OGH on the self-dealing sale of real estate by a limited liability company

Sept 15, 2021 Ivona Vučić

The Supreme Court (Oberster Gerichtshof, OGH) examined the problem of the sale of real estate by a limited liability company (Gesellschaft mit beschränkter Haftung, GmbH) to its only two managing directors and explained under which circumstances such a self-dealing is permissible.

The applicants, as managing directors of a GmbH with sole power of representation, each purchased a share in a property which was the sole property of the GmbH. The uniform deed of sale was signed and notarized by both applicants, once in their function as managing directors of the seller and once in their function as purchasers.

The application for the incorporation of the property was rejected by the court of first instance due to inadmissible self-dealing. This decision was confirmed by the Appeals Court. By means of an extraordinary appeal, the applicants turned to the OGH.

In this regard, the OGH stated that a self-dealing requires documentary evidence of the approval of all other managing directors, of the supervisory board if there is only one managing director, or of all shareholders if there is no supervisory board. The OGH confirmed the assessment of the Court of Appeal that in the present case the consent could not be granted by the other managing director with sole power of representation, since he, as the purchaser, was also threatened with a conflict of interests.

The OGH also shared the opinion of the lower courts that it was a matter of a single purchase agreement and not of two transactions in which the seller was represented once by the first applicant and the other time by the second applicant. This argument would require an interpretation of the contract, which the Land Registry Court (Grundbuchsgericht) was precluded from doing. In order for the land register application to be granted, the contents of the deed had to be free of any doubt.

Consequently, the OGH dismissed the extraordinary appeal.

OGH 5 Ob 48/21a (19.04.2021)