Contributed By CHSH Cerha Hempel Spiegelfeld Hlawati
Austrian stock corporations are governed by a two-tier board system. The members of both boards – the management board and supervisory board – are required to comply with the duty of care of a prudent businessman (Sorgfalt eines ordentlichen Geschäftsleiters) and act foremost in the best interest of the company. Additionally (but only ranking second) shareholders', employees' and public interests may be taken into consideration. Besides that, the Austrian Stock Corporation Act, Section 47a, lays down a general principle of equal treatment of all shareholders. Subject to the principles of the so-called business judgement rule, failure to comply with these duties may result in personal liability. For the managing directors of limited liability companies, similar duties of care and loyalty towards the company apply.
In connection with M&A activities, the directors' duties of care and loyalty do not differ from those in other business situations. Directors’ influence on a target, particularly in a share deal, is limited, since typically negotiations are conducted and decisions are made at shareholder level. In some cases target companies' managing directors are not even involved at an early stage. However, in order to provide information, their involvement is usually required in the due diligence process and in connection with closing.
The Austrian Takeover Act additionally requires managing directors as well as members of the supervisory board to act in the interest of all shareholders as well as in the interest of the employees, creditors and the general public, and to remain objective during the takeover procedure. As soon as the intention to launch a bid has been announced, but also when the members of the boards have been approached by a bidder or have knowledge of the intention to launch a bid, the boards must not prevent the public bid (Verhinderungsverbot), must stay objective (Objektivitätsgebot) and, in addition, have to respond to the bid by way of a statement. Nevertheless, searching for a 'white knight' to make a competing offer is permitted.