To The Point: Technology & Digitalisation L October 2023

• Published date: 06 November 2023
• Subject Matter: Corporate/Commercial Law, Privacy, Technology, Corporate and Company Law, Data Protection, Privacy Protection, Shareholders, Fin Tech
• Law Firm: Schoenherr Attorneys at Law
• Author: Mr Roland Vesenmayer

Welcome to the October edition of Schoenherr's to the point: technology & digitalisation newsletter!

We are excited to present a selection of legal developments in the area of technology & digitalisation in the wider CEE region.

Editorial | Roland Vesenmayer

Austria: First ministerial draft DSA Accompanying Act

The Austrian Ministry of Justice has submitted the first draft of the accompanying act to the Digital Services Act ("DSA").

Accordingly, the already existing communications authority KommAustria should be the Digital Services Coordinator in Austria. In the future, this authority would be responsible for, among other things, the establishment of an out-of-court dispute settlement body or the designation of the "trusted flagger" status.

KommAustria is also authorised to file an application with the Federal Administrative Court to order the temporary restriction of users' access to the affected service or to the affected online interface of the intermediary services provider.

In addition, the Act contains a catalogue of administrative penal provisions that correspond to the obligations under the DSA. If an intermediary service provider violates the penal provisions, KommAustria is also responsible for imposing the fines, which can amount to up to 6 % of the company's worldwide annual turnover.

The draft also includes amendments to the Austrian E-Commerce Act. The right of a third party to the disclosure of user data against host providers (an Austrian peculiarity) will be extended to all providers with whom the infringing user has concluded an agreement on the storage and (now new) transmission of information. Thus, it seems that third parties can now request user information also against access providers, such as domain registrars, telecommunication providers, etc. In addition, the judicial takedown system is set to become less bureaucratic, as courts will have to send the takedown order to the intermediary by e-mail and not by international court service.

Furthermore, a non-material claim for damages in the case of significant defamation on the internet ("Hass im Netz") was anchored in the law. Under the previous law, non-material damage was only to be compensated if there was an additional explicit provision in the law. According to Section 1330(1) ABGB, "full satisfaction" is not to be paid but only the "real" damage is to be compensated. The explanatory notes to the draft state that the defamation must reach a certain intensity to be compensated. Accordingly, "for example, not every written communication between young people, which also contains harmless swear words from youth culture" could be compensated. When assessing the amount of non-material damages, the explanatory notes stay vague and point out that, depending on the specific circumstances, the case law on similar cases or existing legal provisions may serve as a guide.

The draft is now in the review phase until 12 November 2023. We will keep you posted on any further news on the DSA.

Venture Capital Glossary: Reporting obligations and information rights | Niklas Kerschbaumer & Dominik Tyrybon

Reporting obligations

Reporting obligations in the start-up ecosystem pertain to the requirements and commitments of founders and management to provide relevant and timely information to investors and stakeholders. These obligations are often agreed in shareholders' agreements and typically encompass:

Financial reporting: This includes disclosure of financial statements (income statements and balance sheets) and cash flow reports, offering investors insights into the company's financial performance.

Operational updates: Ongoing operational updates help investors understand the day-to-day progress and challenges faced by the start-up, ensuring transparency.

Legal and compliance disclosures: Sometimes start-ups are obliged to disclose any legal issues, disputes or regulatory changes that may affect their operations.

Use of funds: Start-ups are expected to account for how investment capital is being utilised, detailing the allocation of funds for different business activities.

Reporting obligations are essential for maintaining trust and keeping stakeholders informed about the start-up's financial health, operational progress and potential risks.

Information rights

Information rights refer to the legal entitlements of shareholders, particularly in an Austrian limited liability company (GmbH), to access and obtain information regarding the company's affairs. These rights are granted to individual shareholders irrespective of their ownership stake. In contrast to the Austrian Stock Corporation Act, the GmbH Act in Austria provides for comprehensive information rights of shareholders and shareholders have the right to inspect business documents. These rights ensure transparency, accountability and a means for shareholders to stay informed and exercise oversight in the company.

Reporting obligations are typically requested and implemented during a financing round, where investors demand a regular reporting format for key metrics. In contrast, information rights are fundamental rights that are always present for every shareholder, always ensuring transparency and access to company affairs.

Venture Capital Glossary: Alternative venture capital investment instruments: convertible loans and SAFEs | Niklas Kerschbaumer & Dominik Tyrybon

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