In order to maintain shareholder coherence, the articles of association of limited liability companies regularly provide for pre-emptive rights (Aufgriffsrechte), which regularly entitle co-shareholders to acquire the shares of the affected shareholder, often for a specific (predetermined) purchase price. The opening of insolvency proceedings against a shareholder are thereby regularly foreseen as triggering event for such pre-emptive rights.
However, it has so far been highly disputed whether pre-emptive rights can be validly agreed upon in articles of association of a limited liability company in case of insolvency proceedings against a shareholder or whether, in particular, section 26 para. 3 of the Austrian Insolvency Code (Insolvenzordnung) generally contradicts such provisions. In particular, the Higher Regional Court of Linz (Oberlandesgericht Linz) ruled last year (ref. 6 R 95/19m) that pre-emptive rights in case of insolvency proceedings against a shareholder contradict section 26 para. 3 of the Austrian Insolvency Code and my not be agreed upon in the articles of association (see the E&H Newsletter dated November 19, 2019). In practice, this had led to diverging case law by the Austrian Higher Regional Courts.
In its recent decision 6 Ob 64/20k, the Austrian Supreme Court clarified that section 26 para. 3 of the Austrian Insolvency Code generally does not apply to pre-emptive rights concluded in the articles of association of a limited liability company and may conceptually also be concluded in case of a shareholder’s insolvency. The Austrian Supreme Court also ruled that a predetermined purchase price below the market value may also be validly agreed upon in the articles of association provided this does not cause any unequal treatment of the respective shareholder’s creditors compared to other triggering events for the pre-emptive rights and provided such provisions do not only specifically apply in case of foreclosure or insolvency proceedings, but also to all other cases of a shareholder’s voluntary (e.g. share transfer) or involuntary withdrawal from the company. According to the Austrian Supreme Court, creditors may only challenge the validity of the pre-emptive right if it is determined on a case-by-case basis that such provision was agreed upon with the ex ante intention to damage creditors’ rights (sittenwidrige Schädigungsabsicht). In this context, the Austrian Supreme Court generally clarified that the share (Geschäftsanteil) in an Austrian limited liability company represents the total of the shareholder’s rights and obligations and that only such share (Geschäftsanteil), as determined by the articles of association, are considered part of the assets of a shareholder (and as such may be subject to foreclosure measures).
The Supreme Court’s recent decision clarifies that the articles of association of a limited liability company may provide for pre-emptive rights (Aufgriffsrechte) in case of insolvency proceedings against a shareholder and such articles of association must be registered in the Austrian Companies Register (Firmenbuch) provided that this does not cause any unequal treatment of the shareholder’s creditors compared to other pre-emptive rights. The Supreme Court’s decision should ensure a uniform commercial court practice. When drafting the relevant articles of association – in particular concerning any purchase price limitation below the market value – special attention should be paid to avoid unequal treatment of creditors.