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31 October 2018
The Constitutional Court recently ruled on whether the Squeeze-Out Act is compatible with the Constitution.(1)
In January 2017 an Austrian regional court was asked to confirm the legality of a limited liability company's shareholder resolution aimed at squeezing out a minority shareholder. The court dismissed the action, concluding that the resolution complies with all applicable provisions of the Squeeze-Out Act. The plaintiff appealed this decision and requested that the Constitutional Court clarify whether the Squeeze-Out Act complied with the Constitution.
The plaintiff argued that certain provisions of the Squeeze-Out Act(2) violate the Constitution because they restrict shareholders' property rights and the principle of equality (rights enshrined in both the Constitution and the European Convention on Human Rights). For shareholders of limited liability companies, in contrast to shareholders of public limited companies, the equity stake and the personal involvement in the company are critical. Squeezing out a minority shareholder without their consent would therefore violate their property rights, irrespective of whether fair compensation is paid. Further, the plaintiff contended that such provisions violate the principle of trust and equality since minority shareholders cannot foresee the timing of their potential exclusion.
The Constitutional Court saw things differently, holding as follows:
The Constitutional Court's judgment was eagerly awaited. As it provides legal certainty in a highly sensitive environment, the decision counts as a positive development.
For further information on this topic please contact Paul Nimmerfall or Daniel Madari at Schoenherr Attorneys at Law by telephone (+43 1 5343 70) or email (firstname.lastname@example.org or email@example.com). The Schoenherr Attorneys at Law website can be accessed at www.schoenherr.eu.
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