Stricter duties of the management and supervisory board in group-relevant transactions

In its decision of 25 November 2020, the Austrian Supreme Court dealt for the first time in detail with the group management responsibility of the management board, and the corresponding group monitoring responsibility of the supervisory board, and stated that the supervisory board of a group parent company is obliged to subject transactions of group-wide significance to its approval, even if they are concluded in sub-subsidiaries. The management of the parent company of the group must ensure that the supervisory board’s approval requirements of relevance to the group are enforced, and that the supervisory board’s involvement in or influence on transactions of this kind in sub-subsidiaries is established accordingly (as a connecting factor for the control of the supervisory board of the parent company of the group).

In the present decision, the Austrian Supreme Court stated or specified the following in particular:

  • Although there is no codified group law in Austria, de facto group management by the group parent company is recognized. The management of a group parent company must act in a group management capacity. This activity is subject to supervision by the supervisory board of the group parent company.
  • If a group-relevant transaction exists at the level of a group member, it must (also) be approved by the supervisory board of the group parent company. The approval competence does not replace a reservation of approval at the level of the company directly undertaking this transaction or the group-relevant measure, but is in addition to it.
  • There is no legal definition of “group relevance”; rather, it always depends on the circumstances and structure of the respective group. Group relevance is generally assumed if the measures of a subsidiary also noticeably impact the financial position and results of operations of the parent company. The relevant criteria are the profitability and liquidity of the parent company and its financial equilibrium.

However, the reservations of consent of the supervisory board established at the level of the group parent company do not as such have any direct legal consequences for the executive bodies of the sub-companies. It is therefore the task of the management of the group parent company to ensure that reservations of consent are established “up the chain” in the group cascade. In this way, group-relevant measures reach the sphere of the management of the group parent company, which must then submit the issue to its own supervisory board for a decision.

In the light of this decision, management bodies and supervisory boards of group parent companies are well advised to review the corporate governance of their group and, if these are not already in line with the requirements of the Austrian Supreme Court, to adjust them accordingly. Particular attention should be paid to how “group-relevant transactions” be defined for the respective group. In this context, the enforceability of cascading consent obligations under corporate law should also be taken into account. Otherwise, the members of the corporate bodies could be held liable.

For the full text of the decision: OGH 25.11.2020, 6 Ob 209/20h