Introduction
No duty to contribute additional capital
Duty not to block capital measures
Comment


Introduction

When a capital company (eg, a limited liability 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. A financially strong shareholder majority or a single controlling shareholder will often put pressure on minority shareholders to contribute to the financial recovery of the company. The question therefore arises as to 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.

No duty to contribute additional capital

The Supreme Court recently dealt with a case(1) in which the majority of shareholders had agreed to support the company's financial recovery and to implement various remedial finance measures, but a minority shareholder refused to provide additional capital. Due to the majority shareholders' efforts, the company was able to overcome the financial crisis, a situation which also benefited the objecting minority shareholder. The majority shareholders thus requested that the minority shareholder bear its share of the financial recovery of the company and filed a claim for reimbursement on the grounds of unjust enrichment.

The court rejected the majority shareholders' claim and confirmed that a shareholder's obligation to provide further contributions to the company must be specifically provided for in the company's articles of association. An amendment of the articles of association introducing an additional capital contribution obligation can be passed only following unanimous support by the shareholders. Therefore, shareholders in a limited liability company are entitled to rely on the limitation of their financial exposure to the share capital provided by them to the company, unless the company's articles of association specifically provide otherwise. A dissenting shareholder can thus generally not be forced to contribute additional capital to the company by a majority vote of the other shareholders.

The court also rejected the claimant's argument that a shareholder should be obliged to provide additional capital to the company on the basis of the duty to loyalty, even if the company is in a state of severe financial crisis, holding that such interpretation of the duty to loyalty would be too far-reaching.

The court further held that the Civil Code's rules on unjust enrichment should not be applied in this context, since corporate law rules will prevail over the Civil Code under the principle of speciality. The Civil Code's rules on unjust enrichment do not form appropriate legal grounds on which the majority shareholders' claim for reimbursement of part of the costs for the company's financial recovery could be based.

Duty not to block capital measures

In a related case, the German Supreme Court(2) held that, due to the shareholders' duty to loyalty, a minority shareholder cannot block a resolution on capital measures as part of a financial recovery concept which is required to preserve the company in financial crisis and which is desired by a majority of the shareholders. Austrian legal commentators have opined that these principles will also apply under Austrian corporate law.

In such a case, a shareholder is obliged to subordinate his or her interests to the company's benefit. However, this shall apply only if failure of the contemplated recovery measures would inevitably result in the breakdown of the company and the shareholders would be worse off than would be the case following the sale of their shares in a successful recovery and restructuring of the company. A shareholder may thus have to accept a dilution of his or her participation in the company if it benefits the preservation of the company as a whole.

Comment

While shareholders of a capital company cannot be forced to provide additional capital to the company in financial crisis, unless specifically provided otherwise in the company's articles of association, they may be prevented under certain circumstances from undermining the other shareholders' efforts to remedy the company's financial crisis by blocking shareholder resolutions to that effect.

For further information on this topic please contact Michael Walbert at Schoenherr by telephone (+43 1 534 37 0), fax (+43 1 53 43 76100) or email (m.walbert@schoenherr.eu).

Endnotes

(1) OGH 16.11.2012, 6 Ob 47/11x.

(2) BGH 20.3.1995, II ZR 205/94, BGHZ 129, 136.