BEIRA Corona Task Force Update<< Back
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.
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.
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.
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.
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
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.
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.
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