OGH: Managing Directors Close Relatives under Insolvency Law

May 31, 2024 Benn-Ibler Rechtsanwälte

The Austrian Supreme Court (Oberster Gerichtshof, hereinafter OGH) has ruled that a debtor’s de facto managing director is ‘a member of the management or supervisory board’ within the meaning of Section 32(2)1 of the Austrian Bankruptcy Act (Insolvenzordnung, hereinafter IO).

The decision was based on the later debtor’s sale of three properties to the wife of the debtor’s de facto director. These real estate sales were challenged under Section 28(3) of the IO on the grounds that the sales were made with the intention of causing a disadvantage.

All instances decided in favour of the claim. In addition, the OGH elaborated on the qualification of a de facto managing director as ‘a member of the management or supervisory board’ within the meaning of Section 32(3)10 of the IO:

Under Section 32(2)(1) of the IO, members of the board of directors or supervisory board are deemed to be the same as close relatives of the debtor. This provision dates back to the 2003 Austrian Corporate and Insolvency Amendment Act (GIRÄG 2003) as published in the Austrian Federal Law Gazette (BGBl. I 2003/92) where it is stated that such persons have insider status. The acknowledged model for this provision was Section 138(2)(1) of the German Insolvency Act (Insolvenzordnung) which takes into account, among other things, such individuals’ special opportunity to obtain information about the financial circumstances of a debtor.

According to the OGH, the de facto managing director has an insider position or a special information opportunity, just like the legal managing director. This justifies the qualification of the de facto managing director as a ‘member of the management body’ and is in line with the OGH’s case law, which, in principle, subjects the de facto managing director to the same obligations with regard to tortious liability as the formally appointed managing director.

The OGH does not share the concern that, for example, executive employees could therefore also be classified as ‘members of the management body’. This is because a senior manager does not have an insider status equivalent to that of a de facto or de jure managing director and thus no possibility of obtaining information – which would be required not only in individual cases, but also for the purpose of a full analogy.

OGH 17 Ob 2/24d (7 May 2024)