“Austria has learned in the last year that every choice needs to be evaluated and reevaluated,” says Klaus Pfeiffer, Partner at Weber & Co. in Vienna. “Especially when it comes to making decisions about the pandemic, facts on which assumptions are based can change rapidly.” Having learned this lesson, he says, the Austrian government has “put itself in a good position to be flexible and able to constantly reassess its position – which will lead to better responses to the current crisis and future challenges.”
This might yet yield benefits as the pandemic, which became particularly strong in Austria in the Fall of 2020 and resulted in a second and a third lockdown, is now being put under greater control following strong vaccination efforts. “Our third lockdown ended on February 7, and some businesses have opened up as a result,” Pfeiffer says. “These are only certain sectors of the economy excluding mostly hospitality – a partial opening, if you will – with the state of affairs to be reevaluated in the following weeks.”
In the meantime, Austrian businesses are still receiving state aid. “It is a really good system, based on the turnover of a company rather than its profits,” Pfeiffer says, pointing out that this renders it easier to support companies quickly. “It is a pragmatic approach and I’m quite happy with how it turned out so far – Austria has been among the leaders in the EU in terms of the size of relief packages offered to businesses when adjusted for country size.”
Relief afforded to businesses also came in the form of a legislative fix for insolvency. “The insolvency framework of Austria generally allows businesses to have a 60-day gap between discovering the need to file for bankruptcy and actually filing paperwork,” Pfeiffer says. “This period was extended to 120 days for epidemics and pandemics last year, meaning that businesses that were lacking money or funds to operate last September might be filing for bankruptcy soon.”
However, he says, the system probably needs a more complete overhaul. He reports that “a new institute has been proposed – one that would be in line with the EU Directive on Restructuring and Insolvency." According to him, "this would enable distressed companies to file for preventive restructuring, instead of having to go for bankruptcy straight away.” Preventive restructuring, which is known to some EU countries, would be a novel concept for Austria that so far knew only formal bankruptcy. “I expect that a draft should be coming our way in March or April – we have to be compliant with the EU Directive by July 17, 2021, so it’s definitely going to happen soon,” Pfeiffer says.
Pfeiffer says that Real Estate-related M&A has experienced a major shift from expectations last year at this time. “If you had asked me before the pandemic, I’d have recommended investing in the real estate hospitality sector,” Pfeiffer says. “Now this has shifted towards logistics and residential investments, with strong investments coming from Germany and with a focus on Vienna and its surrounding area, as well as Tyrol.”
Finally, Pfeiffer touches upon the EU’s changing relationship with the UK following Brexit. “The good thing is that there is an agreement in place, but there are still a lot of unknowns,” he says. “A true challenge for Austria in 2021 will be finding out how to work with the UK, given that they are a huge export partner. More legal certainty and predictability will be sorely needed, and, hopefully, we’ll get some this year.”