Company Law Digitalization Act 2023 – The Disqualification of Managing Directors

The year could not have got off to a more eventful start from a company law perspective. The introduction of the flexible corporation, "FlexCo" for short, has been covered extensively in the media. So, it should come as no surprise that the provisions governing the sanctioning of members of a representative body of a corporation who have been convicted of criminal offences – which are just as relevant – came into effect almost unnoticed.

The provisions of the Company Law Digitalization Act 2023 entered into force on 1 January 2024 and apply to limited liability companies, flexible corporations, stock corporations, societas Europaea and cooperatives. The new legislation standardizes the rules on the disqualification of managing directors and board members who are or have been convicted of certain business-related criminal offences. The amendment has now transposed into Austrian law Article 13i of Directive (EU) 2019/1151 amending Directive (EU) 2017/1132. The restrictions standardized in Article 13i aim to protect business transactions on the one hand and protect the general public from disqualified representatives on the other.

Grounds for disqualification

The Directive itself gives no further guidance on which offences should result in a person being disqualified. It has therefore been left to Member States to decide exactly which offences justify disqualification. To ensure a high degree of legal certainty, a person is only disqualified if he/she has been found guilty of certain criminal offences that have the force of res judicata. The list of offences set out in Section 15 (1a) of the Act on Limited Liability Companies includes in particular, but without limitation, the following:

  • fraud (Section 146 of the Criminal Code),
  • breach of trust (Section 153 of the Criminal Code), acceptance of gifts by those in power (Section 153a of the Criminal Code), misuse of aid (Section 153b of the Criminal Code), withholding employee social security contributions (Section 153c of the Criminal Code), fraudulent registration with a social security institution or the construction workers leave and severance pay fund (Section 153d of the Criminal Code), organized illegal employment (Section 153e of the Criminal Code),
  • fraudulent insolvency practices (Section 156 of the Criminal Code),
  • harming third party creditors (Section 157 of the Criminal Code),
  • giving preference to a creditor (Section 158 of the Criminal Code).

In addition, the criminal court convictions for a relevant offence must exceed the materiality threshold of six months' imprisonment. Section 15 (1b) of the Act on Limited Liability Companies states that this also covers convictions for a comparable criminal offence handed down by a foreign court.

Legal consequences of disqualification

The legal consequences of disqualification occur ex lege, meaning that no additional official or court decision is required. Consequently, there is a material obstacle to being appointed or continuing to hold the position of manager as soon as there is a non-appealable judgment regarding one of the abovementioned offences that is punishable by more than six months in prison. In addition, the possibility for the managing director to resign has been extended under Section 16a para. 3 of the Act on Limited Liability Companies, as a result of which the director is required to tender his/her resignation immediately in those cases covered by Section 15 para. 1a or 1b of that Act. His/her resignation takes effect after 14 days, thereby giving the company plenty of time to appoint a new managing director.

The disqualification ceases to apply three years after the conviction becomes final. After this time, the person concerned can be reappointed as a member of the representative body.

Consequences for proceedings before the Commercial Register Court

In principle, disqualifications must be upheld by the authorities, which means that any application for the appointment of a disqualified person to represent a company must be rejected. For this purpose, the criminal record is automatically compared against the company register regarding each relevant conviction in order to determine whether the convicted person is entered in the company register as a member of a representative body. In future, the managing director or board member to be appointed will also be under an obligation to make a declaration confirming that he/she has no such convictions.


For the first time, the above provisions create what is known as a "cooling-off" period for representative bodies, with the appointment of a person to a representative body being linked to "economic integrity" in the interest of protecting the general public or third parties. This has an impact on day-to-day practice regarding managing directors and the appointment of board members.