Modelled on the German Stock Corporation Act, a 2015 reform of the Austrian Criminal Code introduced a business judgement rule into the Austrian Stock Corporation Act and the Limited Liability Companies Act. The rule applies to management and supervisory board members and will change boards' decision-making processes – in particular, for complex, risky, far-reaching, resource-consuming and strategically important matters.
The Supreme Court recently considered how a minority shareholder should react if the majority shareholder overrules it on a capital increase resolution that subsequently leads to the dilution of its holding. Under Supreme Court case law, (minority) shareholders are protected against a dilution of their participation following a capital increase if their statutory subscription rights are excluded.
Shareholders of Austrian limited liability companies are subject to general fiduciary duties with respect to the company and their co-shareholders. Considering the consequences of passing shareholders' resolutions in violation of general shareholder duties, the Supreme Court recently confirmed that the arrangements for a general meeting must be determined with due regard to the other shareholders.
Members of the management board of an Austrian stock corporation are appointed for a definite period and may be recalled before the expiration of their tenure only for cause. The Supreme Court recently took the opportunity to confirm and outline a number of criteria in connection with the recall for cause of a board member. The court held that behaviour constituting grave misconduct must be verified on a case-by-case basis.
In a recent case concerning the interpretation of the articles of association of Austrian limited liability companies, the Supreme Court held that provisions which govern "necessarily corporate organisational rules" must be interpreted "objectively". This means that the pure wording of the articles is relevant, irrespective of the intent of the parties or an ancillary agreement concluded outside the articles.
The Constitutional Court recently lifted a threshold set forth in the Stock Corporation Act that limited the right of shareholders to review the share exchange ratio determined or the cash compensation, if any, paid in the course of a merger, if either of these were inadequate. The court sided with the shareholders, stating that an inadequately determined share exchange ratio violated constitutional law.
Under a proposed amendment to the Stock Corporation Act, stock corporations whose shares are not traded on a stock exchange will no longer be able to issue bearer shares. It will be mandatory for closely held stock corporations to issue registered shares and to keep an up-to-date share ledger. In addition, companies will be required to keep a record of the bank account details of each shareholder.
Pursuant to Section 76 of the Act on Limited Liability Companies, on formation of a limited liability company, the articles of association must be drawn up in the form of a notarial deed. Thus, in the past the Supreme Court has consistently held that an amendment of the articles which introduces pre-emption rights must also be drawn up in the form of a notarial deed. However, the court recently overruled its past position.
With effect from January 1 2011, the enforcement process for the timely disclosure of annual accounts has been tightened considerably. In case of late filing of statutory accounts, a first penalty will be automatically imposed on expiry of the filing deadline. Subsequent automatic follow-up penalties will be imposed every two months until the annual accounts have been filed with the Companies Register.
In a recent decision the Supreme Court was called upon to determine the permissibility of a clause in the employment contract of a management board member of an Austrian stock corporation which set forth that the (employment) contract would terminate automatically upon a recall of the board member from his corporate function.
At a recent press conference Chamber of Commerce President Christoph Leitl and Minister of Justice Claudia Bandion-Ortner presented cornerstones for a planned 2010 reform of the Austrian limited liability company. The reform is at an early stage and the full details of the proposal are yet to be made public; however, the goal appears to be to simplify the formation process and reduce the associated costs.
The Stock Corporation Amendment Act 2009 has not only brought about important changes to the provisions governing the shareholders' meetings of Austrian stock corporations, but also introduced new rules governing share registers, which must be kept by all stock corporations that have issued registered shares. The new act introduces a procedure that allows a company to seek the deletion of an entry in the share register.
In a recent case before the Supreme Court a provision in a limited liability company's articles of association was disputed. The provision set forth that in case of the opening of insolvency proceedings or the initiation of an enforcement action against a shareholder, such shareholder would automatically cease to be a shareholder and its share would transfer to the co-shareholder(s) by way of automatic accession.
In a recent decision the Supreme Court had to deal with the issue of whether two golden handshakes, which had been handed out to (former) members of a listed company's management board to achieve an early termination of their management contracts, were unjustifiably high.
The proposal for the implementation of the EU Directive on Shareholders’ Rights is intended to enter into force in 2009. The proposal introduces considerable modernizations to the Stock Corporation Act, including removing obstacles to electronic participation and abolishing share blocking.
The European Commission recently presented its proposal for a Council Regulation on the Statute for a European Private Company. With the objective of making the single market more accessible to small and medium-sized enterprises, the proposal offers a uniform yet flexible corporate vehicle which is aimed at enabling these companies to use the same company form across the European Union.
In the course of implementing EU Directives 2006/43/EC and 2006/46/EC, a number of changes will be made to the Austrian regulations governing the auditing of annual financial statements and the corporate governance regime. In addition, disclosure requirements will be increased. This update summarizes some of the key changes.
Fifty-fifty shareholder structures entail the risk of deadlock situations. Unless a dispute resolution mechanism kicks in, the conduct of the management can be of crucial importance in such a situation if the dispute relates to a matter within the managing directors' competence or control.
In a recent decision the Supreme Court held that the managing director of a private limited liability company can be held liable by a new shareholder that acceded to the company in the course of a capital increase if the company later becomes insolvent. The decision confirms that Section 69/2 of the Insolvency Act covers not only the existing creditors and shareholders of a company, but also new shareholders.