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Notarial deed required to trigger pre-emption rights agreed in the articles of association

02/02/2021

Author

Elisa Kaplenig

Attorney at Law

Only recently, in a decision on the formal requirement for the purchase and transfer of shares of an Austrian Limited Liability Company (LLC, GmbH), the Austrian Supreme Court ruled, in line with established case law, that a seperate notarial deed may be required for the "closing" if the transaction is split up into a signing and a closing process (OGH 23.4.2020, 6 Ob 59/20z, Not­arial deed man­dat­ory for sign­ing and clos­ing private lim­ited li­ab­il­ity com­pany share trans­fers).

In its most recent decision, the Austiran Supreme Court has again ruled on the formal requirements for the the purchase and transfer of shares of an LLC - this time with regard to pre-emtion rights (Aufgriffsrechte) agreed in the articles of association.

OGH 25.11.2020, 6 Ob 198/20s

The Austrian Supreme Court has clarified that depending on the wording of the agreed pre-emption rights clause, both the offer and the declaration of acceptance require the form of a notarial deed.

An informal offer letter to the persons entitled to take up the pre-emption right would only be sufficient in the event that the prerequisites already arise directly from the articles of association in a manner that excludes any doubt. 

According to the Austrian Supreme Court, however, this was not the case with the wording in the articles of association under review.

The partnership agreement on which the decision was based provided for the following provision:
"IX.
[…]
If a shareholder intends to assign his share to other persons, he must first offer his share to all other shareholders in proportion to their shareholding for purchase against payment of the assignment fee pursuant to item XII.
The shareholder willing to assign is irrevocably bound to his offer of assignment vis-à-vis the other shareholders for four weeks, this period counting from the time of the latest offer to a shareholder.
[…]“

In the case reviewed, the shareholder wishing to assign its shares notified the other shareholders of his intention to sell in an informal letter with reference to the pre-emption right provisions in the articles of association. Subsequently, the right to take up the shares was exercised by one of the shareholders in the form of a notarial deed.

Later, the agreement on the assignment of the shares was challenged and its cancellation was requested, on the grounds that both the offer and the declaration of acceptance of the assignment of the shares require the form of a notarial deed if carried out in two separate deeds, as in the case reviewed. 

The Austiran Supreme Court has interpreted the pre-emption right provision in the articles of association merely as an obligation by the shareholder willing to sell the shares to make an offer to the other shareholders. In its view, the provision does not contain an actual offer to the shareholders, which only required a unilateral declaration of acceptance. Accordingly, the offer to the other shareholders required the form of a notarial deed.

Consequences for practice

In practice, the formal requirements for the purchase and transfer of shares of an LLC must not been overlooked. Only in exceptional cases can a separate offer in the form of a notarial deed be omitted in the case of a pre-emption right agreed in the articles of association.

Author

Elisa Kaplenig

Attorney at Law