Austria's lawyers are keeping busy these days, with work primarily driven by an active M&A market, restructuring, litigation, and regulatory changes, while those changes are putting increasing pressure on small businesses, according to Act Legal Partner Roman Hager.
“We are having a very busy end of 2022 due to everybody looking to wrap up their financial year,” Hager begins. “The corporate and M&A markets are very active, despite a general hesitation on the part of investors to seek out new ventures.”
Additionally, Hager reports that there is an uptick in restructuring and refinancing work. “Restructuring is coming up more and more, both for small and mid-sized companies and larger enterprises as well,” he says. “I expect that this will flow over into 2023, meaning that it will impact overall levels of business activity. It remains to be seen how investments fair, in light of this, but I do expect to see trends of recovery as winter ends,” he shares. Moreover, Hager reports a strong trend of litigation. “The climate is quite confrontational, and there are a lot of disputes going on,” he says.
Turning to regulatory matters, a trend stands out, Hager says, with small and medium-sized companies facing a regulatory storm. “ESG has spurred a number of important regulatory changes this year – not just in Austria, but in all neighboring countries – especially when it comes to due diligence work and overall compliance,” he explains. “These changes are beginning to impact smaller companies, ones not used to facing a heavy regulatory burden, which are now facing issues across the board. Many transformation questions and issues are sure to present themselves in many industrial sectors – and not only on account of the ESG changes – but also due to technical developments and digitalization trends,” he says. “Companies will have to start rethinking their business models.”
In addition to ESG-driven regulation, Hager also reports that there have been mortgage restrictions put in place that are affecting businesses. “The banks are now more restrictive in giving out mortgages, which is impacting real estate businesses that are faced with troubles with selling apartments. The borrowers are now required to rely on their own capital,” he says. Hager explains that the “banks were quite aggressive in their behavior, which led them to a position of having to limit their mortgage exposure. The banks and the regulator are currently in negotiations to see if these restrictions could be changed to be more flexible, which would allow the banks to bring in new money,” he reports.
Finally, the changes to the whistleblowing legislation are also impacting the market. “The EU directive demands small and mid-sized companies to establish whistleblowing tools. However, with the implementation of national law being postponed – this area was not taken as seriously. Once it does enter into force – likely in January – there will be an onslaught of work to make everything compliant over the course of a few months. Regardless, we are already assisting clients in reviewing their internal policies and implementing whistleblowing solutions so as to be prepared and compliant,” Hager stresses. “This is just a first step; changes to supply chain due diligence are next – there is no doubt that smaller companies will be faced with higher regulation costs in the near future,” he concludes.