In 2006, the aggregate annual volume on the equity cash market (domestic companies listed on the Official Market, the Semi-Official Market and the Third Market) was €125.7 billion. As of 31 December 2006, shares of a total of 89 companies were listed on the Official and Semi-Official Markets, the two most important markets of the Vienna Stock Exchange. Of these companies on this date 79 were incorporated in Austria. As of 31 December 2006, the market capitalisation of all domestic companies listed on the Official and Semi-Official Markets of the Vienna Stock Exchange amounted to €144.6 billion (Source: Vienna Stock Exchange).
According to the Austrian Stock Exchange Act, the Austrian securities market consists of three statutory markets for listing purposes: the first tier market (the ‘Official Market’), the second tier market (the ‘Semi-Official Market’) and the third tier market (the ‘Third Market’). The Official Market and the Semi-Official Market have been registered as ‘regulated markets’ pursuant to the Investment Services Directive. In December 2004, the US Securities Exchange Commission granted the Vienna Stock Exchange the status of a ‘Designated Offshore Securities Market’ in accordance with the Securities Act.
When meeting the statutory criteria, securities are admitted to listing on the Vienna Stock Exchange and are divided into various trading segments. The equity market (Official and Semi-Official Market) is divided into the segments ‘Prime Market’, ‘Standard Market Continuous’ and ‘Standard Market Auction’. The Prime Market represents the highest ranking market segment of the Vienna Stock Exchange and is comprised of shares in companies that agree to fulfill more stringent reporting, quality and disclosure requirements. For more information please see 8.2.
Out of the currently listed 49 titles of the Prime Market, only 20 are contained in the Austrian Traded Index (‘ATX’). The ATX consists of the most actively traded (most liquid) and the highest capitalised stocks in the Prime Market. It was designed as an underlying reference for futures, options and structured notes. The ATX is calculated, disseminated and licensed by the Vienna Stock Exchange on a real-time basis.
The segments Standard Market Continuous and Standard Market Auction contain all stocks admitted to listing on the Official Market or Semi-Official Market that do not meet the criteria for the Prime Market. Shares listed on the Standard Market Continuous are traded continuously, whereas shares listed on the Standard Market Auction are traded only once a day.
To provide additional liquidity, stocks traded in the Prime Market and the Standard Market Continuous must be serviced by a specialist trader, which has agreed to enter firm quotes into XETRA, the electronic trading system used by the Vienna Stock Exchange on a permanent basis. In both subsegments, additional liquidity providers other than the designated specialists are permitted to act as market makers in securities already serviced by at least one specialist. The market makers’ commitments must meet certain minimum requirements set up by the Vienna Stock Exchange.
General information as well as a range of services, such as quotations and ad hoc information about the companies listed on the Vienna Stock Exchange is provided by the Vienna Stock Exchange via the internet (www.wienerborse.at).
Officially listed shares are traded both on and off the Vienna Stock Exchange. Nearly half of all trades are over-the-counter (‘OTC’). Shares and other equity securities listed on the Vienna Stock Exchange are quoted in euros per share.
The electronic trading system used by the Vienna Stock Exchange is XETRA (Exchange Electronic Trading), the same trading system used by the Frankfurt Stock Exchange. The settlement system uses automated netting procedures and daily mark to market evaluation of collateral requirements to further reduce transfer costs.
The settlement of the transaction concluded on the stock exchange takes place outside the stock exchange. Exchange transactions (spot and forward markets) are settled through CCP Austria Abwicklungsstelle für Börsegeschäfte GmbH. These transactions are carried out T+3 on a delivery versus payment (DvP) basis, with OeKB acting on behalf of CCP Austria Abwicklungsstelle für Börsegeschäfte GmbH as the central custodian and settlement bank. In case of non-delivery, the transaction will be performed T+14 by a settlement in cash, with the defaulting counter-party having to pay a penalty to the purchaser(s). Settlement terms of OTC transactions depend on party agreement.
2. LEGISLATIVE AND REGULATORY STRUCTURE
Five core acts and directly applicable EC laws comprise the majority of Austrian capital markets law. The Austrian Capital Market Act (Kapitalmarktgesetz – KMG), which implemented the EU Prospectus Directive 2003/71/EG in August 2005, defines public offerings, sets out the general format and content of prospectuses and regulates the approval (Billigung) of a prospectus by the Austrian regulatory agency, the Austrian Financial Market Authority (Finanzmarktaufsicht – FMA). The Commission Regulation (EC) No 809/2004, which is directly applicable in Austria, lays down the precise details of the format, content, incorporation of reference and publication methods of a securities prospectus. The Austrian Stock Exchange Act (Börsegesetz – BörseG) sets forth the prerequisites and admission procedure for trading and contains provisions on illegal market practices. The Austrian Securities Supervision Act (Wertpapieraufsichtgesetz – WAG) governs the licence requirements and supervision of investment firms and sets forth know your customer rules for investment firms and credit institutions. The Austrian Takeover Act (Übernahmegesetz – ÜbG) ensures equal treatment of the shareholders of listed companies in takeover procedures. It allows minority shareholders to sell their shares to shareholders that acquire controlling interests in such companies. The Financial Market Authority Act (Finanzmarktaufsichtsgesetz – FMAG) governs the organisation and supervision of the FMA.
Listed companies are also obliged to abide by various regulations issued by the FMA such as the Issuers’ Compliance Regulation (Emittenten-Compliance-Verordnung – ECV), the Publication and Disclosure Regulation (Veröffentlichungs- und Meldeverordnung – VMV) and the Market Practice Regulation (Marktpraxisverordnung – MPV).
3. REGISTRATION OF THE ISSUER AND SECURITIES
The issuer that publicly offers securities in Austria does not have to be incorporated, registered or licensed to do business in Austria. The issuer is not required to retain any form of representation or establishment in Austria, nor do the securities themselves have to be registered in Austria.
However, the issuer has to deposit the approved prospectus and (in case of an initial public offering) an emission calendar which contains the essential parameters of the offering with Oesterreichische Kontrollbank (OeKB).
4. SUPERVISORY AUTHORITIES
The relevant Austrian supervisory authorities are the FMA, OeKB, the Vienna Stock Exchange and the Austrian Takeover Commission (Übernahmekommission).
The FMA is the primary supervisory agency and has comprehensive powers of supervision over credit institutions, insurance companies, employee pension funds, and securities. It approves prospectuses, issues decrees on compliance and ad hoc publicity measures, and monitors trading on the Vienna Stock Exchange, in particular the compliance with rules and regulations regarding insider trading, fairness in trading, and other market related matters. Credit institutions and securities firms are obliged to notify security transactions to the FMA. The FMA is authorised to impose fines and, in some cases, make public certain measures taken against infringers.
The Vienna Stock Exchange is an independent, privately owned and severally supervised stock corporation, based on a licence issued by the Federal Ministry of Finance. Members of the Vienna Stock Exchange include banks, foreign investment firms and other firms trading in securities, derivatives and money market instruments, registered either inside or outside the European Economic Area. The Vienna Stock Exchange is responsible for admitting companies to trading if the relevant statutory requirements are met. It may suspend trading if orderly stock exchange trading is temporarily endangered or if its suspension is necessary in order to protect the public interest. The electronic system provides for automatic volatility interruptions and market order interruptions during continuous auctions and for automatic volatility interruptions during continuous trading.
The OeKB acts as a clearing house for the Vienna Stock Exchange and is the central depository for global securities certificates and the emission calendar.
The Austrian Takeover Commission supervises the compliance of listed companies with, and decides on all matters relating to, the Austrian Takeover Act.
5. OFFERING DOCUMENTS
Entities that wish to offer securities to the public are required to publish an FMA-approved prospectus (based on Commission Regulation (EC) No 809/2004) before their offering and admission to trading. In this context, public means a general non-distinctive audience of at least 100 persons. The prospectus requirement applies to initial as well as other offerings.
Exempt from the prospectus requirement are: • offerings to less than 100 non-qualified investors per EU jurisdiction; • offerings with a value of less than €100,000 during a 12 month period; • offerings that require a minimum investment of €50,000 per investor; • offerings individually and directly communicated to (any number of) addressees; • offerings to qualified investors (such as financial service providers, local governments, central banks or other comparable international institutions as well as large companies and certain small businesses);
• nominal capital increases;
• offerings of shares in the context of mergers or takeovers;
• offerings of a listed company to its executives or employees; and
• offerings of securities or bonds issued by Austrian or European municipalities, the Austrian National Bank and certain other organisations as defined in the KMG.
Reselling securities which were offered on the basis of certain exemptions, however, may trigger the requirement to publish a prospectus. Limited partnership shares (Kommanditanteile), silent partnership and non-securitised profit participation rights are subject to different prospectus rules (under the KMG). Issuers may voluntarily file for approval of a prospectus of an exempt offering, which they might do if they intend to passport the prospectus in other EU countries. In this case, the same provisions (eg prospectus liability) apply as if the offering had not been exempt in the first place.
In order to inform the public about the issuer, a prospectus has to be published at least six days before the end of the offering period, if securities are traded on a regulated market for the first time. Otherwise the issuer must publish the prospectus at least one banking day before the public offering and admission to trading.
The prospectus contains all material information which – based on the nature of the issuer and the security – is necessary to enable investors to make an informed assessment of the assets and liabilities, financial position, profit and losses, and prospects of the company and the rights attaching to the securities. The prospectus contents are determined by EC regulation 809/2004, which provides for a combination of building blocks depending on the type of security and offering.
Major prospectus requirements are the information on the company, its administration and history, auditors, business and markets, organisational structure, operating and financial review, capital resources, intellectual property, shareholders, related party transactions, as well as sufficient risk factors specific to the issuer, the industry, the offering and trading on a regulated market. Profit forecasts or estimates must include assumptions and statements on which such forecasts are based.
The prospectus does not need to disclose the individual remuneration of board members unless the issuer has voluntarily chosen to comply with it under the Austrian Corporate Governance Code. Moreover, the prospectus does not have to mention the final issue price (which will not even exist at the time of approval in a book building procedure) as long as the prospectus contains a price range in the ball park of the final issue price and an explanation of the criteria on how to determine the issue price.
Additional disclosure requirements apply to property companies, which must include a valuation report on the value of another financial data relating to their property.
The prospectus must be written in clear and coherent language which the average investor is capable of understanding. A prospectus may be submitted in German or English.
The issuer is obliged to publish a supplement to an improved prospectus containing significant change or material inaccuracies of the approved prospectus. The supplement must be published in the same way as the prospectus. Investors are entitled to withdraw any offers for securities which are offered prior to the publication of the supplement within a period of two banking days (within one week if they are consumers) after publication of the supplement.
The FMA will examine the submitted prospectus as to whether it is complete, coherent and understandable. It will not verify the contents of the prospectus. The statutory approval period is 10 banking days (20 banking days in case of first time admission to trading on the regulated market) after submission. In order to expedite the approval process, the FMA – one of the most efficient and cooperative government agencies in Austria – accepts draft documents by e-mail for review and comments. As a result, if the FMA receives a fully reviewed draft by noon it may approve the prospectus on that same day.
Issuers may passport a prospectus that has been approved in another EU country to Austria. No filing formalities other than the notification of the FMA about the intended offering in Austria are necessary. Additionally, the FMA requires a translation of the prospectus summary into German or English if the prospectus is not published in one of these languages.
Offering securities before publishing a prospectus is a criminal offence (punishable with a prison sentence of up to two years), as is the wrongful or non-disclosure of material circumstances in a prospectus or prospectus supplement. The FMA may impose administrative fines of up to €50,000 if the information contained in the prospectus or the prospectus supplement infringes upon the provisions of the Austrian Capital Markets Act but is not severe enough to constitute a criminal offence. Additionally, consumers are entitled to withdraw from their investments by giving written notice to the seller within one week after publication of the prospectus.
Investors are entitled to claim damages from (i) the issuer for false or incomplete information that the issuer, the issuer’s employees or advisers disclosed in a prospectus, (ii) the auditor for knowledge of false or incomplete information in a prospectus which contains financial statements for which the auditor issued an opinion and of which he or she knew that they would be included in that prospectus, and (iii) the financial intermediary for knowledge of false or incomplete information in a prospectus.
In addition to the above, standard civil law liability may attach to damages resulting in connection with investment fund or property fund prospectuses or in case a prospectus is not published at all. In this case, persons such as the issuer’s officers or shareholders may also be held liable for negligently causing any such damages.
6. DISTRIBUTION SYSTEM
Companies ordinarily do not issue their securities themselves. They will usually procure the expertise and resources of an underwriter. According to the Austrian Banking Act (Bankwesengesetz – BWG), only licensed credit institutions (including passported credit institution or securities firm from EEA countries) are allowed to act as underwriters for third parties that issue securities.
7. LISTING
The Austrian Stock Exchange Act regulates the admission procedure for trading on the Vienna stock exchange. The issuer must apply for admission to trading on the Vienna stock market. A licensed credit institution which is also a member of the Vienna Stock Exchange is required to sign the application. If the statutory requirements are met the Vienna Stock Exchange is obliged to admit the applicant unless the admission would be detrimental to the interests of potential investors. The Vienna Stock Exchange has ten weeks to render a formal decision. If any of the statutory requirements cease to be met, the admission to trading will be revoked.
Official Market requirements are:
8. ONGOING COMPLIANCE REQUIREMENTS
Domestic and foreign stock corporations are required to protect the rights of individual shareholders. In particular, all shareholders must, under equal circumstances, be treated equally, unless the affected shareholders have consented to unequal treatment. Furthermore, measures affecting shareholders’ rights, such as capital increases and the exclusion of subscription rights, generally require a shareholders’ resolution. Stock corporations must enable their shareholders to properly exercise the rights attached to their shares and inform them about general meetings, dividends, subscription and option rights, changes of share categories or amendments of the company’s articles of association. These rules generally apply to other securities such as bonds, participation certificates or profit participation rights as well.
Parent companies that issue securities on a regulated (or similar OECD member state) market are obliged to prepare their consolidated financial statements according to International Financial Reporting Standards (IFRS). As a rule, listed companies will, therefore, be required to apply IFRS. Listed companies must promptly publish their complete audited (consolidated and unconsolidated) financial statements in the Official Vienna Gazette (Amtsblatt der Wiener Zeitung) and submit them together with the management and supervisory board reports, the auditor’s opinion as well as information on the application of a company’s income to the Companies Register Court within nine months of the end of the audited fiscal year. These documents must also be delivered to the FMA and the Vienna Stock Exchange. They are required to publish unaudited quarterly financial statements according to the same principles as regards their annual statements within three months of the end of the respective reporting period in German. This also applies to non-Austrian companies even if such companies are only subject to annual or semi-annual reporting requirements in their own country.
Prime Market companies exclusively prepare their financial statements according to IFRS. They have to publish their annual financial statements within four months of the end of the audited fiscal year in German, deliver them to the FMA in German and to the Vienna Stock Exchange in German and English. Quarterly results are to be released within two months of the end of the reporting period in English and German and comprise at least a balance sheet, profit and loss statement, cash flow, change in equity and appropriate explanatory remarks. According to the rules of the Prime Market segment, the issuer has to prepare and maintain a corporate action timetable (Unternehmenskalender) at the beginning of each fiscal year in German and English. The corporate action timetable contains the dates of certain important company events such as the release of the annual and quarterly results, the annual general meeting, the dividend payment dates, investor relation activities and roadshows.
Infringements of Prime Market rules are published on the website of the Vienna Stock Exchange and may incur liquidated damages computed according to the severity of the infringement. The basis of such additional requirements is a contract entered into by the respective listed company with the Vienna Stock Exchange.
The notification provisions of the Austrian Stock Exchange Act are applicable to shares of companies having their registered seat in Austria and listed on the Official Market or the Semi-Official Market of an Austrian exchange. Currently, a holder of such shares, whether domestic or foreign, must notify (i) the Vienna Stock Exchange, (ii) the company, the securities of which have been acquired or disposed of and (iii) the FMA within seven days of any acquisition or disposal that results in such shareholder’s voting rights equalling, exceeding or falling below thresholds of five per cent, ten per cent, 15 per cent, 20 per cent, 25 per cent, 30 per cent, 35 per cent, 40 per cent, 45 per cent, 50 per cent, 75 per cent and 90 per cent of the voting securities of such company. The seven calendar days start when the acquiring shareholder gains, or should have gained, knowledge of the acquisition or sale.
The company is required to publish any such event in the Official Gazette of the Wiener Zeitung within nine days of being notified of it. The same applies to the shares that are subject to option and trust arrangements and to banks that exercise voting rights on behalf of their depositaries by virtue of special voting proxies.
Furthermore, persons who have material managerial responsibilities with regard to an issuer and, where applicable, persons closely associated with them, must publish without delay and notify the FMA within five working days of the existence of any transactions conducted on their own account relating to shares of the issuer, or to derivatives or other financial instruments linked to them as soon as the aggregated value of such transactions exceeds €5,000 per calendar year (so-called directors’ dealings). For purposes of calculating this threshold, the value of such transactions during a calendar year is aggregated.
Under certain circumstances, the acquisition of shares or other methods of obtaining control of a company within the meaning of the Austrian Cartel Act (Kartellgesetz) may be subject to the Austrian Cartel Court’s approval.
The Stock Exchange Act requires companies admitted to the Official or Semi-Official Market of the Vienna Stock Exchange to disclose to the public without delay any new developments which have occurred in their business operations and which, due to their effect on the company’s business, financial or earnings situation, are prone to significantly influence the price of shares (so-called ad hoc information).
The Austrian Code of Corporate Governance (the ‘Code’) was published by the Austrian Working Group on Corporate Governance, a group of private organisations and individuals, in 2002. This voluntary self-regulatory initiative is designed to reinforce the confidence of investors by improving reporting transparency, and the quality of cooperation between supervisory board, managing board and shareholders, to provide for accountability and promote sustainable, long-term value.
The Code primarily applies to Austrian stock market-listed companies that undertake to adhere to its principles. The Code is based on statutory provisions of Austrian corporate law, securities law and capital markets law (‘Legal Requirements’). In addition, the Code contains rules considered to be a part of common international practice, such as the principles set out in the OECD Principles of Corporate Governance. Non-compliance with some of these rules must be explained to the shareholders’ meeting (‘Comply or Explain’). However, the Code also contains rules that are voluntary and do not require explanation in the case of deviations (recommendations). Overall, successful implementation of the Code depends on self-regulation by companies. The Code was amended in February 2005 to reflect changes in the Austrian Stock Exchange Act and the Austrian Commercial Code and in January 2006 to reflect the corporate governance recommendations of the European Commission and the changes in the Austrian Stock Corporation Act effective from 1 January 2006. The principal rules and recommendations of the Code include:
9. MARKET ABUSE
Austrian law prohibits the abuse of insider information committed on Austrian territory or by Austrian citizens abroad. The provisions on insider information have been subject to a major amendment, implementing the provisions of the European Directive 2003/6/EC of the European Parliament and the Council of 28 January 2003 on insider dealing and market manipulation (market abuse) which became effective 1 January 2005 (Federal Law Gazette No 127/2004). Market abuse consists of insider dealing and market manipulation.
Insider information is defined as detailed information unknown to the public which directly or indirectly concerns one or more issuers of financial instruments, or one or more financial instruments, and which would – if publicly known – substantially influence the quoted value of such financial instruments or their derivatives. A reasonable investor would likely use such information as a basis for his investment decision.
An insider is any person who has access to insider information due to his position as a member of the administrative, managing or supervisory body of an issuer or due to his profession, occupation, responsibilities or shareholding. Any person who gains access to insider information by way of a criminal offence is also an insider.
Insiders that use insider information with the intent to gain a pecuniary advantage for themselves or a third party by buying or selling financial instruments or by offering or recommending such instruments to third parties, or that provide access to such information to third parties without being required to do so, is subject to a prison sentence of up to three years. If the obtained financial advantage exceeds €50,000, the penalty is six months to five years prison sentence. If this offence is performed by a person who is not an insider, but has information which has been made available to him, such person is subject to a prison sentence of up to one year. If the financial advantage achieved exceeds €50,000, the penalty is a sentence of up to three years.
9.2 Market manipulation
Market manipulation refers to transactions or trade orders which give, or are likely to give, false or misleading signals as to the supply of, demand for, or price of, financial instruments, or which secure, by a person, or persons acting in collaboration, the price of one or several financial instruments at an abnormal or artificial level, unless the person who entered into the transactions or issued the trade orders has legitimate reasons for doing so and these transactions or trade orders conform to accepted market practices on the regulated market concerned. Market manipulation also means transactions or trade orders which employ fictitious devices or any other form of deception or contrivance. Finally, market manipulation includes dissemination of information through the media, including the internet, or by any other means, which gives, or is likely to give, false or misleading signals as to financial instruments, including the dissemination of rumours and false or misleading news, where the person who made the dissemination knew, or ought to have known, that the information was false or misleading. Market manipulation is subject to an administrative fine of up to €35,000 which may be imposed by the FMA.
Pursuant to the Austrian Stock Exchange Act, every issuer is obliged to inform its employees and other persons providing services to the issuer about the prohibition on the misuse of insider information, to issue internal directives for the communication of information within the company and to monitor compliance. Furthermore, issuers are obliged to take organisational measures to prevent the abuse of insider information or its disclosure to third parties. The Issuers’ Compliance Regulation regulates the measures to be taken by issuers in further detail (eg, black-out periods). In addition, it requires each issuer whose securities are admitted to listing on the Official Market or the Semi-Official Market to issue a compliance directive (Compliance-Richtlinie). These compliance directives must be submitted to the FMA.
Issuers are required to establish a register of those persons working for them and who have access to insider information, whether on a regular or occasional basis. Issuers are also required to regularly update this register and transmit it to the FMA whenever requested.
10. INVESTMENT FUNDS
10.1 General
Overall assets under management in Austrian investment funds have continuously increased since the turn of the century and amounted to €167.3 billion at the end of 2006 (Source: Verband österreichischer Investmentgesellschaften).
Investment funds are regulated by the Austrian Investment Fund Act (Investmentfondsgesetz – InvFG) which implemented the EC UCITS Directive 85/611/EC as amended by EC Directives 2001/108/EC (Management Directive) and 2001/107/EC (Product Directive). Only licensed asset management companies (Kapitalanlagegesellschaften) are entitled to manage investment funds. As such, the asset management company is subject to the provisions of both the Austrian Investment Fund Act and the Austrian Banking Act.
Asset management companies are incorporated in the form of stock corporations or limited companies and have supervisory boards. The Austrian Finance Minister appoints a Federal Commissioner (Staatskommissär) who participates in the asset management companies’ board meeting and monitors compliance with the investment fund provisions and decrees of the Ministry of Finance and the FMA. Standard public investment funds are subject to the approval of the FMA. By contrast, special funds (Spezialfonds) – which are limited to ten non-natural persons known to the asset management company – are exempt from FMA approval but must be notified to the FMA.
10.2 Conduct of business
Asset management companies must abide by rules of conduct and maintain certain organisational requirements. They must act with the necessary expertise, avoid conflicts of interest and fulfil certain filing and documentation requirements such as keeping records, monitoring and security regarding electronic data processing. The Austrian Association of Investment Companies (VÖIG) has published rules of good conduct for the Austrian investment fund industry. These rules, which the FMA recognised as binding for fund management companies, set forth organisational, monitoring and reporting standards as well as standards relating to the qualification of fund managers, the separation of fund management, settlement and administrative activities of the fund management companies. The fund management company is obliged to appoint a compliance officer and to properly communicate with investors in a simple and understandable form. The fund manager is liable to the investors of its funds for the diligent management of the funds in accordance with applicable laws and the fund rules.
10.3 Transfer of management
Asset management companies may assign the management of their funds to third parties provided that they notify the FMA that such external manager is licensed to manage assets, that the fund prospectus contains the obligations delegated to the transferee and that the transfer in no way prevents the asset manager from overseeing the management and acting in the investors’ best interest.
10.4 Custodian bank
Asset management companies are obliged to appoint a licensed custodian bank for each of their funds to issue and repurchase unit certificates as well as to keep the assets belonging to an investment fund in custody and to maintain the securities accounts of the fund. The custodian bank is obliged to observe the relevant regulatory provisions, fund rules and the investors’ interests. It is liable to the asset management company and the investors for any losses resulting from the failure to fulfil its duties.
10.5 Financial reports, financial statements and audits
Asset managers are obliged to publish semi-annual and annual reports for each of its funds consisting, inter alia, of revenue and asset statements and the funds’ activities in the reported year. Annual reports must be audited and submitted to the FMA and the supervisory board. Copies of the reports are made available to the investors at the asset manager’s offices and at those of the custodian bank.
Austrian banks as well as banks operating in Austria are required to submit audited financial statements, including the respective audit reports, to the FMA and the Austrian National Bank. A bank auditor must audit all financial statements of banks. The audited financial statements must be published in the Austrian Official Gazette. Bank auditors are also required to examine the timely and complete compliance with all relevant banking regulations. The result of this audit is included in a separate bank supervision audit report that is also filed with the FMA.
10.6 Minimum financial resources and capital adequacy requirements
An asset management company is required to have a minimum starting equity of €2.5 million. Notwithstanding their portfolio value, the maximum amount of equity required is capped at €10 million. The term portfolio value denotes the assets of an asset management company (either managed by it or a third party), excluding assets, which belong to funds established by third parties (but managed by the asset management company). Under Austrian risk-based capital adequacy rules, each bank must maintain a ratio (the ‘Solvency Ratio’) of at least eight per cent. The Solvency Ratio is the ratio of Qualifying Capital (as defined and explained below) to risk-adjusted assets and certain off-balance sheet items.
For purposes of calculation of the Solvency Ratio, the Austrian Banking Act defines ‘Qualifying Capital’ as consisting principally of (i) paid-in capital, (ii) disclosed reserves, (iii) funds for general bank risks, (iv) supplementary capital, (v) hidden reserves, (vi) participation capital, (vii) subordinated debt, (viii) revaluation reserves, (ix) the commitments of members of cooperative banks to make additional contributions quantified in relation to their shareholdings, (x) short-term subordinated capital and (xi) only for the purpose of supervision on a consolidated basis, hybrid capital. Certain losses, certain intangible assets and certain investments in other banks or financial institutions are required to be deducted in computing Qualifying Capital.
In addition to specifying the capital adequacy rules, the Austrian Banking Act, as amended, imposes other requirements and restrictions on Austrian banks, including reporting requirements, liquidity requirements, open foreign currency positions, large exposures and restrictions on participations.
10.7 Reporting
Austrian banks are required to file a number of reports with the FMA, including periodic monthly and quarterly reports. The form of all reports is established by an implementing ordinance. All reports are delivered to the Austrian National Bank, which reviews them and provides to the FMA an opinion as to whether the regulations on solvency, qualifying capital, liquidity, open foreign currency positions, large exposures and participations have been observed.
Asset management companies that wish to issue share certificates in investment funds are required to publish a simplified prospectus and a complete prospectus, both FMA-approved. The law does not distinguish between public offerings and private placements. Only special funds are exempt.
11. TAKEOVERS
11.1 The Takeover Act
On 30 April 2004 the European Directive 2004/25/EC on takeover bids (the ‘Takeover Directive’) entered into force. In implementation of the Directive, Austrian lawmakers recently passed a new Takeover Act which entered into force in the summer of 2006. The Austrian Takeover Act applies to public offers for the acquisition of shares of listed Austrian joint stock companies. The primary purpose of the Takeover Act is to ensure that all shareholders of a company being acquired are treated equally.
A public bid for the shares of an Austrian company listed on an exchange in Austria has to be submitted to the Takeover Commission prior to its publication and has to be prepared in accordance with the requirements of the Takeover Act. A bidder is not allowed to disclose his intention to launch a public bid. If rumours of such intention lead to significant changes in the stock exchange price or if the boards of a bidder have decided to make a bid, a bidder is required to immediately publish such intention and to notify the target boards of the intended bid. The takeover bid has to be submitted to the Takeover Commission within ten stock exchange trading days from such publication. At the bidder’s request, the Takeover Commission can extend this period up to 40 stock exchange trading days.
Furthermore, the Takeover Act requires that anybody (or parties acting in concert) acquiring a controlling interest in a listed company make a mandatory offer to all other shareholders to purchase their shares in such company and submit the bid to the Takeover Commission within 20 stock exchange trading days. Pursuant to the First Regulation by the Takeover Commission under the Takeover Act, a direct or indirect controlling interest exists in the case of:
• owning the majority of the target company’s voting rights;
According to the Takeover Act, the minimum price to be offered in a mandatory offer or a voluntary offer aimed at the acquisition of a controlling interest shall be the higher of (i) the average share price during the six months immediately preceding the acquisition of the controlling interest or (ii) the highest price paid by the bidder during the last 12 months preceding the acquisition of the controlling interest or publication of the bid, as the case may be. The consideration in mandatory offer must be offered in cash.
The Takeover Act requires that the bidder prepares offer documents to be examined by an independent expert, either a qualified auditor or bank, before these offer documents are filed with the Takeover Commission and the target company. The management of the target company must issue a statement on the offer which is also subject to mandatory examination by an independent expert. Any higher bids or competing bids must follow the same rules. From the time a bidder’s intention to submit a public bid becomes public, a target company may not generally undertake measures to jeopardise the offer. The bidder and the parties acting in concert must refrain from selling any shares in the target company and from purchasing target shares for a higher consideration than offered in the bid. The violation of any legal provision may result in the suspension of voting rights and fines imposed by the Takeover Commission.
The Takeover Commission controls the application of the Takeover Act and has the power to fine any party who commits infringements of the Takeover Act. The Takeover Commission may institute proceedings ex officio and is not subject to oversight by any other regulatory authority.
In the course of the implementation of the Takeover Directive, a new law on the squeeze-out of minority shareholders (Gesellschafter-Ausschlussgesetz) was enacted. Pursuant to the new law, a majority shareholder holding not less than 90 per cent of the entire (voting and non-voting) share capital of the company may squeeze-out the remaining shareholders at an equitable price. The squeeze-out right will not be limited to a preceding takeover bid, as provided for in the Takeover Directive. The minority shareholders will not be entitled to block the squeeze-out but will have the right of separate judicial review of the fairness of the compensation paid for their minority stake. Where a squeeze-out follows a takeover bid, the consideration offered in the takeover bid shall be presumed to be fair where, through the acceptance of the bid, the bidder has acquired shares representing not less than 90 per cent of the share capital entitled to vote of the target company.
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