Austria: Increased Due Diligence Obligations for Shareholder Creditors?

Under the Austrian Insolvency Code, those who wish to challenge certain disadvantageous transactions carried out by the debtor after material insolvency has occurred may do so. The risk of legal actions being contested is particularly relevant for shareholders who are also creditors of the debtor company. The Austrian Supreme Court recently needed to decide on the level of duty of care and investigation obligations on a minority shareholder of an Austrian limited liability company (GmbH) who received payments under a (terminated) employment contract at a time when a company was already materially insolvent. The court ruled the possibility to demand information from the company according to the employee’s existing shareholder rights and the omission to make use of this right is to be regarded as a negligent ignorance. Start-ups, in particular, should be aware that the decision imposes additional risks on equity incentive programmes.

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Posted Under: Austria, International

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