There is no codified corporate group law in Austria. Section 15 of the German Stock Corporation Act (AktG) and Section 115 of the German Limited Liability Companies Act (GmbHG) limit themselves to a definition of a group, from which the doctrine deduces that corporate groups are not fundamentally prohibited (see Auer in Artmann/Karollus, AktG I6 Section 15, margin numbers 2 and 20). Corporate law contains isolated provisions that take corporate group situations into account – for example, Section 118 (1) AktG (the shareholders' duty to provide information also extends to the company's legal and business relationships with an affiliated company) or Section 95 (2) AktG (the supervisory board may request a report from the management board at any time on the company's affairs, including its relationships with a group company). Austrian corporate group law is continuously evolving through case law. According to the consistent case law of the Supreme Court (OGH), a corporate group is not a company, but merely indicates a specific "affiliation relationship" between companies that are combined into an economic unit (RS0049295). The group itself has no legal capacity and no corporate bodies of its own.
The Supreme Court recently commented on consent reservations within corporate groups in its decision 6 Ob 209/20h. The decision was based on the following facts:
The plaintiff is L-AG, a pure group holding company. The subsidiary of L-AG, with a 36,39% stake, is the pure holding company W-AG; this, in turn, holds a 100% stake in WS-AG. The rules of procedure of the Supervisory Board and the Management Board of the group holding company L-AG stipulate that certain approval requirements of the Supervisory Board of the group holding company L-AG apply not only to L-AG itself, but also to its subsidiaries, including the sub-group holding company W-AG. Among other things, the assumption of letters of comfort by the sub-group holding company W-AG is subject to the approval requirement. The Management Board of the subsidiary W-AG has issued a letter of comfort to a credit institution at the expense of W-AG with reference to WS-AG – without the approval of the Supervisory Board of the group holding company L-AG.
The key legal question that the Supreme Court had to address in this context from a corporate governance perspective was whether the supervisory board of a parent company can effectively ensure that a legal transaction of the subsidiary may only be carried out with the consent of the supervisory board of the parent company.
In its reasoning for its decision, the Supreme Court provides a comprehensive overview of academic opinions regarding issues of group management. The Supreme Court recognizes that the management board of a parent company also has a certain duty to manage the group, which the supervisory board of the parent company must subsequently monitor, as group management is also a management matter within the meaning of Section 95 (1) of the German Stock Corporation Act (AktG). In the Supreme Court's view, this monitoring of the group by the supervisory board of the parent company must be limited to those issues that are actually "relevant to the group"; group relevance can generally be assumed if measures taken by a group member also have a more than insignificant impact on the assets and earnings of the parent company.
If a legal transaction relevant to the group and requiring approval exists at the level of the group member, this must, in the opinion of the Supreme Court, (also) be approved by the supervisory board of the parent company.
The Supreme Court (OGH) holds that the management board and supervisory board of the parent company are not authorized to directly intervene in the management of "subordinate" group members in the legal form of a stock corporation (as in their own company) or to issue legally binding instructions. However, the fact that instructions under group law are not fundamentally void appears to the OGH to be a feasible solution. Since the consent reservations at the level of the parent company have no direct legal consequences for the executive bodies of the group member, the management body of the group member is also not obligated to obtain the consent of the supervisory board of the parent company. However, the extension of the consent reservation to group matters pronounced by the OGH obliges the management board of the parent company to influence the group member in question to ensure that the management measures in question are actually only carried out with the consent of the supervisory board of the parent company. If the supervisory board of the parent company refuses its consent, the management of the parent company is obliged to ensure that the intended measure is not implemented in the affected group member.
Hemma Parsché oversees investment management from a legal perspective at ÖBAG. She is also jointly responsible for sustainability and governance. As a former lawyer at a commercial law firm, she has extensive international experience, particularly in the areas of corporate/M&A, capital markets, and banking & finance. She completed her law studies with a doctorate in Vienna and an LL.M. in London.
