An extract from The Corporate Governance Review, 10th Edition
Shareholdersi Shareholder rights and powers
Shares in JSCs have – except for limited exceptions provided by law – equal rights (i.e., equal voting, dividend and information rights). The Stock Corporation Act expressly prohibits golden shares (i.e., shares with multiple or disproportionately higher voting rights). However, it is permissible for the articles of association to introduce maximum voting rights or staggered voting rights. In addition, a JSC may issue non-voting preferred shares based on a shareholder resolution, whereas the nominal amount of such non-voting shares may not exceed one-third of the aggregate stated capital of the JSC.
Shareholders in listed companies have no direct influence on the management board and are not permitted to issue instructions or otherwise direct the management board. Their influence is limited to certain reserved decisions, which fall into the following three categories:
- certain decisions (such as changes in the articles of association, appointment of supervisory board members, appropriation of distributable profit, acquisition of treasury stock, issuance of new shares or bonds, mergers, spin-offs or dissolution) require a shareholder resolution by operation of law;
- the management board or the supervisory board may put certain decisions to the shareholders if no agreement can be reached among the boards; and
- there is an obligation to put certain fundamental business decisions to a vote by the shareholders; this requirement is not based on a statutory obligation, but on a doctrine developed by the German Supreme Court, which was also followed by the Austrian Supreme Court.
Other rights of the shareholders include the right to demand a convocation of a shareholders' meeting and the right to put certain matters on the agenda of a convened meeting (which requires the requesting shareholders to hold at least 5 per cent of the stated capital, unless the articles of association provide for a lower threshold) and the right to demand a special audit of the company (which requires the requesting shareholders to hold at least 10 per cent of the stated capital). All shareholders are entitled to request information on all items on the agenda in a shareholders' meeting, and are furthermore entitled to request that any of their statements (and the responses thereto) are recorded verbatim in the meeting minutes.
Dissenting shareholders are entitled to object to resolutions passed at a shareholders' meeting and can (if an objection was made) file for annulment or rescission of a resolution with the competent court in limited circumstances.ii Shareholders' duties and responsibilities
Shareholders of a JSC (both controlling and minority) are subject to a fiduciary duty requiring them not to directly cause harm to the company in the exercise of their shareholder right. Shareholders' resolutions breaching fiduciary duties may be contested and may give rise to damages claims against the JSC and its shareholders. Shareholders breaching this fiduciary duty may also be subject to damages claims by the company.
There are no specific duties for institutional investors above the general duties applicable to all shareholders. There is also no code of best practice for shareholders of Austrian listed companies.iii Shareholder activism
Shareholder activism has traditionally not played an important role in Austria (unlike Germany). More recently, Austrian activist shareholders as well as the Austrian Shareholder Association have taken a more active role in representing free float shareholders.
Proxy battles do occur, but not very frequently. The most recent example was an (initially unsuccessful) proxy battle at the general meeting of Conwert SE, where minority shareholders tried to have two candidates elected to the board. This attempt was initially thwarted as the chair of the meeting decided to suspend the voting rights of certain shareholders owing to alleged violations of the Takeover Act, which led to the election of two candidates proposed by the board. The minority shareholders then initiated legal proceedings aiming at the annulment of this election. Ultimately, the minority shareholders prevailed, as Conwert decided not to continue its objection against the legal proceedings.
As previously mentioned, shareholders in Austrian listed companies have no direct say as regards the remuneration of the directors, with the exception of stock option or transfer schemes, the introduction of which requires a vote of the shareholders. Since June 2019, shareholders also get the opportunity to vote on the general remuneration policy of listed companies; however, such vote is only a recommendation and non-binding.iv Takeover defences
Listed companies have several options to implement general takeover defences prior to the launch of a hostile takeover bid, such as including provisions in the articles of association limiting the maximum voting rights per shareholder, introducing transfer restrictions (to the extent possible) as well as the staggered appointment of supervisory board members. The shareholders' meeting can, however, also decide to install a provision in the articles of association that provides for the non-applicability of such defence provisions upon the formal announcement of a takeover bid. Furthermore, the articles of association can also provide for a reduction of the threshold for mandatory offers to less than 30 per cent, which can also act as a deterrent.
If a hostile takeover is expected, but not yet announced, additional measures can be employed, such as capital increases, purchase of treasury stock and reorganisations. The Takeover Act limits potential defence measures by the corporate bodies of listed companies once the listed company becomes aware of a hostile takeover bid. From this point on, the corporate bodies may only take measures aimed at preventing the success of the hostile takeover bid with the prior approval of the shareholders' meeting (except for the search of a white knight). However, any defence actions by corporate bodies have to be in line with the standard duty of care applicable to them; otherwise they can be held liable for any damage incurred.v Contact with shareholders
Under Austrian law, listed companies are in general required to treat all shareholders in an equal manner. Therefore, as a matter of principle, any direct communication with shareholders is a sensitive matter and is only possible if an objective justification exists. Such an objective justification may exist, for example, if a listed company intends to acquire a business owned by one of its shareholders. In such cases, it is standard market practice to insist on a comprehensive secrecy agreement (which sometimes includes standstill covenants). In such cases, listed companies typically impose internal restrictions so that only a limited number of persons (usually the management board, selected senior managers) have access to such information. If the transaction requires the consent of the supervisory board, the matter is sometimes delegated to a committee of the supervisory board to ensure confidentiality.
Selective meetings with individual shareholders usually take place during corporate roadshows or capital market days. Additionally, several Austrian listed companies do schedule investors' calls, typically around the publication of financial information by the company. To avoid allegations of unequal treatment of shareholders, the presentations given during such events and recordings of investor calls are made publicly available on the website of the company.
Recent legislative changes introduced in the implementation of the EU Shareholder Rights Directive will make It easier for listed companies to get Information on their shareholders as, from September 2020 on, intermediaries such as banks and brokers will be obliged to inform a listed company about the identity of shareholders holding more than 0.5 per cent of the shares or voting rights.