OGH: On legal capacity after BREXIT

Apr 29, 2022 Benn-Ibler Rechtsanwälte

In the present case, the Austrian Supreme Court (Oberster Gerichtshof, OGH) dealt with the question of the legal capacity or universal succession of a British company after the application of the freedom of establishment had ceased.

The plaintiff is a limited liability company (Ltd.) established under English law, whose management was transferred to Styria and has its administrative headquarters there. Furthermore, the company has only one sole shareholder. The defendant applied for the dismissal of an action brought by the plaintiff because the plaintiff had lost its legal capacity and thus its capacity to be a party due to the withdrawal of the United Kingdom from the European Union (EU).

The court of first instance dismissed the application. It stated that the legal form of the company would no longer be recognised due to the discontinuation of the case law of the European Court of Justice (ECJ). The Court of Appeal, however, upheld the plaintiff's appeal, as British Ltds. are to be assessed according to Austrian company law. It further stated, citing literature, that this must be a company in liquidation and that there was an analogous application of Section 142 the Austrian Commercial Code (Unternehmensgesetzbuch, UBG) to a transfer of assets to the sole shareholder.

The OGH held that the appeal was admissible but not justified:

With reference to Sec. 10 of the International Private Law Act (Internationales Privatrechtsgesetz, IPRG), the country of domicile is decisive for the qualification of legal capacity. However, after the BREXIT, Austria is no longer obliged to recognise the legal capacity of Ltds. Consequently, the company would have to be assessed according to Austrian company law, which has the consequence that a company corresponds to a civil law partnership or, in the case of a sole shareholder, to a sole proprietor. Therefore, the company's assets are directly attributed to the sole shareholder in the course of universal succession, analogously to Sec. 142 UGB, whereby the legal entity - the company - loses its legal capacity and capacity to be party to legal proceedings. The OGH also did not consider a legal form sui generis or a company in liquidation to be expedient, as it is precisely companies without legal capacity that do not have legal capacity in their liquidation form. Overall, the proceedings had to be continued with the sole shareholder as the universal successor of the original plaintiff.

OGH 9 Ob 74/21d (27.01.2022)