OGH: No temporary suspension of capital measures

Feb 2, 2024 Benn-Ibler Rechtsanwälte

An application by a listed European Company (SE) for temporary suspension of capital measures has been rejected by the Austrian Supreme Court (Oberster Gerichtshof, hereinafter OGH).

The situation was as follows: A limited company domiciled in Russia held 27.78% of the shares and thus had a blocking minority in an Austrian SE. The beneficial owner of the Russian limited company was a person sanctioned under EU Sanctions Regulation 2014 (Regulation (EU) No 269/2014). The limited company was excluded from participating in two annual general meetings, and no dividends were distributed to make sure that this individual’s influence ended.

In 2023, several resolutions were also passed at an Annual General Meeting (for details see OGH 6 Ob 215/23w para. 7). Essentially, these resolutions provide for a distribution of EUR 9.05 per share resulting from an ordinary capital reduction, with shareholders having the option to receive this distribution in the form of new shares, as opposed to receiving cash. Due to EU Sanctions Regulation 2014, the SE will not make an offer for new shares in respect of the shares held by the Russian Limited. As a result, the Limited may lose its blocking minority, depending on the decision of the shareholders.

The Limited brought an action for annulment against these resolutions of the Annual General Meeting (Sections 195 et seq. of the Austrian Stock Corporation Act (Aktiengesetz, AktG) and applied for an injunction against the implementation of the capital measures.

All instances rejected the application for an interim injunction. In the opinion of the OGH, there was no imminent, irreparable damage to the company (Section 42 (4) of the Austrian Law on Limited Liability Companies (GmbH-Gesetz, analogous)) or to the Russian limited liability company (Section 381 (2) of the Austrian Code of Enforcement, Exekutionsordnung, EO), for the following reasons:

Since the capital measures resulting from the contested resolutions can be reversed in the event of a successful claim in the main proceedings, the company would regain its blocking minority. Even the loss in value of the entire share package conferring the blocking minority (‘control premium’) is only a temporary loss in the event of a victory in the main proceedings, which can also be compensated in cash.

It is true that the limited liability company will no longer be able to prevent subsequent resolutions until the capital measures have been declared null and void due to the lack of a blocking minority. However, as a nullity can only be reversed ex nunc, amendments to the articles of association or capital or reorganisation measures would always be effective. In particular, structural changes would no longer be able to be reversed due to protection by the commercial register. However, merely theoretically conceivable measures without hard-and-fast facts were not enough for the OGH. Furthermore, the OGH was not in agreement as to the extent to which there could be damages which could not be compensated in money.

OGH 6 Ob 215/23w (20 December 2023)