OGH: No Trustor Liability for Initial Contribution

Mar 17, 2023 Benn-Ibler Rechtsanwälte

The Austrian Supreme Court (Oberster Gerichtshof, hereinafter OGH) has rejected the principle of direct liability of a trustor for an outstanding initial contribution. Such liability only applies in exceptional cases.

This decision was based on the following scenario: WK and JP founded M Limited (M Ltd.) via a trustee in Great Britain, which had its real principal place of management in Austria. The purpose of this design was to avoid higher set-up costs and the liability associated with a GmbH (limited liability company). Registration in the Austrian company register was not approved. As a result, M Ltd. founded a limited liability company under Austrian law (M GmbH), whose sole shareholder was M Ltd. M Ltd. paid in the necessary half of the share capital of EUR 17,500. The Ltd. acted as trustee for WK and JP. According to the agreement, the paid-in share capital contribution corresponded to half of each of the two 50% share capital contributions. JP was the sole registered manager, but WK was the de facto manager.

M Ltd was deleted from the English register in 2018. Bankruptcy proceedings were opened against the assets of M Ltd in 2019. The liquidator sued WK's estate for payment of the outstanding part of his initial contribution in the amount of EUR 8,750, claiming that there had clearly been a circumvention of the law, as the liability fund for creditors was to be kept as low as possible. A trustor should not be placed in a better position than a directly participating shareholder. 

The lower courts affirmed direct liability analogous to Section 63 (1) of the Austrian Limited Liability Companies Act (GmbHG).

The OGH, however, was not convinced by this approach.

The Supreme Court pointed out the separation between shareholding in the company and the trust relationship. No liability of the trustor for the payment of the initial contribution by the trustee could be derived from the mere fact of a trust relationship. For the purpose of securing the raising of capital (Section 63(1) GmbHG), a co-controlling legal position is also not relevant. Exceptional liability can only be considered if the interposition of the trustee obviously served the purpose of circumvention or improper use, in particular, if the trustee did not have the necessary means to raise the capital contribution in the first place. However, these conditions were not met.

OGH 6 Ob 31/22k (25.01.2023)