Ousting Managing Director after Shareholder Dispute
In a recent decision, the Austrian Supreme Court (Oberster Gerichtshof, hereinafter OGH) considered the circumstances in which a shareholder-managing director may be removed by court order for good cause. The case centred on a longstanding family dispute between the shareholders, potential breaches of duty, and an alleged impairment of the director’s ability to manage the company.
Continuation in office notwithstanding expiry of the fixed term
In the case at hand, the first defendant had initially been appointed managing director under a fixed-term service agreement. Although that term expired in 2006, he continued to act as managing director with the knowledge and consent of all shareholders.
The OGH therefore held that, following expiry of the original fixed term, the first defendant had been reappointed by the shareholders’ conduct. Accordingly, notwithstanding the original fixed-term agreement, he remained validly appointed as managing director.
Good cause for removal by court order
Under section 16(2) of the Austrian Limited Liability Companies Act (GmbHG), a shareholder-managing director may be removed by court order for good cause. Good cause exists where it is no longer reasonable to expect the company or the other shareholders to permit the director to remain in office.
In the OGH’s view, this requires an overall assessment of the circumstances. Relevant considerations include the director’s conduct, the interests of the company and the other shareholders, and the nature, seriousness, and potential consequences of any breach of duty.
Family dispute insufficient
In the present case, relations between the first defendant and the claimant, his son and fellow shareholder, were severely strained. Among other things, the first defendant had made allegations against the claimant and sought his removal from office.
The OGH nevertheless made clear that personal or family disputes do not, without more, generally constitute good cause for removal by court order. The decisive question is whether, as an objective matter, the dispute has rendered continued cooperation unreasonable.
Moreover, on the findings made to date, the allegations raised by the first defendant were neither knowingly false nor expressed in a manner that would, of itself, amount to a serious breach of duty.
Potential breaches of duty require further examination
The assessment may differ where the director’s conduct causes specific and substantial detriment to the company. The OGH referred to potential breaches of duty in connection with the management of the company and its subsidiaries.
For example, a failure to finalise annual accounts or certain actions taken in relation to other group companies could constitute good cause, if they involved gross fault and had a material impact on the company.
Conduct towards customers or business partners may likewise be relevant where it materially prejudices the company’s interests. Owing to the absence of sufficient findings of fact, it was not yet possible to determine conclusively whether that was so in the present case.
Age and health-related limitations may be relevant
The OGH further clarified that a permanent or substantial impairment of a person’s ability to manage the company may also constitute good cause for removal by court order. This applies in particular where, by reason of age or illness, the proper discharge of the managing director’s duties can no longer be assured.
Further findings and fresh determination
The OGH set aside the decisions of the lower courts and remitted the matter for further findings of fact. Whether good cause for removal by court order is in fact established must therefore be determined afresh once the necessary further enquiries have been completed.
OGH 6 Ob 112/25a (30 June 2026)
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