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.
A recent amendment to the Civil Code will have a dramatic effect on shareholder agreements, as shareholders of a company established for an indefinite term can no longer waive ordinary termination rights. As any party to a civil law partnership can now terminate the partnership, parties should either conclude a termination waiver for a fixed period or conclude the agreement for a fixed period (with renewal options).
Austria recently experienced a significant boom in its start-up sector and has since produced some major international players. That said, starting a business in Austria requires an understanding of the legal system, including common legal risks (eg, founder and shareholder liability), the requirements for founding a limited liability company, adhering to arm's-length principles and establishing exit scenarios.
The Supreme Court recently held that agreements between shareholders on voluntary capital contributions to a company may be agreed outside the articles of association and are subject to no formal requirements. The decision ensures that shareholders of stock corporations and limited liability companies have flexibility when agreeing on capital contributions outside the articles of association.
Compliance presents many challenges for organisations. So far, compliance has not met the global standards which provide guidance on the implementation of compliance management systems (CMSs). In 2013 the Austrian Standards Institute released its own CMS standard, which provides guidance on the implementation of CMSs. This update compares the Austrian standard with the 2014 International Standardisation Organisation guideline.
The Supreme Court recently considered the validity of the payment of a cash consideration to a public limited liability company in the course of an increase in its stated capital. The ruling highlights that business transactions that have a substantive and temporal connection with a formal increase of the stated capital must be made under the disclosure and examination rules for contributions in kind.
Amendments to Austria's federal tax law – which, among other things, have revised the Limited Liability Companies Act – recently came into force. The minimum share capital of a limited liability company (GmbH) has been raised again to the former level of €35,000. Out of the share capital to be contributed in cash, at least €17,500 must once again be paid in when founding the GmbH.
Pursuant to a recent Supreme Court decision, which confirms and clarifies earlier rulings, shareholders of an Austrian limited liability company that did not participate in a shareholders' meeting may not challenge shareholders' resolutions approved in such meeting on the grounds that attendance quorum requirements for holding a shareholders' meeting were not met.
The Insolvency Act has recently been amended to provide for an obligation on majority shareholders of insolvent Austrian or foreign capital companies to file for insolvency if the company no longer has at least one managing director. Non-compliance will result in the direct liability of the majority shareholder towards the company's creditors. The amendment thereby introduces a statutory basis for piercing the corporate veil.
Considering the strict view taken by the tax courts in recent decisions regarding the capital contribution tax on indirect shareholder contributions effected before or during reorganisations, corporations would be well advised to take a cautious approach. To reduce the tax risk, solid commercial arguments that substantiate a predominant interest of the contributing indirect shareholder should be adequately recorded.
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.
A draft of the new act amending the company laws was recently revealed. The act aims to facilitate the establishment of an Austrian limited liability company by making the process easier and cheaper. Among other things, the minimum share capital, and consequently the minimum corporate income tax and the attendant attorney and notary fees, will be reduced.
When a capital company is in financial crisis, its shareholders often do not agree on the measures, if any, that should be taken to remedy the company's financial situation. The Supreme Court recently examined the question of whether, and to what extent, a shareholder may be obliged to contribute additional capital to a company in order to support the company's financial recovery.
The shift of liability from the officers and directors entitled to represent a company to so-called 'responsible representatives' aims to protect senior executives from liability for breaches of public law provisions at their company. However, if such representatives are not appointed in compliance with the law, supposedly protected senior executives may be shocked to find that they remain liable.
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.
The Second Stability Act amends the Stock Corporation Act and the Commercial Code. The most significant provisions include changes to the calculation of managing directors' remuneration, the introduction of a cooling-off period for former management board members following their departure and amendments to the composition of supervisory boards.
Following the introduction of the Company Law Amendment Act 2011, Section 5(4b) of the Companies Register Act has been amended. As a consequence, the fact that a company is listed on a regulated market must be registered in the Companies Register. In addition, listed stock corporations must register the address of their website in the register.
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.