In general, Austrian company law allows for two ‘routes’ to hold directors liable for damages they have caused.
1. Liability of Directors towards the Company
According to section 25 of the GmbHG and section 84 of the AktG, a director must reimburse to the company for all damage caused by not applying the diligence of a prudent business manager. This general rule is supplemented by several special provisions establishing, inter alia, liability:
· of managing directors if assets of the company are distributed to shareholders (except where allowed by law, that is, the distribution of profit or the formal decrease of capital);
· of managing directors if payments are made after the company should have initiated insolvency proceedings;
· of a managing director if he or she breaches his or her non-competition duty;
· of any director if he or she enters into a transaction with the company for his or her own account or as an agent of a third party (‘Insichgeschäft’) without having obtained the necessary prior approval; and
· of any board member up to Euros (EUR) 100,000 if the company files for bankruptcy and the members of the managing board have failed to take, or the supervisory board has failed to approve, the necessary measures to restructure the company, as provided for in the Business Reorganisation Act 1997 (‘Unternehmensreorganisationsgesetz’.)
2. Liability of Directors towards Third Parties
The external liability of board members is based on tort law and comes into play if a provision of law that aims to protect a third party against a particular loss (‘Schutznorm’) is violated. Examples of such provisions are:
· the managing directors’ duty to initiate, in due time, bankruptcy proceedings;
· provisions of criminal law prohibiting the impairment of creditors’ interests;
· sections 122 of the GmbHG and 255 of the AktG penalizing wrong information on the financial status and other characteristics of the company.
Moreover, specific laws establish the direct liability of managing directors towards third parties, for instance:
· a managing director, under certain conditions, shall be liable for damages resulting from unfair trade in the meaning of the Unfair Trade Practices Act (‘Gesetz gegen den unlauteren Wettbewerb’); and
· if, at the fault of a managing director, outstanding taxes or social security contributions become irrecoverable from the company.
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