OGH: Adjustment Certificates Do Not Securitise Shareholder Rights

May 26, 2023 Benn-Ibler Rechtsanwälte

The Austrian Supreme Court (Oberster Gerichtshof, hereinafter OGH) has clarified that anyone purchasing a securitised adjustment certificate does not thereby acquire the rights of the original squeezed out shareholder. This applies, in particular, to claims for damages arising from a violation of the principle of equal treatment.

In the original case, B Plc. decided to exclude its free float shareholders from the company via a squeeze-out by paying them a cash settlement. The defendant was the main shareholder of B Plc. Several major shareholders opposed the squeeze-out. A settlement was reached whereby one of the major shareholders was paid EUR 14 million and in turn sold all but one share to B Plc. Subsequently, proceedings were instituted to review the cash settlement. On this occasion, one security (as adjustment certificate) was issued to each shareholder. However, an investment bank repurchased some of these adjustment certificates.

The plaintiff, who was not originally a shareholder of B Plc., bought the certificates from the investment bank. She now demanded the same premium on the cash settlement as the most favoured major shareholder had received. She was entitled to equal treatment under the provisions of company law, the violation of which made the defendant former majority shareholder liable for damages. The acquisition of the adjustment rights also included the acquisition of the claims for damages and other claims on the part of the original shareholders.

All instances dismissed the claim.

Pursuant to Section 5(4) of the Austrian Squeeze-out Act (Gesellschafter-Ausschlussgesetz, GesAusG), securities representing shareholdings from the time of registration of the squeeze-out resolution only securitise the claim to cash compensation. If a potential right to subsequent adjustment is securitised and a certificate is issued in this respect, it only securitises the claim to a possible subsequent payment of the cash compensation on the basis of the result of a review procedure of the cash compensation. However, with the mere purchase of the adjustment certificates no claims for damages of excluded shareholders against the principal shareholder are acquired.

A valid transfer of these claims does not regularly take place in the case of securitised adjustment rights. Trading in adjustment rights is (only) a bet on the outcome of the ongoing price review proceedings.

OGH 6 Ob 71/22t (18.04.2023)