This was the question confronting our client, an Austrian limited liability company. A few years ago, our client established a joint venture company (the "JV") with his partner F-Co. Our client held a share interest in the JV amounting to 45%, while F-Co held 55% of the shares.
In addition to the articles of association, our client concluded a separate shareholders' agreement with F-Co. This agreement was intended to secure our client's influence on the management of the JV. It also included a provision according to which both the appointment and dismissal of managing directors requires a two third majority of the shareholders' votes. In addition, the shareholders were obliged to exercise their voting rights accordingly. Therefore, according to the shareholders' agreement, resolutions regarding a change of management could only be passed unanimously. This was a deviation from the general rule provided for in section 39 para 1 of the Austrian Act on Limited Liability Companies that provides for a simple majority of the votes cast at the shareholders' meeting.
The JV had two managing directors, each representing the interests of the respective shareholder. Due to different approaches in the management of the JV, a shareholders' meeting was convoked with the aim of dismissing our client's managing director with immediate effect. Unimpressed by our client's referrals to the respective provisions in the shareholders' agreement, F-Co declared that the resolution on the dismissal of our client's managing director would be passed in the upcoming shareholders' meeting – regardless of the clear provisions in the shareholders' agreement. In fact, the majority shareholder would have been (legally) able to pass a resolution on its own, i.e. without the approval of our client, because in relation to the company only the articles of associations are decisive.
In light of these facts our client filed an application for an interim injunction intending to prevent F-Co from exercising its voting rights in violation of the shareholders' agreement. The application was mainly based on a ground-breaking decision of the Austrian Supreme Court (case no. 7 Ob 59/03g).
The court agreed with our arguments and approved the application within two working days. The court ruled that F-Co may not adopt a resolution on the dismissal of a managing director without our client's approval. F-Co has filed an appeal against this ruling but it has not yet been decided upon by the Higher Regional Court of Vienna.
Consequently, if a clear breach of a shareholders' agreement is imminent, the affected shareholder should consider applying for an interim injunction to secure its legal position.