Shareholders' Rights & Shareholder Activism 2023 Comparisons

Austrian law distinguishes between corporations and partnerships. 

The most prevalent type of corporation in Austria is the limited liability company (Gesellschaft mit beschränkter Haftung, GmbH). In addition, there is the stock corporation (Aktiengesellschaft, AG) and the occasionally used domestic European Society/European Company (Societas Europaea, SE). 

While both, AG and SE are far less common than the GmbH, they are the only companies eligible to be listed on a stock exchange in Austria. 

The most common partnerships are the general partnership (Offene Gesellschaft, OG) and the limited partnership (Kommanditgesellschaft, KG). 

A hybrid type between a corporation and a partnership is also possible, for example as a GmbH & Co KG, that is initially a KG but has a GmbH as its only general partner with unlimited liability.

Further, a new type of corporation, ie, the flexible company (FlexCo), has been implemented into the Austrian legal system and came into force on 1 January 2024. 

Put very simply, FlexCo contains legal characteristics of both a limited liability company and a stock corporation and can be designed very flexibly to best meet the needs of founders and investors. 

Generally, foreign investors are entitled to freely choose their preferred type of company when starting a business in Austria. 

Nevertheless, foreign investors commonly opt for the limited liability company due to its flexibility in design and the fact that within the company a higher level of corporate law control is possible. Additionally, it allows for lower equity provision. Foreign and domestic investors mostly choose the limited liability company to pursue their business activities within a corporation. Thus, the following sections will focus mostly on the limited liability company, without, however, disregarding the differences from the stock corporation in essential areas.

The limited liability company is also by far the most popular legal form for operating a joint venture company in Austria.

Partnerships will usually be less attractive due to the personal liability of their partners.

For limited liability companies, there is generally no statutory distinction between types or classes of shares and only ordinary shares may be issued.

The main types of shares issued by stock corporations are: 

• bearer shares (Inhaberaktien; may only be issued by listed corporations); and
• registered shares (Namensaktien).

Each type can be issued as:

• ordinary shares (Stammaktien); or
• preferred shares (Vorzugsaktien).

Preferred shares are – as opposed to ordinary shares – non-voting shares with priority over profit distribution.

Shareholder’s membership rights are partly stipulated by relevant statutes and can in some cases be supplemented or amended by articles of association. There are two types of membership rights: 

• administrative rights (Verwaltungsrechte); and
• proprietary rights (Vermögensrechte).

The right to participation in general meetings, the right to be informed about certain company-related matters as well as voting rights are administrative rights. 

The most significant proprietary right is the right to participate in the distribution of the company’s annual profit.

The limited liability company provides for flexibility when it comes to regulating the individual shareholders’ rights. As a result, it is a more favourable option for family businesses or joint venture projects, where shareholders seek a more personalised framework.

Apart from the articles of association, in which shareholders’ rights may be varied, further agreements may be concluded (Gesellschaftervereinbarungen) which allow the parties to further individualise the shareholder’s rights.

The Austrian Stock Corporation Act (AktG), however, does not allow for a variation of shareholder rights to such an extent. Therefore, a deviation from the regulations of the Stock Corporation Act is very limited (principle of formal strictness; Satzungsstrenge).

As of 1 January 2024, the limited liability company has a minimum capital requirement of EUR10,000 of which at least EUR5,000 must be paid up in cash. 

Compared to the GmbH, the minimum nominal capital of a stock corporation is EUR70,000.

Contrary to corporations (AG and GmbH), partnerships have no minimal capital requirements.

Stock corporations and limited liability companies can be founded with only one shareholder, whereas both the general partnership and the limited partnership each require a minimum of two shareholders. 

In the case of a GmbH & Co KG, the only partner with unlimited liability is a limited liability company.

Regarding the nationality or residency for any type of company, there are no restrictions from a corporate law perspective. However, certain industries may be affected by restrictions resulting from foreign trade, investment or tax regulations.

Shareholders’ agreements are commonly used by shareholders of limited liability companies for regulating their legal relationships outside of the articles of association. In this way, a certain degree of secrecy can be achieved because, in contrast to the articles of association, the shareholders’ agreement is not disclosed to the Austrian commercial register. In stock corporations, shareholders’ agreements can be used to agree on regulations that by statute could not be regulated in the articles of association. 

Typical provisions in shareholders’ agreements are: 

• the definition of corporate bodies and corresponding nomination rights; 
• the determination of economic targets, regulations for future capital increases;
• financial reporting as well as rights to information and disclosure;
• regulations on share transfers (eg, call options, put options, pre-emption and acquisition rights);
• voting agreements;
• regulations for shareholders’ and supervisory board meetings as well as procedures for conflict resolution, arbitration agreements and mediation proceedings;
• leaver and vesting provisions;
• non-compete clauses; and
• confidentiality and non-disclosure clauses.

Within the contracting parties of the shareholders’ agreement, its provisions are legally enforceable. Shareholders’ agreements usually also contain an obligation for new shareholders to join the agreement.

Unlike shareholders’ agreements, joint venture agreements regulate the co-operation of at least two companies that otherwise operate independently of each other and therefore constitutes a form of syndicate agreement. The underlying companies themselves remain legally and economically independent within the framework of a joint venture.

Agreements of this sort are generally not public.

There are two types of general meetings: the ordinary general meeting and the extraordinary general meeting. The law provides that a limited liability company shall hold an ordinary general meeting at least once every year. 

In the ordinary general meeting, the shareholders will decide on: 

• the approval of the annual financial statements;
• the profit distribution of the company; and
• the discharge of the managing directors for the previous financial year of the company.

An extraordinary general meeting may be convened if there is an urgency and the interests of the company so require. This is particularly the case when:

• more than 50% of the share capital has been used up, which is to be assumed when half of the assets required to maintain the share capital have been consumed; or
• the equity ratio is below 8% and the fictitious debt repayment term surpasses 15 years. 

Regarding the notice and calling a meeting, please see 2.2 Notice of Shareholders’ Meetings and 2.3. Procedure and Criteria for Calling a General Meeting. The annual general meetings of stock corporations must be convened no later than 28 days before the meeting. The articles of association may provide for longer notice periods, a shortening of the notice period is not permitted. 

The articles of association of a limited liability company may regulate the notice form and notice period before a general meeting. If the articles of association do not contain such provision, the notice for a general meeting must be given via registered letter seven days before the meeting takes place. That notice period may not be shortened.

Resolutions may also be passed without observing the statutory notice period if all shareholders are present or represented by proxies and no shareholder objects to the convening of that general meeting. 

Extraordinary general meetings of stock corporation must be convened no later than 21 days before the meeting. The minimum content of the notice is regulated in detail by law. The convening notice must also be published in the official gazettes.

The managing director of a limited liability company has the authority to call a general meeting. If there are multiple managing directors, it is sufficient for one of them to initiate the meeting. 

Shareholders may request a general meeting if they hold at least 10% of the shares in the company. In the articles of association, the minimum percentage of shares required to call a general meeting can be reduced, but not increased (minimum minority right). If the request is not complied with within an appropriate period, the shareholders may themselves call a general meeting. Under certain circumstances, the supervisory board is also authorised to call a general meeting.

All shareholders must receive notice of a general meeting, irrespective of their actual voting rights. 

Any shareholder may inspect the books and records of the company within 14 days prior to the general meeting convened to approve the annual financial statements or prior to the expiration of the period set for the written vote. In addition, the shareholders have a general right to receive information about all matters related to the company.

Unlike the shareholder of a stock corporation, who is limited to exercising the right to information at the general meeting, the exercise of the right to information by the shareholder of a limited liability company is permitted at any time and without limitation to the general meeting.

The right to information of a shareholder of a stock corporation must be exercised at the general meeting in respect of the items on the agenda. A question asked by a shareholder must be relevant to the discussion of an item on the agenda.

The Austrian company register is open to the public. Therefore, shareholders can inspect the company register anytime.

During the COVID-19 pandemic, the COVID-19 Company Law Act (“COVID-19-GesG”) was enacted to provide a temporary legal basis for “virtual meetings” of shareholders or board members. 

Through the Virtual Shareholder Meetings Act (VirtGesG) passed on 7 July 2023, the option of holding shareholders’ meetings without the physical presence of its participants has now been permanently introduced. There are three types of virtual meetings:

• the simple virtual meeting;
• the moderated virtual meeting; and
• the hybrid meeting.

Whereas in a simple virtual meeting there is a two-way connection, ie, all participants can speak at any time, in a moderated virtual general meeting the meeting is primarily broadcast, but with the possibility of written requests to speak at any time (eg, by chat, e-mail or in a separate portal) and, at the request of a participant or if the meeting chair gives a participant the floor, oral contributions/questions can also be enabled.

The moderated meeting is preferably used if the number of participants is so high that the meeting would otherwise become hard to manage. 

The hybrid meeting allows for shareholders to participate virtually, but also physically. In that case, it is important to ensure that neither of the participants obtains an unfair advantage over others.

Unless otherwise provided by law or the articles of association, the general meeting of a limited liability company can only pass resolutions if at least 10% of the share capital is present or represented. 

Regarding the voting requirements, in most cases a simple majority is sufficient to formally decide on a matter. The articles of association may provide for higher majorities for all or individual matters.

A three-fourths majority is required by law, for example for an amendment to the articles of association or for the merger of a limited liability company with another company.

If the object of the company is to be changed, unanimity is generally required.

In general, resolutions can be passed in a general meeting or in written form, if the shareholders agree a vote in writing (circular resolution for written voting). General meetings may be held in person or ‒ if provided for in the articles of association ‒ also in virtual form.

For applicable voting thresholds, please see 2.6. Quorum, Voting Requirements and Proposal of Resolutions.

In some cases, the statutory provisions stipulate that resolutions must be passed in a general meeting and be further notarised by a notary (eg, amendment of the articles of association or dissolution of the company). General meetings to be notarised by a notary can also be held in virtual form. 

The following matters typically require shareholder approval in all circumstances: 

• approval of the annual financial statements;
• distribution of the balance sheet profit;
• discharge of the managing directors and the supervisory board;
• repayment of additional contributions;
• decisions as to whether procuration/signing authority (Prokura) or commercial power of attorney may be granted for the entire business operation;
• reorganisation of the company; and
• measures that go beyond the ordinary course of business in terms of their nature or scope.       

If the statutory provisions or the articles of association do not provide for higher majority requirements, a simple majority is sufficient to decide on the matters listed above.

The exercise of a voting right by proxy is permitted, for which a written power of attorney stating the exercise of the voting right is required. Shareholders may therefore authorise a representative to vote and exercise their voting rights on their behalf during a general meeting or via a circular resolution.

The voting right of the individual shareholder is determined in proportion to its share in the share capital of the company (one vote per full EUR10, fractions below this do not count). However, the articles of association may stipulate otherwise, and each shareholder must be entitled to at least one vote.

In practice, the voting right is exercised by the shareholder signing the minutes of the general meeting or the circular resolution for written voting.

The exercise of voting rights by means of electronic communication is possible in virtual shareholders’ meetings.

The shareholders of limited liability companies have significant influence on the company’s management by directly appointing the managing directors and further being entitled to instruct them. 

Shareholders who hold a minimum of 10% of the shares in the company may demand a general meeting and a new item to be included on the agenda. 

Resolutions of a general meeting are subject to the control of the courts. Incorrect resolutions can therefore be contested by shareholders by means of a resolution challenge. However, the resolution can only be challenged under certain conditions and to a limited extent. 

Grounds for challenging are procedural defects, material defects and violation of articles of association (void or voidable resolutions).

In principle, any shareholder who has raised an objection on the record to the resolution at the shareholders’ meeting is entitled to challenge it by filing an action. An objection is to be assumed if a shareholder makes it clear (impliedly or expressly) that they do not agree with the resolution and consider it inadmissible. 

In addition, the managing directors and the supervisory board as well as each member of these bodies are entitled to file an action if the adoption of the resolution would render them liable to compensation or criminal prosecution.

The action to challenge the resolution shall be brought against the company within one month from the date of dispatch of the copy of the minutes.

Shareholders may contact the entity’s management directly to request information.

As part of their investments strategy, investors often reserve nomination rights for the nomination of managing directors or of members of an advisory board (Beirat), which gives them greater influence in the company. 

A minority of the shareholders whose capital contributions amount to at least 10% of the share capital or the nominal amount of EUR700,000 may obtain the appointment of auditors by court order for the purpose of auditing the most recent annual financial statements if dishonesty or gross violations of the law or the articles of association are shown to be credible (Sonderprüfung).       

A shareholder may also transfer its share to a nominees/trustee (Treuhänder), who then legally acts as shareholder and is entered into the commercial register. The ultimate beneficial owner is still the trustor (Treugeber; former shareholder).

However, when the shares are transferred, the former shareholder loses their direct voting and all information rights towards the company, meaning that they can only assert their rights through or against the nominee/trustee. To appoint authorised representatives is therefore generally preferable for the transfer of shares to a nominee/trustee.

The exercise of the right to inspect the books of a shareholder of a limited liability company by authorised representatives is generally only permissible with the consent of the other shareholders, and without their consent if the shareholder cannot inspect the books themself, eg, due to long-term illness or permanent absence. Furthermore, it is recognised that the shareholder is generally entitled to consult expert third parties (eg, lawyers, auditors, tax advisors, accountants) who are bound to secrecy when exercising the shareholder’s right to information, unless their participation would be completely superfluous or would be regarded as harassing or abusive in individual cases with regard to the associated disruption of the company’s business operations or for other reasons.

Shareholders may pass resolutions in writing (circular resolution) instead of passing resolutions at a general meeting, unless the law stipulates that a shareholders’ meeting must be held for this purpose.

Shareholders’ resolutions by way of circulation are permissible if all shareholders agree.

However, if notarisation is required, resolutions may not be passed by circulation; resolutions must therefore be passed at a general meeting (see 2.7 Types of Resolutions and Thresholds).

Voting thresholds remain unchanged (see 2.6 Quorum, Voting Requirements and Proposals for Resolutions).

In the case of stock corporations, resolutions may not be adopted in writing.

Existing shareholders often have pre-emption/first subscription rights (Bezugsrecht), which gives them the opportunity to purchase new shares before they are offered to third parties. This mechanism serves to maintain the proportional ownership of existing shareholders in the company and to protect from a dilution of their shares. 

In the absence of a provision to the contrary in the articles of association or in the resolution to increase the share capital, the existing shareholders shall have the right to take over the new shares in proportion to their existing ones within four weeks of the date on which the resolution is adopted. Subscription rights can be excluded, but the principle of equal treatment of shareholders must be observed. The preferential treatment of individual shareholders will therefore require objective justification (affected shareholders are generally to be compensated financially for the financial disadvantages suffered).

Furthermore, the exclusion of subscription rights can only be considered in the context of an ordinary capital increase, but not in the case of merely nominal capital increases.

In the case of stock corporations, each shareholder must be allocated a portion of the new shares corresponding to their share of the existing share capital at their request. A period of at least two weeks must be set for exercising the subscription right. 

The subscription right can only be excluded in the capital increase resolution with a majority of at least three quarters of the share capital represented when the resolution is passed (stock corporations only). 

Shareholders’ subscription rights are ex lege excluded in the case of the conditional capital increase, which is only permitted for certain purposes (stock corporations only).

By law, shares in a limited liability company are generally freely transferable or alienable.

Nevertheless, the company’s articles of association may require the transfers of shares to be formally approved by the company or other shareholders (Vinkulierung). This is the case for most limited liability companies in Austria (especially family businesses). In addition, pre-emptive rights (Vorwerbsrechte), call options, tag-along rights (Mitverkaufsrechte) and drag-along rights (Mitverkaufspflichten) are stipulated in the articles of association or in a shareholders’ agreement and can further limit the unrestricted transfer.

Furthermore, it must be considered that the transfer of shares in a limited liability company is subject to very formal requirements and the assignment agreement must be concluded in the form of a notarial deed (ie, notarisation).

In the case of a stock corporation, the transfer of shares does not require a notarial deed.

The form of transfer of shares in a stock corporation depends on the type of shares to be transferred. Bearer shares, which may only be issued by listed stock corporations, can be traded on the stock exchange without any further restrictions. Registered shares made out to a specific person may be transferred by endorsement or assignment.

In Austria, shareholders are entitled to use their shares to grant security interests. Therefore, it is possible to grant shares as collateral for loans or other financial transactions. The articles of association may include restrictions on the use of shares as collateral (similar to 3.2 Share Transfers).

Corporations and partnerships are registered in the Austrian commercial register (Firmenbuch) that is publicly accessible and keeps records of all shareholders and their shareholdings (ie, the nominal value of each individual share). Any changes in the company must be reported to the competent commercial register without delay. Various changes in the status of shareholders only become legally effective upon entry in the Austrian commercial register.

The beneficial owners of a company/partnership must be registered under the beneficial owner register act (Wirtschaftliches Eigentümer Registergesetz – WiEReG). This transparency register is non-public, but authorities and all persons having a legitimate interest may inspect the register and thereby obtain knowledge of which natural persons are registered as beneficial owners of the respective legal entity. Beneficial owners may apply for a restriction of inspection if there are interests worthy of protection that justify such a restriction. Changes regarding the beneficial owner must be reported to the register.

Regarding publicly traded stock corporations, the investor must notify the regulatory authority when buying or selling stock when certain thresholds are met. If it comes to a significant change, it must be made public within two stock exchange days. The notification must be made to the Financial Market Supervision Authority (FMA). 

In a stock corporation or a limited liability company shares can be cancelled after they have been issued in different, but limited ways.

• If a shareholder does not pay its contribution, there is the possibility of a so-called Kaduzierung, which is a form of exclusion of a shareholder: shareholders who do not pay the required amount of the capital contribution in due time may be granted a grace period with the warning that they will be declared to have forfeited their shares and the payments made after the expiry of the grace period.
• Another option for cancellation is a capital reduction, which must be resolved by the general meeting.
• The third cancellation option is the so-called Einziehung, which is only possible for stock corporations: based on a resolution of the general meeting shares can be withdrawn. In this context, the provisions on capital reduction must be observed. Such Einziehung does not exist for limited liability companies.

Furthermore, in some cases, the majority shareholder of a stock corporation or limited liability company that holds 90% of the nominal capital can unilaterally affect the exclusion of minority shareholders and call in the remaining shares (squeeze-out).

Generally, limited liability companies may not acquire or hold their own shares.

Austrian stock corporations may buy back their own shares from their shareholders but only in restricted cases and only up to a maximum limit of 10% of its share capital. 

The authority for such acquisition measure lies with the executive board, which, however, requires prior authorisation from the general meeting. The authorisation is valid for a maximum period of 30 months.

Shares held by the stock corporation itself do not grant any rights and therefore are neutralised.

Listed stock corporations must notify the FMA regarding the approval of the buyback and may be obliged to issue an ad hoc announcement when they exercise the approval to repurchase their own shares. 

Limited liability companies are not allowed to hold their own shares and cannot buy back shares.

Stock corporations and limited liability companies must prepare annual financial statements within a specific period after the end of a financial year. The financial statements show either a balance sheet profit or a balance sheet loss.

A profit distribution is only permissible when a profit is reported in the annual financial statement. 

The executive board shall convene the annual general meeting, which shall take place within the first eight months of the financial year. At the annual general meeting the shareholders decide on the distribution of profits. Generally, the whole profit must be paid out to the shareholders (Vollausschüttungsgebot), unless there is a statutory restriction on distributions (profit amounts are excluded from the distribution if, for example, they are required by law to be allocated to reserves) or the articles of association contain special provisions; profits can also be retained. 

Unless the articles of association stipulate otherwise, the amount of each shareholder’s entitlement to the distribution of profits shall be determined in proportion to its share in the share capital of the company. Alinear/asymmetric distributions are possible. For tax reasons, the permissibility of such a profit distribution must be stipulated in the articles of association.

In the case of a stock corporation, the executive board may, with the consent of the Supervisory Board, pay to the shareholders after the end of half of the financial year a discount on the anticipated net profit for the year of up to half of the average annual dividend of the last three years, provided that such discount payments are covered by the result of the past half financial year determined on the basis of an interim balance sheet plus any profit carried forward and less any loss carried forward and that distributable reserves remain in the amount of the sums paid out (Zwischendividende, Vorabdividende). This is not permissible in the case of a limited liability company.

A limited liability company is ultimately controlled by its shareholders, who have the authority to make critical decisions in the shareholders’ meeting. This includes appointing and dismissing the company’s managing directors and providing them with binding directives. Directors can be removed through a resolution passed by the shareholders. If directors are also shareholders, they can be appointed through a provision in the company’s articles of association.

Every stock corporation, regardless of its size, must have a supervisory board consisting of at least three persons. It is elected by the shareholders’ meeting. The supervisory board alone is responsible for appointing and dismissing the executive board, supervising its management, and advising it. Shareholders have no special rights to appoint members of the executive board or to make proposals. 

Directors of a stock corporation are not subject to the instructions of the shareholders or even the supervisory board. However, some important transactions may only be undertaken with the prior consent of the supervisory board.

In contrast to the stock corporation, shareholders of a limited liability company may directly influence the directors by issuing enforceable directives, establishing general guidelines or directly require directors to take certain actions. A disregard of such is considered a breach of duty and can therefore give rise to a direct liability or constitute grounds for the dismissal of the director. 

Corporations must have their annual financial statements and management report audited by an auditor. Small limited liability companies are generally exempt from this obligation unless they are required by law to have a supervisory board.

The auditor of the annual financial statements is appointed by the shareholders and may also be dismissed by the shareholders in accordance with the terms of appointment and the articles of association.

Listed stock corporations must issue an annual corporate governance report. Limited liability companies are not legally required to.

The report shall contain a statement by the management and the supervisory body as to whether the provisions have been complied with and, if so, whether mandatory or “comply or explain” rules have been/will be deviated from and why. 

The report must be published on the company’s website and is therefore publicly accessible.

A controlling company does not have a specific legal obligation to the shareholders of the controlled company. Deviations may arise from ancillary agreements (such as profit and loss transfer agreements or intercompany agreements), although these agreements primarily affect the controlled company itself and not the controlling company.

Since only the company with its entire corporate assets is liable for corporate debts, there is no direct or personal liability of the shareholders if the company is insolvent. 

Shareholder rights remain essentially unaffected by the insolvency (eg, right to attend shareholders’ meetings, their voting rights and the right to information, and can still dispose of the company’s insolvency-free assets or right to dispose of the shares).

The opening of insolvency proceedings or the court order by which insolvency proceedings are not opened due to a lack of assets to cover costs lead to the dissolution and liquidation of the company. After the creditors are paid out from the liquidation proceeds, shareholders are rightfully entitled to a share of the remaining liquidation proceeds (if any) pro rata in proportion of their share or depending on the rights a specific share class conveys. 

Depending on the nature of the right concerned, shareholders are generally provided with different sets of legal remedies.

A claim for infringement of proprietary rights (Vermögensrechte) (eg, dividend rights) can be enforced by way of a civil action by every shareholder without substantial restrictions (including minority shareholders).

Concerning their administrative rights (Verwaltungsrechte) (eg, voting rights), shareholders may legally challenge resolutions of the shareholders’ meeting if the resolution is:

• null and void; or
• voidable (see 2.11 Challenging a Resolution).

Remedies in Connection With the Dismissal of the Company’s Directors/Officers

The shareholders’ meeting of a limited liability company can appoint and dismiss the managing directors without good cause. In addition, the shareholders’ meeting can issue instructions to the managing directors and in this way also exercise control over the management of the company.

In contrast to the managing directors of a limited liability company, the members of the executive board of a stock corporation have a much stronger independent legal position, as they are not subject to instructions from other bodies/even third parties when exercising their function and, moreover, cannot be dismissed from their function for any reason. 

There are no direct contractual obligations and no direct claim/legal remedy between the directors/officers and the shareholders.

Remedies in Connection With the Assertion of Claims for Damages 

Some breaches of duty can lead to a personal liability of the managing director or executive board to compensate the company for the resulting damage if the managing director has contributed to the damage and has acted unlawfully and at fault (Verschulden).

However, this liability does not give rise to any direct claim on the part of the shareholders and must be asserted by the company (possibility of a derivative action, see 10.3 Derivative Actions).

The possibility of bringing a derivative action by shareholders on behalf of the company is generally not permitted for shareholders of a stock corporation. Claims of the company against shareholders or against members of the executive board must be asserted by the company only if the general meeting resolves to do so by a simple majority. The same applies if requested by a minority, whose shares together account for 10% of the share capital and if the claims asserted by the minority are not manifestly unfounded. In the event of claims against members of the executive board, the supervisory board is responsible for representing the company.

In restricted cases provided for in the Limited Liability Company Act (GmbHG), shareholders of a limited liability company can bring a derivative action on behalf of the company against other shareholders, managing directors or members of the supervisory board if: 

• their capital contributions amount to 10% of the share capital or the nominal amount of EUR700,000 or a lower amount, if stipulated in the articles of association;
• the pursuit of these claims for the company has been rejected by resolution of the shareholders; or
• a motion aimed at this has not been brought to a resolution, although it was notified to the managing directors in good time.

In Austria, a vast majority of the listed stock corporations are controlled by one shareholder or a group of shareholders. A fragmented shareholder structure is only an exception. The Austrian corporate governance system does not offer much space for shareholder activism. Although the majority shareholder can inhibit certain objections by activist shareholders, the legal minority protection of shareholders provides some room for activism.

The implementation of the Shareholders’ Rights Directive into the AktG has also provided certain statutory provisions, such as “sayon pay”, where shareholders have an influence on the remuneration of the management board at the AGM: the supervisory board must draw up a remuneration policy containing the principles for the remuneration of the management board and the supervisory board. The remuneration policy must be submitted to the shareholders for a vote each time it is amended and at least every four years. This vote is only of a recommendatory nature and the resolution cannot be contested. In the event of rejection, a revised remuneration policy has to be presented at the next AGM. This say-on-pay right of the shareholders has the potential to foster shareholder activism. 

The aim of shareholder activism is to exert influence on the target company with respect to governance issues, social policy and financially motivated economic activism, as pursued by hedge funds. 

From a legal perspective, the shareholder rights and/or minority rights pursuant to stock corporation law offer opportunities to exert influence on the target company. 

These include:

• the right to speak and to receive information at the AGM;
• the right to request a special audit; and
• the right to propose motions and countermotions for resolutions and to propose supervisory board members. 

Activist funds are often concerned with replacing the management board and attempting to change the business direction in terms of cost reductions, strategy changes or the sale of non-relevant company shares or assets.

First, it should be noted that shareholder activism can vary from individual to individual. The course depends on different factors that must be considered, eg, the reaction of the target company. The target company can react to activism either openly or reservedly. Accordingly, it is conceivable that an initial contact or submission of a proposed resolution will be followed by an offer of dialogue or that the demands expressed therein will be rejected. Basically, every campaign follows a similar process. In a first step, there are two possibilities. One is that activist investors generally want to persuade companies to improve certain circumstances. So, they first choose the appropriate issue to determine the problem and only then determine one or more suitable target companies. Conversely, there is also the possibility of first determining the target company and only then identifying problems in the specific company.

After the first step, the investor must choose a strategy tailored to the target and then apply it. The selection of the instruments to be used, as well as with further investors or the use of publicity-effective media, is crucial. Once the strategy has been decided, the reaction from the company must be awaited. No reaction can be expected to a shareholder proposal presented at the AGM, with only a minimal amount of approval. A letter to management outlining the issues and problems, possibly signed by several investors, and asking to be contacted is more likely to get a response. The activist shareholder can then enter into a dialogue with the company to implement the demands, depending of course on the nature of the response from the company. This allows the activist shareholder to conclude the campaign as successful/unsuccessful or, in the worst case, repeat the second step and work out a new strategy and then apply it.

In addition to the activist strategies mentioned above, shareholder activists also use the AktG. It offers minority shareholders in particular various opportunities to demand information from a company and then also to influence it. The rights provided by law primarily allow a minority shareholder to force a company to co-operate constructively with the shareholder. However, some measures, such as the special audit, may allow shareholders to put pressure on a company by exposing it to the risk or even threat of an audit by an independent auditor.

It is difficult to categorise Austrian shareholder activism into a particular industrial sector because shareholder activism plays a subordinate role in Austria. 

In Austria, the financial industry, industrial goods (such as water treatment system) and real estate industry are being more targeted by activist behaviour

It is also expected that ESG issues will increasingly become the focus of activists.

Petrus Advisers, an investment fund based in UK, has been more active (see also 11.6 Proportion of Activist Demands Met) than other activists. However, it is difficult to draw conclusions about the type of shareholder activists are, as shareholder activism is rather rare in Austria.

A few years ago, Petrus Advisers, holding shares in Wienerberger AG, proposed the expansion of the supervisory board to nine members, suggesting two experts of its choice. Although Petrus withdrew the expansion suggestion, the case illustrates the ability to apply pressure as a minority shareholder. 

In 2017, the activist shareholder Petrus Advisers tried to put pressure on the management board of Immofinanz AG and expressed its dissatisfaction with the strategy of the company’s management in an open letter and requested, inter alia, the sale of its Russian businesses and non-core assets. In 2018, the two listed real estate funds Immofinanz AG and CA Immo were considering a merger. Again, the activist shareholder Petrus Advisers, who was against the merger, stated its opinion in an open letter and was ultimately able to prevent the merger.

In another case, the majority shareholder planned to marge Austrian Best Water Technology AG (BWT) into an unlisted 100% subsidiary. The activist shareholders were against the merger and argued that the sole reason for the merger structure chosen by the majority shareholder was the creation of a cold delisting from the stock exchange against the will of the remaining shareholders and that a review proceeding should be initiated. In 2017, the Austrian Supreme Court decided that the merger for the purpose of the intended delisting was abusive. 

Effective groundwork for a successful interaction between shareholder activists and the management boards, as well as the supervisory boards of ATX (Austrian Traded Index) companies is significant. It is only possible if the following criteria exist:

• analysing and minimising risk potential towards activist strategies;
• constant improvement of corporate governance;
• communication with activists and the board; and 
• regular meetings with relevant shareholders and proxy advisors.