Prohibition of competition and prohibition of appropriation of corporate opportunities do not (always) protect a GmbH against its sole shareholder-director.

Limited liability company Prohibition of competition Corporate opportunity Return of capital contributions capital-maintenance Trustee Due Diligence

6 Ob 71/21s

In principle, it is permissible for the sole shareholder-director of a GmbH to compete with his/her GmbH. Certain limits are set by the prohibition of return of contributions.

A GmbH (limited liability company) had sought to acquire a property and had also already carried out due diligence. In the end, however, the sole shareholder and managing director of the GmbH bought the real estate for himself.

In its decision 6 Ob 71/21s, the Supreme Court had to assess whether the sole shareholder and managing director had violated the prohibition of competition for managing directors under the law on limited liability companies or – due to the appropriation of a corporate opportunity of the limited liability company – the prohibition of return of capital contributions.

The Supreme Court came to the following conclusions:

- Managing directors are generally prohibited from doing business in the GmbH's business branches for their own account or for the account of third parties without the consent of the GmbH. Furthermore, they may not participate in a company of the same business sector as personally liable partners or hold a position on the management board or supervisory board or as managing director.

- However, a deviating authorisation by resolution of the shareholders of the GmbH is always possible and can also be granted tacitly.

- The managing sole shareholder of a GmbH is not subject to the prohibition to compete because in such a case there is no company interest, that deviates from the interests of the sole shareholder-managing director, which were to be protected. Furthermore, tacit consent to the activity can also be assumed.

- As a result, the GmbH-law prohibition of competition does not apply to sole shareholder-directors, even if – as in the present case – 50% of the shares were held for a trustor and the trust agreement contains a prohibition of competition. This prohibition in the trust agreement does not affect the company.

- The (gratuitous) transfer of corporate opportunities may violate the prohibition of return of contributions, but only if the corporate opportunity already has a market value. The mere incurring of frustrated expenses (e.g. due diligence costs) by the GmbH is not sufficient to assume a market value.