A newly founded GmbH wants to run a plumbing trade. A sole trader takes over a business without a master craftsman’s certificate of their own. In both cases a role from Austrian trade law comes into play: the trade-law managing director (gewerberechtlicher Geschäftsführer). This person makes sure that the trade is carried on properly in professional terms and in line with the trade-law rules, and, for regulated trades, provides the proof of qualification (Befähigungsnachweis).
This article explains who has to appoint a trade-law managing director, which requirements apply and what half the normal working time is about. It then covers responsibility and liability, the difference from the managing director under company law, and appointment and departure. The information comes from the Austrian Economic Chambers (WKO), the Business Service Portal (USP), the Province of Styria and oesterreich.gv.at.
Key points at a glance:
- A trade-law managing director is appointed by the trade licence holder with independent authority to give instructions and is responsible for compliance with the trade-law rules.
- Companies such as a GmbH, OG or KG need one for every trade, sole traders mainly if they lack the proof of qualification for a regulated trade.
- For regulated trades, the person must either be authorised to represent the company or be employed for at least half the weekly normal working time; in a sole proprietorship, only employment counts.
- The trade-law managing director is liable to the business owner for the proper practice of the trade, but only where at fault.
- If the person leaves, a new one has to be appointed: by sole traders within one month, by companies within six months.
What is a trade-law managing director?
According to the USP, the trade-law managing director is appointed by the trade licence holder and given independent authority to give instructions (selbstverantwortliche Anordnungsbefugnis). The role is responsible for compliance with the trade-law rules and for the proper professional practice of the trade. If the trade requires a proof of qualification, the trade-law managing director provides it.
The tasks of a trade-law managing director therefore include making sure that work in the business is done properly and that the Trade Regulation Act (Gewerbeordnung, GewO) is complied with. For further premises, that is a branch, a branch manager (Filialgeschäftsführer) can also be appointed. That person is then responsible for the trade-law duties at those premises.
Who has to appoint one
Whether a trade-law managing director is needed depends on the legal form and on the qualification. According to the WKO, the following have to appoint one, among others:
Companies need a trade-law managing director for a free trade too, so a GmbH that carries on a trade always needs one. There are separate rules for those entitled to continue a business, such as heirs. One limit matters: according to the WKO, the appointment can make up for a missing proof of qualification, but not for other personal requirements of the licence holder. If the holder is subject to a ground for exclusion or lacks a necessary residence permit, the appointment does not help.
Requirements for the role
The USP lists the requirements for the trade-law managing director in detail. The person has to meet the personal requirements for carrying on the trade: Austrian citizenship, that of an EEA country or Switzerland, or a residence permit as a third-country national; residence in Austria, the EEA or Switzerland; full legal capacity, generally from the age of 18; and no grounds for exclusion from the trade.
The person must also be able, in terms of place and time, to be active in the business, and must have documented consent to the appointment and to the independent authority to give instructions. For regulated trades, the person also needs the proof of qualification, a legally effective finding of individual qualification or a decision recognising or equating a proof of qualification from the EEA.
Employment and 20 hours
For regulated trades, the position in the business matters. In a sole proprietorship, the trade-law managing director has to be an employee with full social insurance who works in the business for at least half the weekly normal working time. In a company, either authority to represent the company, for example as a managing director entered in the company register, or such employment is enough.
This gives the often-heard rule of thumb that a trade-law managing director has to be employed for 20 hours: with normal working time of 40 hours, half is 20 hours a week. By law, weekly normal working time is at most 40 hours; if the collective agreement sets a shorter one, half can be correspondingly less. For free trades, the trade-law managing director can hold any position in the business, for example as an authorised signatory (Prokurist) or a freelance worker (freier Dienstnehmer) with fewer hours. For a regulated trade, by contrast, an authorised signatory can only be appointed if they are also an employee working at least half the normal working time.
Actual activity in the business
Employment alone is not enough. Through adequate presence in the business, the trade-law managing director also has to be able to carry out their control and supervisory tasks. According to the WKO, this may be lacking in individual cases if the person already works 40 hours a week in another business or already acts as trade-law managing director for other businesses. A long distance between home and business can also play a part. On the other hand, modern means of communication such as telephone and video conferences are taken into account, as they can partly replace being there in person.
Tasks, responsibility and liability
On liability, the WKO distinguishes two parties a trade-law managing director answers to: the business owner and the trade authority. Towards the business owner, the person is liable for the proper professional practice of the trade, but only where at fault. If they act as an employee, liability is assessed under the Employee Liability Act (Dienstnehmerhaftpflichtgesetz). Liability runs from the legally effective appointment until actual departure. According to a 2017 decision of the Supreme Court, civil liability towards injured third parties can also arise in individual cases.
Towards the trade authority, the trade-law managing director is responsible for ensuring that the Trade Regulation Act is complied with. Administrative penalties under the Trade Regulation Act are generally imposed on the trade-law managing director; according to the WKO, an agreement that the business owner takes them over is invalid. In practice, this means that anyone taking on the role should know the business and its processes well and be on site regularly.
Which rules the role covers
The responsibility of the trade-law managing director does not cover every area of law. The WKO names the following areas, among others:
| Examples | |
|---|---|
| Responsibility of the trade-law managing director | Trade Regulation Act including scope of the trade, practice of the trade, operating permit for premises and anti-money-laundering rules; regulations under the Trade Regulation Act; Opening Hours Act; Vocational Training Act; Price Labelling Act |
| Stays with the business owner or the managing director under company law | Tax law; employee protection rules; Foreign Nationals Employment Act; Waste Management Act; insolvency law; building law; Food Safety and Consumer Protection Act |
Within the scope of the Trade Regulation Act, the trade-law managing director takes on responsibility under administrative criminal law; an additional responsible representative (verantwortlicher Beauftragter) cannot be appointed for it. For the areas that stay with the owner, that is possible.
Managing director under company law compared
The managing director under company law (handelsrechtlicher Geschäftsführer) is the managing director in the sense of company law: the person represents, for example, a GmbH externally and is entered in the company register. The trade-law managing director, by contrast, is a role under the Trade Regulation Act and is entered in the Austrian trade information system (GISA). The differences at a glance:
| Managing director under company law | Trade-law managing director | |
|---|---|---|
| Role | Representing and running the company | Proper professional practice of the trade and compliance with the trade-law rules |
| Entry | Company register | GISA |
| Proof of qualification | Not required under the Trade Regulation Act | Required for regulated trades |
| Responsibility | Among other things taxes, employee protection, insolvency law | Trade Regulation Act, regulations under it and related trade-law acts |
Both roles can be held by one person. A managing director under company law who is also the trade-law managing director meets the position requirement in a GmbH through the authority to represent alone. Without the proof of qualification, another person takes on the trade-law role, for example another managing director authorised to represent the company or an employee working at least half the weekly normal working time.
Appointing a trade-law managing director
If an appointment is needed for the first trade licence, the trade-law managing director is appointed together with the trade registration, according to the USP. The process:
Choose a person who meets the personal requirements and, for regulated trades, holds the proof of qualification.
For regulated trades, agree on authority to represent (companies only) or on employment for at least half the weekly normal working time.
Obtain consent to the appointment and the declaration on grounds for exclusion from the trade.
Report the appointment to the trade authority responsible for the location, informally, with a form or online.
The authority enters the appointment in GISA. For trades with a reliability check under section 95 GewO, such as master builder, electrical engineering or gas and sanitary engineering, the appointment requires approval; the authority then issues an approval decision (Genehmigungsbescheid).
The appointment takes effect on the day of the notice. Where approval is required, it takes effect only once the approval decision is final.
According to the Province of Styria, the online notice requires the GISA number of the trade and the company register number or social security number. An informal notice should include, among other things, the name of the licence holder, the wording of the trade, the trade location, the GISA number, where applicable the location of the branch, and the personal details of the managing director.
Documents the authority needs
According to the USP, personal documents such as a birth certificate, proof of citizenship or a passport and, for third-country nationals, the residence permit are not needed if the person is already entered in GISA or the authority can retrieve the data from registers. Regardless of that, the documents include, among others:
When the managing director leaves
If the trade-law managing director leaves, the trade authority has to be informed without delay, according to the WKO. The appointment of a new trade-law managing director has to be notified within one month by sole traders and within six months by companies and other legal persons.
The authority shortens this period if carrying on the trade without a managing director involves a particular danger to life or health. The same applies if the trade was carried on without a managing director for more than six months in total in the two preceding years. Planning a successor in good time therefore pays off.
In short: a trade-law managing director brings the qualification for the trade and is responsible for compliance with the trade-law rules. Companies need one for every trade, sole traders mainly if they lack their own proof of qualification.
A business account for the company
Whether GmbH or sole proprietorship: a separate account helps to keep the business’s finances apart from private money. With Vivid, companies such as a GmbH, AG or cooperative as well as sole traders from Austria can open a business account online. Opening the account itself costs nothing. What it includes:
Even on plans without a monthly fee, individual services can incur charges. These include additional cards, cash withdrawals above certain allowances or premium features from higher plans.
Vivid at a glance: an online business account for trade businesses in Austria, from a GmbH to a sole proprietorship, with plans from €0 a month.
The business finances in one place
Open the Vivid business account online and keep the business’s payments and invoices in one app.
Frequently asked questions
What does a trade-law managing director do?
The role ensures the proper professional practice of the trade and compliance with the trade-law rules. For regulated trades, the person provides the proof of qualification.
Who needs a trade-law managing director?
Companies such as a GmbH, AG, OG and KG as well as associations as soon as they carry on a trade, including a free trade. Sole traders mainly if they lack the proof of qualification for a regulated trade, and in certain cases if they have no residence in Austria.
How many hours does the person have to be employed?
For regulated trades, at least half the weekly normal working time, so 20 hours with a 40-hour week. In companies, authority to represent is an alternative.
Is the trade-law managing director liable?
Towards the business owner for proper practice, but only where at fault. Towards the trade authority, the person is responsible for the trade-law rules.
How does the role differ from the managing director under company law?
The managing director under company law represents the company and is in the company register. The trade-law managing director is responsible for the trade and is in GISA; one person can hold both roles.
What does a trade-law managing director earn?
The Trade Regulation Act does not set a salary for the role. If the trade-law managing director is employed, pay depends on the employment contract and the applicable collective agreement.
What happens when the person leaves?
The departure has to be reported to the authority without delay. Sole traders appoint a new one within one month, companies within six months.
This article is for general information only and is not legal advice. The rules mentioned are based on the Trade Regulation Act and on information from the Austrian Economic Chambers (WKO), the Business Service Portal, the Province of Styria and oesterreich.gv.at; for a specific case, the trade authority is the right point of contact. Payment services are provided by Vivid Money S.A., 21 rue Glesener, Luxembourg, L-1631, Luxembourg, an Electronic Money Institution authorized and regulated by the Commission de Surveillance du Secteur Financier, Luxembourg, under the register number W00000015.
