Austria: Supreme Court confirms: partial transfer of share permissible subject to shareholder approval, despite agreed indivisibility

Facts of the case

In the case, an Austrian LLC (GmbH) had two shareholders: one holding 90 % of the shares and the other 10 %. The articles of association expressly excluded the division of shares. The majority shareholder entered into a trust agreement with the later claimant, which included an offer to transfer a part of the 90 % share. The majority shareholder declared that it had acquired part of the share as the claimant's trustee and was obliged to transfer the share at any time free of charge. Ultimately, the claimant declared their intention to take over the (trust) share from the majority shareholder. Despite the articles of association stipulating the indivisibility of shares, the minority shareholder confirmed the transfer of the share to the claimant. However, the majority shareholder, who also served as the managing director of the company, refused to register the change in shareholders with the Commercial Register.

Both the court of first instance and the court of appeal rejected the registration on the grounds that the articles of association expressly exclude the division of shares.

Supreme Court decision

Addressing the purpose of Section 79(1) GmbHG, which establishes the indivisibility of shares unless expressly stipulated in the articles of association, the Supreme Court cites two key objectives. On the one hand, the provision protects the shareholders' interest in partial disinvestment; on the other hand, it safeguards the company from an unrestricted increase in the number of shareholders. It should be left to the shareholders to decide whether they consider it necessary to permit a division at all and whether they reserve the transfer of parts for their approval.

In an earlier decision (1 Ob 530/76), the Supreme Court already confirmed that compliance with the requirements for division of shares is not to be examined ex officio if all shareholders were involved in the partial transfer of shares.

According to the current decision of the Supreme Court, the offer of the majority shareholder in the trust agreement is considered as implicit consent to the partial transfer of the share. Since the minority shareholder also confirmed the transfer to the claimant, the partial transfer was valid despite the contrary provision in the articles of association.

The Supreme Court does not differentiate between articles of association that are "silent" on divisibility and articles of association that expressly stipulate indivisibility.

Furthermore, the consent of all shareholders to the partial transfer does not need to be provided simultaneously or in the same document; it can also be granted after the effective transfer. However, once the partial transfer of the share has become effective, revocation of consent is not permitted.

Key takeaways

• The Supreme Court decision illustrates the importance of considering future assignment modalities when drawing up the articles of association. This is because any general deviation from the (in)divisibility is only possible through an amendment to the articles of association.
• The stipulated indivisibility can be waived with the consent of all shareholders. Even minority shareholders can, therefore, effectively block a partial transfer of a share.
• The consent must be granted separately for a specific (partial) transfer. However, consent (i) does not have to be declared at the same time or in the same document, and (ii) can also be provided after the effectiveness of the transfer.
• With respect to the consent of shareholders, there is no difference between articles of association that are silent on divisibility and articles of association that expressly regulate indivisibility. In both cases, indivisibility is ultimately part of the articles of association, either expressly or by dispositive law.

authors: Gabriel Ebner (attorney at law, corporate/m&a), Georg Steidl (attorney at law, dispute resolution)