1. Restructuring (Spinn-off/Merger/Squeeze out/Transformation) Ass.-Prof. Dr. Peter Stockenhuber LL.M.

2. Spin-off

3. Definition  Division of companies with limited liability (corporations) having legal personality and transfer of assets by means of universal succession and with exclusion of the liquidation of the respective companies;  (4 types of spin-off)  Key aspects:  Only for corporations  Universal succession  The principle of maintenance of capital with respect to the nominal capital  Exclusion of liquidation  Protection of creditors

4. Consideration for „old“ shareholders  The shareholders of the transferring company receive shares of the accepting company as consideration  Ratio continuation (“verhältniswahrend”)  Without ratio continuation (“nicht verhältniswahrend”)  When the companies involved have a different legal form (“rechtsformübergreifend”) or a spin-off without ratio continuation is intended the shareholders objecting to the spin- off have the right to relinquish their position against a cash consideration

5. Type I ( Aufspaltung zur Neugründung)  The company forms two or more new companies by means of transferring all its assets and liabilities via universal succession to the respective new companies without going into liquidation (“Aufspaltung” zur Neugründung) A AG B AG (new company) C AG (new company)

6. Type II ( Aufspaltung zur Aufnahme)  The company transfers all its assets and liabilities via universal succession to more than one existing company without going into liquidation (Aufspaltung” zur Aufnahme) A AG B AG (existing company) C AG (existing company)

7. Type III ( Abspaltung zur Neugründung)  The company forms a new company by means of transferring (a part of) its assets by universal succession to a thereby newly established company (“Abspaltung zur Neugründung”) A AG (exisiting company) B AG (new company)

8. Type IV ( Abspaltung zur Aufnahme)  The company transfers a part of its assets to another existing recipient company and remains in existence („Abspaltung zur Aufnahme”) A AG B AG A AG B AG Assets

9. Maintenance of capital  The principle of summation (“Summengrundsatz”)  The sum of the nominal capital of the involved companies must amount at least to the value of the nominal capital of the transferring company prior to the spin-off  The sum of the legal reserves of the involved companies must amount at least to the value of the legal reserve of the transferring company prior to the spin-off  Not applicable when the company transfers its assets to another existing recipient company without being wound up (continuance)  The value of the net assets left behind in the transferring company must amount to the value of its nominal capital including the legal reserves after the spin-off

10. Procedure I 1.Planning phase: 1.Draft terms of the spin-off drawn up by the managing board of the company, when establishing a new company in the course of the spin-off.  The content with respect to the minimum information required is regulated by law such as:  The type, name and the registered office of both companies involved  The share exchange ratio and the amount of any cash payment  The precise description and allocation of the assets and liabilities to be transferred 2.Spin-off and transfer agreement concluded between managing boards of both involved companies, in the course of allocation of assets and liabilities to an existing company  The content with respect to the minimum information required is regulated by law

11. Procedure II 3.Establishing the effective day of the spin-off 1.Determines the date of effectiveness of the spin-off with respect to tax law and accounting 2.For accounting purpose the respective transactions will be treated as being those of other of the recipient companies 3.Closing balance sheet needs to be issued for the effective day of the spin-off, dated not longer than 9 months prior to the notification of the spin-off to the court 4.The draft terms of the spin-off furthermore need to specify 1.The date from which the allocated shares entitle the new holder to participate in profits

12. Procedure III 1.Spin-off report 1.Drawn up by the managing board of the each company 2.Explains the draft terms of the spin-off 3.Sets ground for the legal and economic ground for the spin-off 1.In particular the share exchange ratio 2.The Assessment of the spin-off 1.The supervisory board determines the auditor 2.The auditor has to report to the company in writing 3.Assessment by the supervisory board

13. Publicity  Draft terms of the spin-off need to be published in the official gazette (Amtsblatt der Wiener Zeitung)  At least one month prior to the shareholders‘ meeting resolution on the respective spin-off  The spin-off including the draft terms needs to be notified to the companies register at least one month prior to the shareholders‘ meeting resulting on the respective spin-off.  The following documents need to be available at the companies registered office throughout the period of one month prior to the shareholders‘ meeting resulting on the respective spin-off  Draft terms of the spin-off  Balance sheets (and interim balance sheet)  The reports

14. Shareholders Resolution I  The spin-off needs to be approved by the shareholders resolution which furthermore needs to be notarized by the public notary  Majorities  GmbH: AG: 75% of the votes cast in the shareholders’ meeting  AG: 75% of the share capital represented in the shareholders’ meeting  In cases of spin-off without ratio continuation  90% of the whole nominal/share capital

15. Application for registration  After the shareholders have resolute on the respective spin-off the spin-off needs to be applied to the companies register in order to be registered.  The application must be signed by all members of the managing board  The application also needs to contain the statement of the managing board of the transferring company that all shareholders have waived their right to content the spin-off  The application needs to contain the following documents  The shareholders‘ resolution  The reports  The copy of the publication in the official gazette  The statement

16. Protection of the creditors  Joint and several liability of the each company involved in the spin-off  For the allocated assets  For other old liabilities of the of the other company  Limited by the net value of allocated assets  Maintenance of capital

17. Merger

18. Definition  Unification of companies with limited liability (corporations) having legal personality and transfer of assets by means of universal succession and with exclusion of the liquidation of the respective companies  Down-stream merger: the parent company merges into its subsidiary (subject to special conditions);  Up-stream merger: the subsidiary merges into its parent;  Side-stream merger: between sister companies

19. Consideration  The shareholders of the transferring company receive shares of the accepting company as consideration  The exception thereof is regulated by law and appleis in particular:  When the acquiring company holds shares of the transferring company  The transferring company holds own shares  Furthermore the legal regulations provide for the possibility to exclude the respective consideration in shares e.g. by waiver of the shareholders of the transferring company  When the companies involved have a different legal form the shareholders objecting to the merger have the right to relinquish their position against a cash consideration, which needs to be set out in the merger agreement/draft terms of the merger

20. Merger through Absorption (Verschmelzung durch Aufnahme)  A company transfers its assets and liabilities to another existing company (acquiring company) A AG (aquiring company) B AG A AG (aquiring company )

21. Merger through formation of a new company (Verschmelzung zur Neugründung)  Two or more companies transfer their assets and liabilities to a company that they form in the course of the merger (new company) A AG B AG AB AG (new company)

22. Maintenance of capital  To avoid the “reduction of capital”-effect: The nominal capital of the transferring company must be equal or lower than nominal capital of the acquiring company, or else the acquiring company needs to assure the full settlement of the creditors of the transferring company by either  Securities  Evidence, that all creditors have been settled  Binding the acquired capital into the companies premium reserves for the purpose of settlement of potential creditors  Positive market value of the transferred shares

23. Procedure I 1.Planning phase: 1.Merger agreement/Draft terms of the merger drawn up by the managing board of the company, the content with respect to the minimum information required is regulated by law 2.Agreement/Draft must contain inter alia the following information 1.The type, name and the registered office of both companies involved 2.Agreement to transfer the assets and liabilities 3.Shares exchange ratio 4.Effective date of the merger (see below 3) 5.The date from which the allocated shares entitle the new holder to participate in profits

24. Procedure II 3.Establishing the effective date of the merger 1.Determines the date of effectiveness of the merger with respect to tax law and accounting 2.For accounting purpose the respective transactions will be treated as being those of one or other of the recipient companies 3.Closing balance sheet needs to be issued with reference to the effective date of the merger, dated not longer than 9 months prior to the notification of the merger to the court

25. Procedure III 1.Merger report 1.Drawn up by the managing board of each company 2.Explains the merger agreement 3.Sets ground for the legal and economic ground for the merger 1.In particular the share exchange ratio 2.The Assessment of the merger 1.The supervisory board determines the auditor 2.The auditor has to report to the company in writing 3.Assessment by the supervisory board 4.In case of intra-group mergers many of the above mentioned measures may be waived by the shareholder(s)

26. Publicity  Draft merger agreement/draft terms need to be published in the official gazette (Amtsblatt der Wiener Zeitung) and needs to be notified to the companies’ register at least one month prior to the shareholders‘ meeting resulting on the respective merger (not required for GmbH)  The following documents need to be available at the companies registered office throughout the period of one month prior to the shareholders‘ meeting resolving on the respective merger (not required for GmbH)  Merger agreement/draft terms  Balance sheets (and interim balance sheet)  The reports

27. Shareholders Resolution  The merger needs to be approved by the shareholders resolution which furthermore needs to be notarized by the public notary  Majorities  GmbH: AG: 75% of the votes cast in the shareholders’ meeting  AG: 75% of the share capital represented in the shareholders’ meeting

28. Application for registration I  After the shareholders have resolved on the respective merger the boards of the directors of both companies involved need to apply to the companies’ register for registration of the merger  The application must be signed by all members of the managing board  The application also needs to contain the statement of the managing board of the transferring company that all shareholders have waived their right to contend the merger

29. Application for registration II  To be submitted:  The merger agreement  Minutes of the respective shareholders‘ meeting  Merger balance sheet  Other documents regarding the transferring company  Declaration, stating that  no action of nullification has been filed (1 month after the shareholders‘ resolution) or  that such action has been withdrawn or  shareholders have waived their right to bring such an action in the form of a notarial deed

30. Squeeze-out

31. A “squeeze out” previously required:  A transformation of the corporate form (Umwandlungsgesetz „UmwG“) or  The spin-off of Corporations (Spaltungsgesetz „SpaltG“; so called squeeze-out spinn-offs) Now:  By means of a shareholders’ resolution  if the majority shareholder holds at least 90% of the shares according to the Austrian Act on Exclusion of Minority Shareholders

32. Act on Exclusion of Minority Shareholders  Conditions  Shareholders resolution resolving on the squeeze-out  Offer of a cash compensation  Majority shareholder holds at least both, 90% of the issued shared capital containing voting rights, and 90% of the voting rights of the company  When in addition the respective shareholder holds the 90% of the total issued shared capital, he can also acquire the non-voting preference shares of the respective company  Squeeze-out sometimes pursued subsequent to a takeover bid aiming at the acquisition of all shares

33. Act on Exclusion of Minority Shareholders: Step by step Exclusion of a minority shareholder:  Demand of the majority shareholder to exclude minority shareholder  Evaluation of the company (by KPMG, Deloitte, Ernst & Young etc. )  Joint report of the management and main shareholder  Request to commercial register to appoint an auditor  Auditor evaluates the adequateness of the cash compensation  Convocation of the general meeting and forwarding of the documents to the shareholders  Resolution of the general meeting on the exclusion and consent of the majority shareholder  Request to commercial register to register the exclusion

34. Transformation of Corporate Forms

35. Change of the legal form (Rechtsformändernde Umwandlung)  By changing the legal form with continuation of the identity of the company  Without the transfer of the assets  Without liquidation of the company A AGA GmbH

36. Transfer onto the main shareholder (Übertragende Umwandlung) 1.Transfer of the company's entire business to the majority shareholder holding at least 90% of the issued shared capital by means of universal succession  The majority shareholder may not be a corporation  Cash compensation for the minority shareholders being squeezed-out in the course of the transformation GmbH B D C A D 92%

37. Transformation of the Company (Errichtende Umwandlung) 2.Transfer of the company's entire business (assets and liabilities) into newly established partnership by means of universal succession  Former shareholders become partner of the new partnership  In case of declining to become a partner they are entitled to cash compensation GmbH 2% 94% 2% OG 94% 2%