Introduction
Obligations when calling a general meeting
Voidance risk


Introduction

Shareholders of an Austrian limited liability company are subject to general (fiduciary) duties with respect to the company and their co-shareholders. As regards the latter, this means in essence that shareholders are obliged to take into consideration the shareholder interests of other stakeholders when exercising their rights in a company.

Shareholder resolutions passed in violation of such general (fiduciary) duties are not null and void per se, but carry the risk that a shareholder may bring a motion for their voidance.

Obligations when calling a general meeting

Among the individual obligations of each shareholder towards its co-stakeholders is the duty to consider such stakeholders' circumstances when setting the forum for an exercise of shareholder voting rights. Specifically, the location and timing of a general meeting must be determined with due regard to the other shareholders.

In a decision handed down earlier this year (6 Ob 60/12k), the Supreme Court declined to deal with a lawsuit seeking voidance of an invitation to a shareholders' meeting in substance. However, the court nevertheless confirmed a number of principles to guide lower courts.

First, it held that shareholders of a limited liability company must not call a general meeting for a time at which they already know that other shareholders will be unable to attend. Known reasons which (may) prevent another shareholder from attending a general meeting are thus, in principle, to be taken into consideration. Exceptions may apply in cases of particular urgency, but a case-by-case analysis is required.

Second, the specific circumstances of the individual company must be taken into account. The company in this case had only two shareholders, one of whom had to travel to Austria from abroad (another EU member state) for the general meeting. The general meeting was held on a different date from that which was originally communicated to the foreign co-shareholder.

Third, the invitation to a general meeting must be made in a transparent manner. In the case at hand, the invitation was included in a package of 'monthly correspondence', rather than sent out to the shareholders separately or at least under a separate cover. The court considered this unacceptable.

Voidance risk

Applying the consequence facing shareholders' resolutions passed in violation of general shareholder duties, the Supreme Court confirmed the Court of Appeal's ruling that an invitation to a general meeting made in violation of the principles set out above carries the risk of voidance on application by a shareholder.

For further information on this topic please contact Florian Kusznier at Schoenherr by telephone (+43 1 534 37 0), fax (+43 1 53 43 76100) or email (f.kusznier@schoenherr.at).

This article was first published by the International Law Office, a premium online legal update service for major companies and law firms worldwide. Register for a free subscription.