Reorganisations

Now even easier to implement in practice thanks to the Supreme Court

In several recent decisions, the Supreme Court has issued clearer and more practical guidance on the corporate reorganisation of companies, in particular mergers.

- In case 6 Ob 210/19d, the Supreme Court examined the issues surrounding the protection of the status quo for reorganisations: Certain reorganisations – in this specific case, a conversion – are entered in, and take effect upon their entry in, the Commercial Register. As the Supreme Court has stated, it should in principle no longer be possible to eliminate reorganisations after their entry in the Commercial Register. Therefore, even a reorganisation that has been incorrectly carried out but that has been entered in the Commercial Register is still valid and does not have to be reversed. There is unanimous agreement in legal literature that this case-law is applicable not only to conversions, but also to mergers and demergers. Although the shortcomings identified in the resolution are not – according to the Supreme Court – cured by the entry made in the Commercial Register, in principle it is only possible to assert a claim for damages. The Supreme Court applies the protection of the status quo not only to the reorganisation resolution itself, but also to preparatory resolutions. For the time being, it is still open to debate whether violations of criminal, competition or supervisory regulations, for example, can break through the protection of the status quo. According to the prevailing view, however, violations of the ban on the retransfer of capital contributions (capital maintenance rules) do not result in an exception to the protection of the status quo.

- Twenty-five years ago, the Supreme Court held that the rights of first refusal of the transferring company had been lost in the course of a merger. Since then, there have been considerable doubts in practice as to whether universal succession under reorganisation law also covers highly personal rights – such as rights of first refusal, repurchase and resale, prohibitions on encumbrance and sale, servitudes or powers of attorney. In three decisions issued in rapid succession, the Supreme Court has now done a somewhat spectacular about-turn: First of all, in case 5 Ob 136/19i the court did not uphold the case-law according to which the merger gives rise to the termination and expiration of the highly personal rights that are recorded in the Land Register in favour of the transferring company, at least with regard to the repurchase right. This was followed by case 1 Ob 173/19a: A repurchase right that existed in favour of the transferring company prior to the merger continues to exist after the merger in favour of the acquiring company and may be exercised by the latter until the expiry of the time limit. The conclusion for now was issued in case 5 Ob 74/20y: In this decision, the quarter-of-a-century-old legal rule on rights of first refusal was expressly abandoned, with the court ruling that a right of first refusal did not cease to exist in the event of a reorganisation involving universal succession but was in actual fact transferred to the acquiring legal entity. This shift in the case-law is not only dogmatically correct – as the literature has shown for many years – but also very gratifying in practice. Reorganisations are thus greatly relieved and simplified, especially with regard to the real estate rights to be transferred.