Contributed By CHSH Cerha Hempel Spiegelfeld Hlawati
Shareholder activism has emerged and become increasingly visible in Austria in recent years. However, shareholder activist organisations (eg, typically the Austrian Chamber of Labour, trade unions and consumer protection organisations such as Verein für Konsumenteninformation) mainly focus on advising and representing consumers who have suffered damage to their investment made in units for collective investment or similar instruments, mainly by a wrongful prospectus or advertising, including in legal proceedings, rather than tackle M&A cases. Therefore, activism caused by the aforementioned groups in M&A transactions is seen quite rarely.
It is noteworthy that minority shareholders in particular may avail themselves of legal remedies surrounding M&A activities – not so much preventing or challenging a takeover, merger or similar reorganisation or squeeze-out as such, but as regards the judicial review of the adequacy of (cash) compensation offered or granted for any forced exit as shareholder of a company. These proceedings mostly go without media publicity.
In addition, shareholders may exercise minority rights prior to and in the general meeting, eg, by taking advantage of their right to ask questions. In rare cases minority shareholders have tried to stretch these rights, such as to pose numerous questions, request a special audit or challenge resolutions in court, bordering on abuse, but since the law provides for a rather limited system of minority rights, these strategies have not often proven successful. However, lawsuits do occur from time to time. Most recently, a lawsuit to challenge a resolution to appoint members of the supervisory board of a large listed Austrian company was filed for lack of gender diversity.
In Austria, activists seeking to encourage companies to enter certain M&A transactions, spin-offs or major divestitures are hardly seen. There may have been very rare M&A cases where the picture may have looked rather the opposite – that hostile acquisitions or takeovers with the likely intention to liquidate, restructure or dispose of large parts of the target business and/or workforce may in rare cases have triggered certain activism or involvement (typically on a discussion and negotiation level rather than by strikes) by politicians or trade unions. But undoubtedly, cases exist where activists, typically minority shareholders, have sought to reinforce their ideas by putting pressure on management. There was a case, for example, where a shareholder publicly criticised the management strategy in Austrian newspapers.
Shareholder activists rarely interfere with the completion of announced transactions in Austria. Regarding the workforce and employee representatives, such as works councils and trade unions, interfering measures, if any, are quite seldom since Austrian corporate culture is in many ways characterised by discussion and compromise rather than by strikes or other disruptive action.
In this context it should be noted that the Austrian Labour Constitution Act grants the works council certain rights to be informed about, to comment on and to be consulted in a timely fashion of planned transfers or reorganisations of undertakings or business units, particularly as to the consequences for the employee workforce. However, the law does not provide for sanctions if the management board fails to comply with the relevant provisions.