acts that are directly or indirectly based on the necessary measures in connection with the management of the COVID-19 crisis (see Update of 20 March 2020). This provision was supplemented by the 3rd COVID-19 Act and now also exempts all legal transactions, which are necessary for the implementation of measures in connection with the management of the COVID-19 crisis, from the relevant stamp duties.

According to the explanatory notes, this is intended in particular to exempt sureties which, as a measure to deal with the COVID-19 crisis, shall ensure the liquidity of concerned companies; in addition, eg rental agreements which are concluded by local authorities or aid organisations to ensure medical care in Austria are exempt as well.

However, according to the wording of the Act, the exemptions could probably also cover other (security) transactions entered into to secure liquidity in the current situation (eg security assignments or mortgages). It is not clear from the explanatory notes whether and, if so, what evidence must be provided for the applicability of the exemption.

Furthermore, the planned increase in court fees has been suspended for the time being.
 

SOCIAL SECURITY AND EMPLOYMENT LAW

Work Accidents in Home Office

New provisions in the Austrian General Social Security Act (ASVG) stipulate that accidents occurring in home office are considered to be work accidents, regardless of whether the employee is working from a dedicated study room or not. However, the provisions are limited to the period of the COVID-19 crisis and apply only to events that occurred after 11 March 2020.

Special Care Leave

According to the 3rd COVID-19 Act, the employee and employer may also agree on a special care leave if the employee has to take care of a relative whose 24-hour-carer is not available. In this case, one third of the wage costs of the employee are covered by federal funds. The model is limited in time, any form of special care leave can only be taken until the end of May 2020, and the employer's claim for remuneration from federal funds must be processed by the end of June 2021.
 

PROCEDURES AND DEADLINES

Insolvency Proceedings

In insolvency proceedings, it is no longer possible to have procedural deadlines interrupted so that proceedings can be completed quickly. Interrupted procedural deadlines commence anew once the 4th COVID-19 Act comes into force. However, in the event of over-indebtedness, the debtor's obligation to file for insolvency remains suspended until 30 June 2020. During this period, the personal liability of members of the management board of stock corporations in respect of payments that are made after the company has become over-indebted will also cease to apply.

Additionally, it is possible to have payment schedule instalments modified, taking in consideration the current situation, and to request deferrals for period of up to nine months.

Equity Substitution Laws

From the day the 4th COVID-19 Act has come into force until 30 June 2020, a loan granted to a company by its shareholder for no more than 120 days, and for which the company does not provide a pledge or comparable security from its assets, does not constitute a loan within the meaning of sec 1 of the Austrian Equity Substitution Act (EKEG) and is therefore not considered to be an equity substitution. This provision is intended to temporarily facilitate a quick and unbureaucratic bridging of short-term liquidity bottlenecks by a shareholder loan. The provision is limited to unsecured shareholder loans in order not to shift too much of the risk that such restructuring fails to any potential insolvency creditors.

Financial Market Authority

The Austrian Financial Market Authority (FMA) can extend various statutory terms, such as regarding reporting, publication and information obligations, upon reasoned request or ex officio.

Beneficial Owners Registry Act

The period for reporting data by legal entities and the period for imposing penalties in accordance with the Austrian Beneficial Owners Registry Act (Wirtschaftliche Eigentümer Registergesetz) will also be interrupted on 16 March 2020 and will commence anew on 1 May 2020, whereby such interruption may be extended by the Federal Minister of Finance, if necessary.
 

FURTHER MEASURES

Corporate Law Deadlines and Meetings

As set-out in our Update of 20 March 2020, meetings of shareholders and board members of a corporation, partnership, cooperative, private foundation or association, mutual insurance association or small insurance company can be held without the participants being physically present, as long as the measures related to COVID-19 continue.

In addition, rules deviating from the respective statutory provisions were imposed for periods and dates of meetings of statutory corporate assemblies and supervisory board meetings. Furthermore, the deadline for the submission of documents to the supervisory board by management bodies may now be exceeded by up to four months under certain circumstances. This also applies to other accounting documents that must be submitted within the deadlines applicable to the submission of annual financial statements.

Notarial Deeds and Authenticated Documents

In the area of corporate housekeeping and M&A transactions, the following simplification was introduced: Notarial official acts required for the establishment of a notarial deed or any other public document or certified document can now be carried out using electronic means of communication. This opportunity has been granted by the legislator until 31 December 2020 (at the latest).

Intellectual Property Rights

Deadlines applying to intellectual property protection are suspended from 16 March 2020 to 30 April 2020. Such period is not to be included in the deadlines for filing a request, making a declaration or performing an action under the Austrian Patent Act (Patentgesetz), Austrian Utility Model Act (Gebrauchsmustergesetz), Austrian Trademark Protection Act (Markenschutzgesetz), Austrian Design Protection Act (Musterschutzgesetz), etc. The suspension does not apply to time limits under European law or to administrative time limits, as well as time limits concerning appeals to the Higher Regional Court of Vienna or the Austrian Supreme Court.

Our specialists with the respective expertise are at your disposal.

BEIRA Corona Task Force Update

EU and Austrian Competition Law in Times of COVID-19 – An Overview (as per 09 April 2020)

Currently, there is hardly any area not affected by the COVID-19 pandemic. Competition law is no exception to this. The following overview provides a snapshot of selected competition law topics that may be relevant for undertakings in this time of crisis:
 

MERGER CONTROL

Procedural Timelines

At the European level, the European Commission's Directorate-General for Competition ("DG COMP") encourages undertakings, if possible, to postpone their submissions of merger control notifications. DG COMP assumes that it will be more difficult for case teams to obtain information from third parties (such as customers, competitors and suppliers). In addition, DG COMP's staff has worked increasingly from home since 16 March 2020. However, deadlines have so far not been suspended on a general level.

For Austria, the 2nd COVID-19 Act affects the deadlines for merger control proceedings: For notifications received by the Austrian Federal Competition Authority ("FCA") prior to 30 April 2020, the deadline for the FCA and the Federal Cartel Prosecutor to request an in-depth review pursuant to sec 11 of the Austrian Cartel Act (phase I) will only start to run from 1 May 2020. For merger control notifications submitted prior to 21 March 2020 (i.e., prior to the 2nd COVID-19 Act), the FCA stated that the phase I-deadlines remain unaffected by the 2nd COVID-19 Act. For notifications which were or will be filed after 21 March 2020 (for which the period for submitting a request for review to the Cartel Court will not end before 29 May 2020), obtaining early waivers of review from the FCA and the Federal Cartel Prosecutor is still possible.

However, for proceedings in phase II, which were pending before the Cartel Court at the time when the 2nd COVID-19 Act entered into force or which will be put on the Court's docket before 30 April 2020, the decision deadlines for the Cartel Court will only commence on 1 May 2020. This applies regardless of when the respective merger notification was filed with the FCA.

In Germany, the Federal Cartel Office has also called on representatives of companies to consider whether a project should be submitted to the Office at this stage or whether it could possibly be filed at a later stage. However, the deadlines have not yet been formally changed.

Obtaining all necessary merger control clearances will therefore, in many cases, take longer than usual during the COVID-19 crisis. This should be anticipated in ongoing M&A negotiations by adjusting the transaction schedule and affected SPA clauses (such as long stop dates) accordingly.

Personal Meetings and Digital Submissions

The FCA does currently not receive parties or their representatives in person and does not accept any submissions via its front desk. Since the latter is not staffed continuously, the FCA also discourages parties from submitting documents by mail. At least for the time being, merger filings can only be submitted to the FCA by means of the Austrian electronic legal communication system "ERV" (Z008239) during the FCA's office hours (Mon-Thurs 8am-4pm, Fri 8am-3pm). Filings submitted after the FCA's office hours will be considered as having been submitted on the following working day.

At DG COMP it is, in principle, still possible to submit merger notifications in person, but restrictions may occur. DG COMP also accepts notifications by e-mail (comp-merger-registry@ec.europa.eu) or via the eTrustEx system.

Scenarios of Insolvency; Failing Company Defence

The acquisition of companies or parts thereof is still subject to merger control rules, even if insolvency proceedings have been initiated by or are pending against the target company.

If a financially ailing company is to be taken over, the "failing company defence" can be of importance in the substantive assessment conducted during merger control proceedings. This line of argument suggests that the target company is financially so weak that it would exit the market without a takeover, and that the market shares of the target company would then transfer to other market participants. This is the hypothetical scenario to be used when calculating the increase in the acquirer's market share. Essential for arguing the "failing company defence" is that there are no other potential buyers for the target company who would experience a smaller increase in market share, eg because they had not been active on the relevant market so far.

Evidence that the target company would exit the market without a takeover has to be provided to the competition authority during the merger control proceedings. Pending or imminent insolvency proceedings are considered a meaningful indicator.

Temporary Modification of Commitments from Previous Proceedings

If clearances in past merger control proceedings were only granted subject to commitments or conditions, it may be possible to modify or suspend ongoing behavioural commitments during the COVID-19 crisis.

For example, the acquisition of the Austrian TV channel ATV+ by the ProSieben-Sat 1-Puls 4 Group in 2017 was cleared by the Austrian competition authorities subject to commitments, inter alia, to continue their news program "ATV Aktuell" under defined minimum requirements. These commitments also contained a "revision clause" on the basis of which the ProSieben-Sat 1-Puls 4 Group applied, in March 2020, for an amendment to the commitments regarding "News & Information" in order to be able to react to the changed news production situation during the COVID-19 crisis. As a result, the commitments were, until the end of the COVID-19 crisis or 30 April 2020 (whichever date is earlier), suspended in so far as necessary to maintain the operation of the newsroom.

If commitments or obligations were part of a clearance decision by the Cartel Court in Phase II, they can be modified even without an explicit "revision clause" in the commitments themselves: If the relevant circumstances change after such clearance, the Austrian Cartel Act empowers the Cartel Court to modify or withdraw restrictions or obligations at the request of an undertaking concerned.
 

ABUSE OF DOMINANCE

Controlling the unilateral behaviour of dominant undertakings is also of relevance in the COVID-19 crisis: Not only the above-mentioned acquisition of a failing company may lead to an increase in market shares of the acquirer during and after the crisis. Also, the market exit of undertakings may result in an increase in a competitor's market share to such an extent that the latter could be qualified as dominant for the first time. From this point on, stricter rules would apply to such competitor which rules seek to prevent abusive market behaviour by dominant undertaking. A shortage of certain products can also lead to a dominant position.

The "European Competition Network" ("ECN") published a joint statement by all national competition authorities on 23 March 2020. According to this statement the competition authorities will not hesitate to act against dominant undertakings in relation to products considered essential at this time (eg face masks or sanitiser gel), if they exploit the crisis by unjustifiably increasing prices. Additionally, the FCA announced that it would give priority to investigating any suspicion of excessive prices, artificial supply shortages or other abusive behaviour in the area of health protection products.
 

AGREEMENTS BETWEEN UNDERTAKINGS

General

In the EU Member States, including Austria, European and national competition laws continue to apply to agreements between undertakings. However, in its statement of 23 March 2020, the ECN recognised that the current crisis might require extraordinary measures, including cooperation agreements between competitors or between undertakings at different market levels. Taking these circumstances into account does not require any special legislation, but can be accomplished with the existing mechanisms of national and EU competition law. The ECN states that, under the present circumstances, competition authorities will not actively intervene in necessary and temporary measures taken by undertakings to avoid supply shortages.

Also DG COMP acknowledges that businesses are currently facing particular challenges which may call for specific cooperation initiatives in order to overcome the crisis to the ultimate benefit of consumers. In order to swiftly receive informal guidance from DG COMP on the compatibility of such cooperation initiatives with EU antitrust law, undertakings can contact DG COMP via a dedicated email inbox which was newly established on 30 March 2020 (COMP-COVID-ANTITRUST@ec.europa.eu). On 8 April 2020, the Commission issued a "Temporary Framework for assessing antitrust issues related to business cooperation in response to situations of urgency stemming from the current COVID-19 outbreak". The Temporary Framework sets out an exceptional guidance procedure which may result in the Commission issuing even an ad hoc "comfort" letter in relation to "specific and well-defined cooperation projects" with an EU dimension. However, the Temporary Framework does not leave any doubt that providing such guidance due to the exceptional circumstances is subject to DG COMP's own discretion, as undertakings are normally required to make an antitrust assessment at their own risk.

If a cooperation initiative primarily concerns one specific Member State, the national competition authority of the respective Member State would still be the best point of contact.

Futhermore, there might be agreements which are concluded by undertakings only in order to fulfil statutory obligations. Such agreements do not violate competition law. Eg, if the legislator decides that certain products (such as sanitiser gels) may only be sold through certain channels or to certain end customers, an agreement between a supplier and its distributor that reflects this restriction does not contravene applicable competition law. However, such an agreement must not be excessive or stay in effect for longer than the statutory laws it intends to implement.

Vertical Agreements

The crisis may also justify agreements of a different nature, such as exclusive purchase and supply obligations, in particular if they guarantee security of supply. It is important that these agreements are limited to subject matters indispensable to the achievement of such objectives, and that they are terminated immediately once their justification ceases to apply.

Fixing resale prices by imposing either minimum or fixed prices, though, still amounts to a hardcore restriction and cannot be justified by the crisis. However, competition law does give producers the possibility to set maximum prices for their products in order to put a stop to unjustified price increases at downstream market levels – the ECN expressly refers to this possibility in its statement from 23 March 2020.

Horizontal Agreements

In the case of agreements between competitors, the crisis may justify measures that would otherwise violate competition law. Necessary and temporary measures may be allowed if they (i) either do not amount to restrictions of competition at all or (ii) produce efficiencies that outweigh the negative effects of the restriction.

An example of such an exception to the ban on anti-competitive agreements are short-term deliveries to a competitor who, without any fault on his part, suffers from a supply bottleneck regarding an input product. This might happen, for example, when borders are suddenly closed. Other possibilities to protect against a supply interruption, such as forming purchasing groups, are also conceivable. However, as the competition law rules remain fully applicable, a careful assessment should be made in each case, weighing the necessity of the envisaged measure against its restrictive effects on competition. Restrictions of competition must be minimised, and the benefits gained from the cooperation must be passed on to the customers.

The Commission's Temporary Framework of 8 April 2020 explains how the Commission will assess cooperation agreements between competitors aimed at addressing the shortage of essential products and services, notably in the health care sector. While such cooperation may require exchange of information that would under non-crisis circumstances be problematic, the Commission indicates that such measures may be acceptable to the extent that they are (i) designed and objectively necessary to actually increase output in the most efficient way, (ii) temporary in nature and (iii) proportional. The fact that cooperation is encouraged/coordinated or even requested by a public authority will also be taken into account. 

In this context, howver, it should be noted again that various European national competition authorities, including the Commission, announced that they are focusing on certain areas that are currently prone to prohibited horizontal agreements, such as price fixing for goods in particularly high demand. The Austrian FCA has announced that it will investigate any suspicion of cartel agreements in the area of health protection products (such as face masks or sanitiser gels) and give top priority to such complaints.
 

CONCLUSION

Austrian and EU competition law remain fully applicable in this time of crisis.
Competition authorities in Austria and elsewhere have declared that they will focus their market monitoring efforts on certain goods which are currently in particularly high demand (e.g. protective masks or sanitiser gels) and that they will give priority to prosecuting competition law violations affecting these areas. At the same time, applicable competition rules give undertakings a room for manoeuvre to react to the crisis with special measures – even if this requires agreements with competitors.

With regard to merger control, delays must be expected throughout, notwithstanding that the FCA and other competition authorities switched to digital communication channels for the purpose of submitting merger control notifications. In insolvency scenarios the merger control rules remain applicable, but the "Failing Company Defence" may lead to (fast) clearance by the authorities.

Regardless of whether measures could qualify as restrictive agreements, abuse of a dominant position or require merger control: even during the COVID-19 crisis, undertakings should carefully examine every action that might infringe applicable competition law.
 

Contact: Isabella Hartung, E: hartung@beira.at

BEIRA Corona Task Force Update

Overview of legal measures to mitigate the financial impact of the Coronavirus crisis on companies (as per 27 March 2020)

The Austrian legislator has extended the measures adopted so far and has introduced new measures to mitigate the financial effects of the crisis in connection with "SARS CoV 2" or "COVID-19" ("Coronavirus") for companies. More and more details on the various subsidies and grants for companies are now being published. The following is an overview:
 

ASSISTANCE MEASURES FOR AFFECTED COMPANIES

First of all, it should be noted that all the assistance measures listed below are only available within the limits of budgetary resources and there is no legal entitlement to them. In addition, grants and subsidies can be reclaimed in the event of false statements being made (in addition to the possible threat of criminal prosecution).

Furthermore, it should be noted that the various subsidies or grants should not be applied for in parallel, as they are either deducted from each other or may even constitute a criterion for the exclusion of eligibility (for example, a prerequisite for applying to the Federal Hardship Fund is that no further subsidies in the form of cash payments by local authorities due to the Coronavirus crisis have been received).

Federal Hardship Fund

The Federal Hardship Fund is intended to support companies that have fallen into acute financial difficulties due to the Coronavirus crisis by granting them a one-off, non-repayable subsidy. The Austrian Chamber of Commerce ("WKO") has been commissioned to administer the fund.

The following are eligible to apply (according to current status)

  • Sole proprietors;
  • Micro-enterprises with fewer than ten employees (part-time employees are calculated by conversion into     full-time equivalents) and with a turnover or balance sheet total of no more than two million euros;
  • Employed shareholders who are compulsorily insured under GSVG/FSVG;
  • "New self-employed persons" who are compulsorily insured under GSVG;
  • Free(lancing) employees who are compulsorily insured under ASVG; and
  • Freelancer professions.

Entrepreneurs who earn more than about 60,000 euros per year (80 percent of the annual maximum contribution basis under Austrian social security law) are not eligible for benefits. Entrepreneurs who earn less than around 5,500 euros per year (annual marginal earnings threshold) are also ineligible.

Individuals who receive unemployment benefits or a statutory pension are also excluded from such subsidy claim, as are farmers, foresters and non-profit organisations; separate subsidy regulations are currently being established for the latter three mentioned.

The exact conditions for a claim under  the Hardship Fund will be laid down in a special regulation issued by the Federal Minister of Finance and will include, among other things, proof that the company or entrepreneur is affected by an economically significant threat from the Coronavirus crisis. Whether someone is affected by such case of hardship is determined on the basis of whether (i) he or she is no longer able to cover current costs/expenses, (ii) there is an officially ordered ban on entering the premises, or (iii) there is a drop in sales of at least 50% compared to the same month of the previous year. In addition, only generally healthy companies are eligible (no pending insolvency proceedings, no suspected need for reorganization).

Submissions are possible from 27 March 2020, 5 p.m. (until 31 December 2020) directly on the WKO website and must include the following data and documents:

  • Tax number;
  • Code number of the Company Register (KUR) or Global Location Number (GLN), both to be found in the Company Service Portal (not applicable to free(lancing) employees);
  • Passport, driving license or identity card.

The first grants are to be made in the upcoming days, with either EUR 500 or EUR 1,000 being paid out as immediate support in a first phase and up to EUR 6,000 (EUR 2,000 per month for up to three months) in a second phase.

Federal Emergency Aid Fund

The Austrian government has announced an emergency aid fund of 15 billion euros for industries directly affected by the Coronavirus crisis, such as gastronomy, tourism or trade. Such aid will be given in the form of a mixture of loans and grants, whereby initially loans will be granted up to the maximum amount of a quarterly turnover or up to a maximum of 120 million euros, and after one year an evaluation of the damages the company has suffered as a result of the measures taken by the federal government in connection with the Coronavirus crisis will be carried out. In the amount of such damages (or a part thereof), the loan will then be converted into a grant. Further details are not yet known.

Emergency Fund in Vienna

The Emergency Fund of the City of Vienna and the Vienna Chamber of Commerce ("WKW") is intended to support Viennese companies whose business activities have been significantly affected by the Coronavirus crisis by paying out a non-repayable special grant to cover their current expenses.

Eligible for application are Viennese companies that

  • have been a member of the Chamber of Commerce for at least two years as of 1 March 2020;
  • hold at least one valid business license in Vienna;
  • have a maximum of ten employees (part-time employees are calculated by conversion into full-time equivalents);
  • carry out their business activities at a Viennese location (in the case of business activities in several regions, a proven turnover for the Viennese location must be presented); and
  • are in economic distress due to the Coronavirus crisis.

Economic distress shall be constituted if

  • there is a significant monthly decline in turnover of at least 50%; or
  • there is a massive monthly decline in turnover of at least 75%.

Such significant or massive decline in turnover must have occurred for at least one month in the period from 1 March 2020 to 31 July 2020.

If these elements are present, a grant in the form of a non-repayable subsidy for a maximum duration of five months may be applied for. In concrete terms, the grant may be paid out as follows (whereby it is not allowed to apply for both types of grant at the same time):

  • In the event of a significant decline in turnover (50 % to 74 % of monthly turnover), a non-repayable rent subsidy in a maximum of 100 euros per month (in case of a housing association) or a maximum of 600 euros per month (in case of rented property) is paid out.
  • In the event of a massive decline in sales (75 % or more of monthly turnover), a non-repayable loss compensation in a maximum of 1,000 euros per month is paid out.

Submissions can be made directly to WKW from 1 April 2020 (until 31 December 2020) and must include the following data and documents:

  • for a rent subsidy: the most recent rent invoice; or
  • for a loss compensation, either: the most recent income tax statement, the most recent income tax advance payment, list of account balances, the most recent annual financial statements or the most recent income-expense statements; and
  • records of monthly turnovers for the current year and the previous year.

Livelihood Security Fund in Lower Austria

The province of Lower Austria and the Lower Austria Chamber of Commerce ("WKNÖ") also offer companies with at least two years of Chamber of Commerce membership and a maximum of ten employees (on a full-time equivalent basis) a one-time grant of up to 5,000 euros from the Livelihood Security Fund.

For such grant, a significant decrease in monthly turnover due to the effects of the Coronavirus crisis must be proven by a comparison with the monthly turnover of the previous year.

The application can be downloaded from the WKNÖ website and submitted to the regional office of the WKNÖ starting in April 2020 (until 31 December 2020).

Hardship Fund and Guarantees in Burgenland

In addition to Vienna and Lower Austria, the Province of Burgenland has also set up an emergency aid fund at Wirtschaft Burgenland GmbH ("WiBuG") to offer sole proprietors and micro-enterprises (fewer than nine employees) in the commercial sector, including tourism and gastronomy, located in Burgenland non-repayable subsidies for fixed costs and rent.

Subsidies of up to 50 % (maximum 500 Euros) for rental costs and up to 50 % (maximum 5,000 Euros) for fixed costs can be granted for the period from 1 March 2020 to 30 June 2020.

In addition, the Province of Burgenland now also offers bridge financings in the form of guarantees for working capital financings (in exceptional cases also in the form of small direct loans) to Burgenland's commercial SMEs.

The parameters are similar to those in Vienna and Lower Austria (state liability rate up to 80% of the loan amount, maximum loan amount of 1.5 million euros, term up to five years, guarantee fee from 0.5% p.a., no handling fee). The application must be submitted to WiBuG by the financing bank. If financing by the relationship bank is not possible, WiBuG may directly grant small loans of up to 50,000 euros (term up to five years, interest rate from 2.0% p.a., no handling fee).

The respective application forms can be downloaded from the WiBuG website and submitted until 31 July 2020.
 

FURTHER MEASURES

Basic Levies of the Chambers of Commerce

The Chambers of Commerce have suspended the charging of basic levies until further notice. Impositions already made for the year 2020 are currently to be regarded as irrelevant.

Civil Law

Contrary to Germany, where the Coronavirus crisis has led to far-reaching interventions in civil law matters (such as compulsory deferrals or partial non-terminability of loans), Austria has not yet introduced any regulation or - to the extent known - formally initiated any efforts in this direction.

However, the Austrian Federal Government has announced that the Federal Minister of Finance is in contact with Austrian banks in order to facilitate loan deferrals for affected individuals. It remains to be seen whether legal measures will also be taken in Austria if voluntary deferrals by Austrian banks are not granted.
 

Our specialists with the respective expertise are at your disposal.

BEIRA Corona Task Force Update

Overview of legal measures to mitigate the financial impact of the Coronavirus crisis on companies (as per 20 March 2020)

The Austrian legislator has extended the measures adopted so far and has introduced new measures to mitigate the financial effects of the crisis in connection with "SARS CoV 2" or "COVID-19" ("Coronavirus") for companies. Existing measures, which can be reviewed in our overview of 17 March 2020, remain in place. The following is an overview of the new measures:
 

RELIEF EFFORTS FOR AFFECTED COMPANIES

Crisis Management Fund

According to the Austrian legislator, the implementation of the financial support under the "COVID 19 Crisis Management Fund" pursuant to the COVID-19 Fund Act is to be carried out via the Federal Government's "Abbaubeteiligungsaktiengesellschaft" ("ABBAG").

The regulation of the Federal Minister of Finance on the guidelines for the granting of financial aid from the COVID-19 Crisis Management Fund has already been issued and regulates the utilisation procedure and the conditions for utilisation applicable to the individual ministries that want to take certain measures to manage the Coronavirus crisis. One such measure that has already been taken is the Hardship Fund endowed with one billion euros from the COVID-19 Crisis Management Fund (see below).

Export Guarantees

The Austrian federal government provides an export credit facility of two billion euros via "Österreichische Kontrollbank" ("OeKB") to support the liquidity of Austrian export companies. These funds are made available via a new refinancing framework (COVID-19-KRR). Export companies, together with their financing bank, can apply for a credit line of 10% (for large enterprises) or 15% (for small or medium-sized enterprises) of their export turnover at OeKB. The maximum amount is 60 million euros per customer; the financing is initially limited to two years (with the possibility of an extension). The costs are based on the existing refinancing framework, with a slightly increased fee on the guarantee in respect of the relevant promissory notes.

Assistance for Small or Medium-Sized Enterprises

In order to support small or medium-sized enterprises, the Austrian legislator, in the SME Assistance Act, has provided for an expansion of the guarantee frameworks of both the "Österreichischen Hotel- und Tourismusbank" (ÖHT) and the "Austria Wirtschaftsservice" (aws). Such expansion will be implemented by a regulation to be issued by the Federal Minister of Finance together with any any other minister competent in the respective matter.

Hardship Fund

The establishment of a hardship fund (endowed with one billion euros from the COVID-19 Crisis Management Fund; see above and our overview of 18 March 2020) is intended to mitigate hardship cases in SPs, freelancers, NPOs and micro-enterprises caused by legal and economic consequences of the Coronavirus crisis. The implementation of this subsidy programme will be based on a directive issued by the Minister of Finance in agreement with the competent ministers on the basis of the SME Assistance Act. The actual processing will be carried out by the Austrian Chamber of Commerce.

Artists' Social Security Fund

In order to mitigate the loss of income for artists due to the Coronavirus crisis, the Austrian legislator has resolved that the Artist's Social Security Fund may grant additional subsidies in the total amount of up to five million euros in the calendar year 2020. Separate directives will be issued for the granting of such subsidies, which may also provide for support for cultural agents.

Fees and Administrative Charges

As an additional financial relief, the Austrian legislator has exempted (retroactively as of 1 March 2020) writings and official acts that are or will be made directly or indirectly on the basis of the measures necessary in connection with the Coronavirus crisis from fees and federal administrative charges payable on them.
 

PROCEDURES AND DEADLINES

General Rules

Among other things, the Austrian legislator has resolved on the temporary suspension of court proceedings, the suspension of time limits, the restriction of court operations, the reduction of visiting rights in prisons, the use of video technology for interrogations and hearings, and the possibility of circular decisions/resolutions by the Constitutional High Court and the Administrative High Court.

Specifically, all time limits in court proceedings (civil proceedings, non-contentious proceedings, land register and commercial register matters as well as enforcement and insolvency proceedings) will in principle be suspended until 1 May 2020 and will start to run anew on 1 May 2020, whereby such suspension period may be extended by the Federal Minister of Justice if necessary. The only exception to the suspension of proceedings are proceedings concerning detention measures.

However, the competent court may shorten the duration of the suspension of proceedings for reasons of urgency (to avert a danger to life and limb, security or freedom or to avert substantial and irrecoverable damage to a party to the proceedings).

Oral hearings and personal interviews should, if possible, only be conducted for the above-mentioned reasons of urgency and, if so necessary to be conducted, they should be conducted by suitable technical means of communication (e.g. video conferences).

Largely similar rules have also been resolved for deadlines in proceedings under the Austrian Federal Fiscal Code and the Austrian Fiscal Penal Code.

In addition, deadlines under substantive law are also deemed suspended until 1 May 2020; i.e. the period from 23 March 2020 up to and including 30 April 2020 is not included when calculating the period in which an action or application is to be filed or a declaration is to be made.

During this period, a written reminder in respect of a liability that became due after 23 March 2020 will not lead to a default in insolvency restructuring proceedings.

For merger control notifications received by the Federal Competition Authority prior to 30 April 2020, the deadline for the examination request shall run from 1 May 2020, and for examination requests that are pending before the Austrian Cartel Court on 23 March 2020 or that are made by the end of 30 April 2020, the deadline for a decision shall run from 1 May 2020.

As long as the periods mentioned in this point are suspended, certain alleviations apply to notifications requiring proof of delivery.

Insolvency and Enforcement Proceedings

In the Austrian Insolvency Code as well as in the Austrian Enforcement Code, the Austrian legislator has included a clarification that epidemics and pandemics fall under the term "natural disaster". If a natural disaster is (partly) responsible for the insolvency of a company, the time period for the obligatory filing for insolvency is extended to 120 days. It should be noted that such extended period (same as the regular period) may only be utilised as long as there is the prospect of a successful restructuring.

If a person is affected by a natural disaster that puts him or her in economic difficulties and if this leads to the initiation of enforcement proceedings, the enforcement is to be delayed at the request of the obligated person without the provision of security if (i) such enforcement would otherwise destroy the economic existence of the obligated person and (ii) there is no risk of substantial damage to the creditor caused by such delay of enforcement.
 

SPECIAL MEASURES IN COMPANY LAW

In respect of company law, the legislator has taken two measures in the form of a separate act (COVID-19 Company Law Act, "COVID-19-GesG")

Meetings of Shareholders and Board Members

As long as the measures relating to the Coronavirus crisis persist, meetings of shareholders and members of the bodies of a corporation, partnership, cooperative, foundation or association, mutual insurance association or small insurance association may be held without the physical presence of the participants (whether or not such form of meeting is provided for in the company's documents). The Federal Minister of Justice will stipulate by regulation how these meetings are to be held, in particular to ensure a comparable quality of the decision-making process.

Annual General Meetings of Stock Corporations

In the calendar year of 2020, the annual general meeting of stock corporations must no longer be held within the first eight months of the financial year of the relevant stock corporation, but only within the first twelve months thereof.
 

Our specialists with the respective expertise are at your disposal.