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Brexit: Legal consequences for "Austrian" Limiteds

Tuesday, 9 April 2019

With - now – 12 April 2019 the withdrawal of the United Kingdom from the EU becomes effective. A "hard Brexit" - i.e. a break with the EU without a bilateral withdrawal agreement - is currently not excluded. In the absence of or with a non-comprehensive agreement, the United Kingdom will thus become a mere third country vis-à-vis the EU.

In the past, Limiteds were established and registered with Companies House in England, but (only) operate in Austria and thus have their administrative seat in Austria ("Austrian" Limited). The recognition under corporate law of foreign companies of which the registered office and the administrative headquarters differ is based on the freedom of establishment under European law, which will no longer be applicable to Limiteds after the Brexit. Therefore, the "Austrian" Limited would have to be assessed in accordance with Austrian corporate law. The consequence of a hard Brexit would be the loss of the legal capacity of the "Austrian" Limited because this legal form would no longer be recognised. Thus, the limitation of liability would be lost and the "Austrian" Limiteds would have to be considered as partnerships with personal liability of the shareholders as of 12 April 2019.

In order to avoid these disadvantages provisionally, "Austrian" Limiteds will be treated under the Brexit-Accompanying Act 2019 as if the United Kingdom were still a member of the EU until 31 December 2020. However, the Brexit Accompanying Act only treats the Austrian side and it is unclear how the UK will deal with "Austrian" Limiteds.

From an Austrian perspective, the following options exist:

1. Cross-border transfer of the registered office

The "Austrian" Limited could change its legal form to that of an Austrian limited liability company by transfer of its registered office to Austria. The problem with such transfer is that there are no regulations under EU and Austrian law (see our respective article in Newsletter 2/2018).

Therefore, this approach would be technically possible, but would require coordination between the two legal systems and, in particular, the commercial register courts; thus, an implementation before 12 April 2019 appears no longer possible.

2. Cross-border merger

In this case, the Limited would be merged cross-border into a newly established Austrian company by way of universal succession. There are provisions for such a merger under English law as well as under Austrian law.

Based on our previous experience, a cross-border merger will take some time due to mandatory legal deadlines and the involvement of different jurisdictions. In addition, the merger only becomes effective upon registration with the commercial register; thus, an implementation before 12 April 2019 is also no longer feasible.

3. Contribution of the Austrian branch

Another option would be to transfer the Limited's business to a newly established Austrian limited liability company. In contrast to a merger, in which all assets are transferred by way of universal succession, the transfer is made by way of individual succession, so that all contractual partners must be contacted. The procedure of such a contribution would be as follows:

  • Establishment of the receiving Austrian limited liability company
  • Preparation of a contribution balance sheet as of the contribution date
  • Signing of the contribution agreement
  • Registration of the transfer of business with the commercial register
  • Registration of the dissolution and deletion of the branch with the commercial register
  • Deletion of the Limited from Companies House

4. Conclusion

The withdrawal of the United Kingdom from the EU – in particular in case of a hard Brexit – leads to hardly predictable legal uncertainties. Therefore, "Austrian" Limiteds would be well advised to find a way into an Austrian legal form as soon as possible.

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