Lexology: M&A Litigation - Austria by fellnerwratzfeldpartner

M&A LITIGATION Austria

Consulting editor Kirkland & Ellis LLP

Lexology GTDT - M&A Litigation

M&A Litigation Consulting editors

Matthew Solum , Stefan Atkinson Kirkland & Ellis LLP

Quick reference guide containing side-by-side comparison of local insights into M&A litigation, including types of shareholder claim; class or collective actions; derivative litigation; interim relief and early dismissal; claims against third-party advisers or counterparties; limitations on claims; standards of liability; legal restrictions on indemnities; challenges to particular clauses or terms; pre-litigation tools and procedure; the role of directors’ and officers’ insurance; forum and discovery considerations; damages and settlements; directors’ duties regarding unsolicited or unwanted M&A proposals; types of counterparty claim; and recent trends.

Generated 20 July 2022

The information contained in this report is indicative only. Law Business Research is not responsible for any actions (or lack thereof) taken as a result of relying on or in any way using information contained in this report and in no event shall be liable for any damages resulting from reliance on or use of this information. © Copyright 2006 - 2022 Law Business Research

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Table of contents TYPES OF SHAREHOLDERS' CLAIMS Main claims Requirements for successful claims Publicly traded or privately held corporations Form of transaction Negotiated or hostile transaction Party suffering loss COLLECTIVE AND DERIVATION LITIGATION Class or collective actions Derivative litigation INTERIM RELIEF AND EARLY DISMISSAL Injunctive or other interim relief Early dismissal of shareholder complaint ADVISERS AND COUNTERPARTIES Claims against third-party advisers Claims against counterparties LIMITATIONS ON CLAIMS Limitations of liability in corporation's constitution documents Statutory or regulatory limitations on claims Common law limitations on claims STANDARD OF LIABILITY General standard Type of transaction Type of consideration Potential conflicts of interest Controlling shareholders INDEMNITIES Legal restrictions on indemnities

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M&A CLAUSES AND TERMS Challenges to particular terms PRE-LITIGATION TOOLS AND PROCEDURE IN M&A LITIGATION Shareholder vote Insurance Burden of proof Pre-litigation tools Forum Expedited proceedings and discovery DAMAGES AND SETTLEMENTS Damages Settlements THIRD PARTIES Third parties preventing transactions Third parties supporting transactions UNSOLICITED OR UNWANTED PROPOSALS Directors' duties COUNTERPARTIES' CLAIMS Common types of claim Differences from litigation brought by shareholders UPDATES AND TRENDS Recent developments

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Contributors Austria Markus Fellner markus.fellner@fwp.at Fellner Wratzfeld & Partner

Paul Luiki paul.luiki@fwp.at Fellner Wratzfeld & Partner

Evelyne Schober evelyne.schober@fwp.at Fellner Wratzfeld & Partner

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TYPES OF SHAREHOLDERS' CLAIMS Main claims Identify the main claims shareholders in your jurisdiction may assert against corporations, officers and directors in connection with M&A transactions.

The main claims shareholders may assert against corporations in connection with M&A transactions are: claims for rescission of shareholder resolutions approving M&A transactions, provided the M&A transaction was brought before the shareholders for resolution; claims for fair cash compensation when shareholders exit the corporation due to certain transactions (eg merger, spin-off, legal transformation or squeeze out); and claims for tort damages in case of violation of statutory law intended to protect shareholders.

Typically, improper conduct of board members primarily damages the corporation. In this case, the board members are only liable towards the corporation itself, whereas shareholders are not entitled to raise any direct tortious claims against the culpable board member for disadvantages indirectly accruing to the shareholders (eg, reduction in the value of the shares). As exceptions to this principle, the main claims shareholders may directly assert against the management board, the supervisory board and individual members thereof are the following: culpable violation of absolutely protected rights of shareholders (eg, unlawful exclusion of subscription rights, unlawful reduction of decision-making authority reserved to the general meeting); culpable violation of statutory law aiming to protect shareholders (eg, information and reporting duties in the course of a merger, prohibition on frustrating action with regard to takeover bids, fraud, wilful misrepresentation in financial statements, deficiencies in a public prospectus); if the loss is caused by intentional tortious immoral conduct (inducement to buy or sell shares through deliberately inaccurate ad hoc announcements); and in the case of negligent granting of special benefits not related to the corporation.

Apart from this, the general meeting may resolve, or a defined minority of shareholders may demand, that claims for damages have to be asserted by the corporation against former board members based on their negligent management of the corporation. A shareholder of a limited liability company may under certain circumstances bring a claim for a loss suffered by the company against other shareholders, managing directors or members of the supervisory board ( actio pro socio ). Law stated - 19 May 2022

Requirements for successful claims For each of the most common claims, what must shareholders in your jurisdiction show to bring a successful suit?

In the case of claims for rescission of shareholder resolutions, it is necessary to distinguish whether the shareholder attended the general meeting or not. If the shareholder attended the general meeting it must have filed an objection to the respective resolution in the minutes to be entitled to challenge the resolution. If the shareholder did not attend the general meeting, although it was entitled to do so, the shareholder must prove that it was not permitted to the general

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meeting, the general meeting was inadequately convened or the subject matter of the respective resolution was inadequately announced. In addition, it is always necessary to prove the status as a shareholder, which must be maintained throughout the proceedings of first instance. In general, in the case of claims for fair compensation with regard to shareholders exiting the corporation due to certain transactions, the facts of the dispute are investigated ex officio by the court. In the case of claims for compensation against members of the management board or the supervisory board, shareholders as claimants have to allege and prove all facts supporting the claim. Thus, shareholders have to prove that the damage was incurred due to the unlawful and negligent conduct of the respective defendant. The burden of proof with regard to culpability shifts to the management board, the supervisory board and individual members thereof as defendants, if statutory law aiming to protect shareholders was violated. In the case of a claim due to negligent granting of special benefits not related to the corporation, the shareholder as claimant has to provide proof of all facts giving rise to the claim, including culpability. Neither a shift in the burden of proof nor a less onerous burden of proof applies. Law stated - 19 May 2022

Publicly traded or privately held corporations Do the types of claims that shareholders can bring differ depending on whether the corporations involved in the M&A transaction are publicly traded or privately held?

In general, the duties of a board member and thus claims for compensation in the case of violation of such duties differ on whether the corporation is publicly traded or privately held. For example, certain information and disclosure obligations (eg, ad hoc announcements), the prohibition of insider dealings and market manipulation only apply to publicly traded corporations. Furthermore, the management board of a publicly traded corporation is subject to certain additional obligations that qualify as statutory law aiming to protect shareholders. Any violation of such obligation results in the direct liability of the board member to the shareholders harmed. Law stated - 19 May 2022

Form of transaction Do the types of claims that shareholders can bring differ depending on the form of the transaction?

Shareholders may mainly assert claims for damages. A different type of claim and special proceedings apply if the shareholder exiting the corporation due to a merger, spin-off, legal transformation or squeeze-out asserts a claim to review the appropriateness of the cash compensation. Law stated - 19 May 2022

Negotiated or hostile transaction Do the types of claims differ depending on whether the transaction involves a negotiated transaction versus a hostile or unsolicited offer?

Due to the fact that certain provisions of the Austrian Takeover Act constitute statutory law intended to protect shareholders of the target company (eg, defensive measures taken by the managing board to prevent the takeover bid),

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shareholders may in particular assert claims for injunction against these defensive measures or claims for damages. Law stated - 19 May 2022

Party suffering loss Do the types of claims differ depending on whether the loss is suffered by the corporation or by the shareholder?

As noted above, typically, the conduct of board members primarily damages the corporation. In this case, the board members are only liable towards the corporation itself, whereas shareholders are not entitled to raise any direct tortious claims against the culpable board member for disadvantages indirectly accruing to the shareholders (eg, reduction in the value of the shares). However, the general meeting may resolve, or a minority shareholder may demand, that claims for compensation have to be asserted by the corporation. Only if the shareholder directly suffers a loss or the board members’ conduct violates statutory law aiming to protect shareholders may the shareholder assert claims itself or herself. Law stated - 19 May 2022

COLLECTIVE AND DERIVATION LITIGATION Class or collective actions Where a loss is suffered directly by individual shareholders in connection with M&A transactions, may they pursue claims on behalf of other similarly situated shareholders?

According to the Austrian model of class or collective actions, entitled persons may assign their claims to an association (or other legal entity) that asserts the individual claims collectively in one proceeding. Additionally, claims for reviewing the appropriateness of the cash compensation in the course of certain transactions (eg, merger, spin-off, legal transformation or squeeze-out) may be initiated by only one shareholder, whereas the court ruling awarding a higher cash compensation generally inures to the benefit of all shareholders who have exited the corporation due to the transaction ( erga omnes ). Law stated - 19 May 2022

Derivative litigation Where a loss is suffered by the corporation in connection with an M&A transaction, can shareholders bring derivative litigation on behalf or in the name of the corporation?

A shareholder of a limited liability company may assert a claim on behalf of the company for a loss suffered by the company against other shareholders, managing directors or members of the supervisory board. To do so, the shareholder must hold at least 10 per cent of the share capital or shares in a minimal amount of €700,000 or a smaller amount if specified in the articles of association. Furthermore, the pursuit of these claims on behalf of the company must have been rejected by a shareholders’ resolution or a motion to this effect has not been brought to a resolution although it had been notified in due time. The claim must be filed within one year of the shareholders’ resolution being passed or the resolution was prevented from being passed. As long as proceedings are pending, the minority shareholder as claimant cannot sell its shares without the approval of the company. Upon application of the defendant, the minority shareholder as claimant can be required to provide security to the defendant, which is determined at the discretion of the court. The minority shareholder as claimant may also be held liable for damages incurred by the

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defendant if the claim turns out to be unfounded and the claimant acted in bad faith or grossly negligent in filing the claim. In the case of a joint stock corporation a defined minority of shareholders may demand, or the general meeting may resolve, that claims for compensation against the management board, the supervisory board and individual members thereof may be asserted by the corporation. In general, a minority of 10 per cent of the share capital (in the case of an audit report 5 per cent of the share capital) may demand the assertion of a claim, provided the claim asserted is not manifestly unfounded. Law stated - 19 May 2022

INTERIM RELIEF AND EARLY DISMISSAL Injunctive or other interim relief What are the bases for a court to award injunctive or other interim relief to prevent the closing of an M&A transaction? May courts in your jurisdiction enjoin M&A transactions or modify deal terms?

Every preliminary injunction requires the meeting of a certain level of proof ( Bescheinigung ) of a claim and a danger of irreparable damage (mere pecuniary losses are generally always compensable). However, injunctions cannot be issued if they lead to an irreversible result. The court may, at its discretion, make the preliminary injunction conditional upon the deposit of a security, if the applicant has not sufficiently certified the alleged claim and the threat of disadvantages to the opponent from the preliminary injunction can be compensated by payment of damages. The certification of a danger cannot be replaced by a security deposit. The injunction is intended to protect the present legal situation that would be associated with imminent irreparable damage. Thus, preliminary injunctions could be used to block the closing of M&A transactions (eg, in the case of a violation of the articles of association or – which is still controversial – in the case of an encroachment on the competences of the general meeting). The courts may also modify deal terms of M&A transactions, depending on the claim asserted by interpreting the contract according to the parties’ intent, eventually, for example, leading to a reduction of the agreed purchase price. Law stated - 19 May 2022

Early dismissal of shareholder complaint May defendants seek early dismissal of a shareholder complaint prior to disclosure or discovery?

Austrian law does not provide for the concept of early dismissal of a shareholder complaint. However, a claim may be dismissed by the court a limine due to lack of jurisdiction resulting in the claim not becoming disclosed. Law stated - 19 May 2022

ADVISERS AND COUNTERPARTIES Claims against third-party advisers Can shareholders bring claims against third-party advisers that assist in M&A transactions?

External auditors are typically appointed by the corporation in the course of M&A transaction to provide opinions (eg, fairness opinion) or reports required by law (eg, audit report of the spin-off auditor). Even if auditors are appointed by

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the corporation, they are responsible and liable to all participating corporations and their shareholders for errors and omissions of the audit report. Every shareholder who suffers a loss due to a negligently incorrect audit report is entitled to claim compensation from the auditor. Austrian statutory law stipulates certain maximum amounts for compensation claims, depending on the size of corporation being audited. This applies to both statutory (eg, audit report of the spinoff auditor) and voluntary (eg, fairness opinion) reports. Law stated - 19 May 2022

Claims against counterparties Can shareholders in one of the parties bring claims against the counterparties to M&A transactions?

If a shareholder suffers a loss, it may claim compensation based on tort. In addition, the Austrian Stock Corporation Act provides for a special compensation provision in favour of shareholders where damage is caused by an intentional informal influence on members of the management or supervisory board to obtain a special benefit not related to the corporation. The purpose of this liability standard is to protect the assets of the corporation and the ownership of the shareholders from damaging informal influence exercised for pursuing external special interests. An offender may be any natural or legal person capable of committing an offence, for example, also the counterparty to an M&A transaction. For example, a loss occurs when the board members are determined to have entered into a contract that is unfavourable to the corporation. Shareholders may independently assert a claim if a direct damage occurs; indirect damages in the form of a reduction in the value of shares due to the damage to the corporation is not sufficient. Law stated - 19 May 2022

LIMITATIONS ON CLAIMS Limitations of liability in corporation's constitution documents What impact do the corporation’s constituting documents have on the extent board members or executives can be held liable in connection with M&A transactions?

Board members’ liability is mandatory and cannot be limited or reduced by articles of association or any other constituting documents. However, specific responsibilities may be assigned to individual board members (eg, with bylaws generally issued by the supervisory board), which may result in a reduction of liability for matters that fall within the scope of responsibilities assigned to other board members. Each board member bears full responsibility for business areas allocated to him or her. This departmental responsibility of an individual board member, however, does not relieve other board members of all responsibility, but reduces their duty to one of a monitoring nature over the departmental management of their colleagues. Certain core areas of management constitute a minimum responsibility of the entire management board and can therefore not be assigned to individual board members. These core areas include strategic management, fundamental questions of business policy, duty to maintain an accounting system and implement an internal control system, duty to report to the supervisory board, preparation of the financial statements and other mandatory reports and the duty to file for insolvency. Law stated - 19 May 2022

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Statutory or regulatory limitations on claims Are there any statutory or regulatory provisions in your jurisdiction that limit shareholders’ ability to bring claims against directors and officers in connection with M&A transactions?

If an M&A transaction is covered by a lawful shareholders’ resolution, the liability of the management board towards the company ceases to exist. Further, under Austrian statutory law, liability claims against board members are subject to a limitation period of five years, unless the board member was acting in violation of criminal law. In such case, the limitation period, depending on the misconduct, is in general extended to up to 30 years. However, shareholders typically cannot directly assert any liability claims against board members. Rather, a defined minority of shareholders can merely assert liability claims against board members. Austrian statutory law incorporates the business judgement rule, which creates a safe harbour from liability. A board member acts within the business judgement rule when a business decision is made on the basis of appropriate information is free of conflicts of interest and is in the best interest of the company. This safe harbour from liability applies even if the business decision later turns out to have been wrong. Law stated - 19 May 2022

Common law limitations on claims Are there common law rules that impair shareholders’ ability to bring claims against board members or executives in connection with M&A transactions?

In general, Austria, as a civil law jurisdiction, does not impair the shareholders’ ability to bring claims against board members. In particular, the business judgement rule that was previously applied in case law decisions by Austrian courts was implemented into Austrian statutory law in 2016. Law stated - 19 May 2022

STANDARD OF LIABILITY General standard What is the standard for determining whether a board member or executive may be held liable to shareholders in connection with an M&A transaction?

In general, Austrian law provides for an objective standard, namely the diligence of a prudent businessperson. A board member usually is expected to have the skills and knowledge in the relevant business sector and according to the size of the company. The board members owe an effort that is appropriate to the industry, size and situation of the company, whereby the situational adequacy of the behaviour in transactions must also take into consideration the transaction value. The objective standard is specified by the business judgement rule, which stipulates that a business decision made on the basis of appropriate information, free of conflicts of interest and in the best interest of the company does not lead to a violation of the objective standard even if the business decision later turns out to have been wrong. If such business standards are complied with, board members are granted a large degree of discretion. In addition to the violation of the objective standard, any liability requires that the board member act negligently or intentionally. Law stated - 19 May 2022

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Type of transaction Does the standard vary depending on the type of transaction at issue?

No, the standard itself does not vary. In the case of complex M&A transactions, however, it is advisable for the management board to obtain certain opinions (eg, fairness opinion, market research) from external qualified specialists (eg, audit firms, investment banks, corporate finance consultancies) to be compliant with the business judgement rule. Against this background, obtaining expert opinions as a means of obtaining appropriate information within the business judgement rule context is strongly recommended for the management board, as this leads to a reduction of the liability risk of board members towards the corporation. Law stated - 19 May 2022

Type of consideration Does the standard vary depending on the type of consideration being paid to the seller’s shareholders?

No, there is no direct link between the applicable standard and the type of consideration paid to the seller’s shareholders. Law stated - 19 May 2022

Potential conflicts of interest Does the standard vary if one or more directors or officers have potential conflicts of interest in connection with an M&A transaction?

The standard includes the business judgement rule, which stipulates that a business decision has to be made on the basis of appropriate information and free of conflicts of interest and in the best interest of the company. Thus, potential conflicts of interest of one or more board members in connection with an M&A transaction must be disclosed. If not, the privilege of the business judgement rule will not apply. Law stated - 19 May 2022

Controlling shareholders Does the standard vary if a controlling shareholder is a party to the transaction or is receiving consideration in connection with the transaction that is not shared rateably with all shareholders?

The standard itself does not vary. If a shareholder is party to a transaction or is receiving consideration in connection with the transaction, another issue arises: any benefit granted to a shareholder or a shareholder’s affiliate must comply with the very stringent Austrian capital maintenance rules. The purpose of the capital maintenance rules is to protect all assets of the corporation in favour of the corporations’ creditors. As such, a transaction that provides any benefit to a shareholder or a shareholder’s affiliate must be concluded at arm’s-length terms. Basically, any transaction between the corporation and its shareholder is suspicious unless it involves a distribution of profits or bulk transactions in the corporation’s line of business. If capital maintenance rules are violated, the transaction is null and void and benefits contributed to the shareholder have to be reclaimed by the company. In case a shareholder receives consideration that is not shared ratably with all shareholders, an additional issue arises: pursuant to statutory law all shareholders must

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be treated equally. The principle of equal treatment of shareholders may thus be violated. A violation of capital maintenance rules and the principle of equal treatment of shareholders may also result in the liability of board members. Law stated - 19 May 2022

INDEMNITIES Legal restrictions on indemnities Does your jurisdiction impose legal restrictions on a company’s ability to indemnify, or advance the legal fees of, its officers and directors named as defendants?

In general, Austrian law does not prohibit a corporation from indemnifying or advancing legal fees of members of the management or supervisory board named as defendants in civil proceedings. If a board member is confronted with proceedings under criminal, administrative or civil law in connection with his or her professional activities for the corporation, he or she may have a claim against the corporation for reimbursement of the costs associated with appropriate legal representation and defence. Moreover, the board member may also have a claim to appropriate advance payment of these expenses. However, if the board member is convicted of a criminal or administrative offence, the amounts advanced must be recovered by the company. Law stated - 19 May 2022

M&A CLAUSES AND TERMS Challenges to particular terms Can shareholders challenge particular clauses or terms in M&A transaction documents?

Shareholders may indirectly challenge particular clauses or terms in M&A transaction documents by asserting a claim for rescission of the shareholder resolution approving the M&A transaction, provided this M&A transaction was brought before the shareholders' meeting by the management board for resolution or requires such resolution by law (eg, in the case of a merger or a demerger). In addition, shareholders (as well as anyone else) can claim that an M&A transaction is null and void if it violates capital maintenance rules. Law stated - 19 May 2022

PRE-LITIGATION TOOLS AND PROCEDURE IN M&A LITIGATION Shareholder vote What impact does a shareholder vote have on M&A litigation in your jurisdiction?

In the case of a limited liability company, shareholders’ resolutions are binding for managing directors. The shareholders may intervene broadly in management matters. Managing directors of a limited liability company are bound by the shareholders’ resolution regarding the M&A transaction, unless such resolution violates the law. In contrast, board members of joint stock corporations are not subject to instructions of shareholders. Should issues related to management matters of the corporation be brought before the general meeting of the joint stock corporation by the board members, the respective shareholder resolutions are binding for the management board. In certain M&A transactions (eg, merger, spin-off, legal transformation, sale of the entire assets) a shareholders resolution approving the transaction is mandatory for the effectiveness of the transaction.

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Law stated - 19 May 2022

Insurance What role does directors’ and officers’ insurance play in shareholder litigation arising from M&A transactions?

Many Austrian corporations, in particular joint stock corporations, have directors' and officers' insurance for their active management and supervisory board members for slight negligence. The directors' and officers' insurance also covers disputes in which members of the management or supervisory board are held liable by the corporation. Depending on the insurance policy, claims of shareholders arising from M&A transactions may also be covered by such insurance. Law stated - 19 May 2022

Burden of proof Who has the burden of proof in an M&A litigation – the shareholders or the board members and officers? Does the burden ever shift?

In general, the claimant has to allege and provide proof of all facts supporting the claim. Thus, the corporation as claimant (based on a resolution of the majority of the shareholders or on the demand of a certain minority of shareholders) asserting a claim for damages against a board member bears the burden of proof that the corporation has suffered damage, which was caused by the misconduct of the board member. Furthermore, the claimant also has to present facts, which indicate a violation of the board members’ duty obligations. If the facts of the case at least indicate a violation of the board members’ obligations, it is incumbent on the board member to provide proof of exoneration that he or she fulfilled his or her duties. The board member may invoke the business judgement rule, but must prove that the requirements have been met. Regarding the negligence of the board member, a shift in the burden of proof applies. In the case of tortious claims against a board member directly asserted by shareholders, the claimants have to allege and prove that the damage was incurred due to the unlawful and negligent conduct of the respective defendant. If statutory law aiming to protect shareholders was violated, the burden of proof with regard to the culpability shifts to the relevant members of the management board and/or the supervisory board. Law stated - 19 May 2022

Pre-litigation tools Are there pre-litigation tools that enable shareholders to investigate potential claims against board members or executives?

Shareholders of a limited liability company have unlimited information rights towards the company. The information right covers all affairs of the company, including all legal and economic circumstances within the company (including the right to inspect books and records) and towards third parties. These information rights also apply outside the general meeting. The information right is limited where it is raised in an abusive manner (or is intended to serve noncorporate purposes) or if the shareholder seeks to obtain business information that it uses to compete with the company. In contrast, the information right of shareholders of a joint stock company are much more limited. Although they have the right to information regarding all affairs of the corporation, such right may only be exercised at a shareholders'

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meeting and is limited to the necessary assessment of an item on the agenda of the respective general meeting. The obligation to provide information at the general meeting of a parent company at which the consolidated financial statements and the group management report are presented also applies to the situation of the group and the companies included in the consolidated financial statements. Still, the management board may refuse to provide information under certain circumstances (eg, criminal or administrative liability if the information is disclosed, statutory confidentiality obligations and significant imminent harm to the company). Furthermore, the majority of the shareholders may resolve to appoint a special auditor. A minority shareholder with a minimum stake of 10 per cent of the share capital (or in the case of a limited liability company shares in a minimal amount of €700,000 as well) may file a court application for the appointment of a special auditor, provided the general meeting rejects a motion to appoint such special auditor. The purpose of special audits is to examine the correctness of certain matters in the corporation by external auditors acting on their own responsibility to discover any breaches of duty by board members. In the case of a limited liability company, the subject matter of the audit is limited to the most recent annual financial statements. Law stated - 19 May 2022

Forum Are there jurisdictional or other rules limiting where shareholders can bring M&A litigation?

The question of whether a court has jurisdiction is governed by Austrian law and Regulation (EU) No. 1215/2012 (Brussels Ia Regulation). If a claim is brought against the company (eg, claim for rescission of shareholders resolutions approving M&A transactions), both Austrian law and the Brussels Ia Regulation stipulate that the court where the company has its registered seat shall have exclusive jurisdiction. A choice-of-court agreement is invalid. Where the action is brought against a board member, the court where the board member has its domicile or habitual residence (general defendant’s domicile rule) and in addition the court where the corporation has its registered seat (elective place of jurisdiction) have jurisdiction. The parties may also enter into a choice-of-court or arbitration agreement (eg, articles of association or employment contract with the board member). Law stated - 19 May 2022

Expedited proceedings and discovery Does your jurisdiction permit expedited proceedings and discovery in M&A litigation? What are the most common discovery issues that arise?

In general, Austrian law permits preliminary injunction proceedings. Austrian law does not allow discovery as understood in common law jurisdictions. Austrian ‘discovery’ is limited to exercising information and special audit rights existing under law. Preliminary injunctions require the certification ( Bescheinigung ) of a claim and a danger of irreparable damage (pecuniary losses are generally always compensable). However, injunctions cannot be issued if they lead to an irreversible result. The injunction is intended to protect the present legal situation that would be associated with imminent irreparable damage. Discovery proceedings with regard to information rights, including the right to inspect the books and records, may be asserted by the shareholder of a limited liability company in non-contentious proceedings. If an answer to the question of a shareholder of a joint-stock corporation was refused at the general meeting, the shareholder may enforce his request for information in non-contentious proceedings. Furthermore, requests for information may also be enforced by courts imposing penalties.

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Discovery proceedings with regard to the appointment of a special auditor to review certain suspicious conduct of the management board, a minority shareholder with a minimum stake of 10 per cent of the share capital (or in the case of a limited liability company shares in a minimal amount of €700,000 as well) may file a court application for appointment of a special auditor, provided the general meeting rejects a motion to appoint such special auditors. Law stated - 19 May 2022

DAMAGES AND SETTLEMENTS Damages How are damages calculated in M&A litigation in your jurisdiction?

Damages

are

determined

accordance

with

the

principles

civil

law

called

‘difference

calculation’ ( Differenzrechnung ), which also apply to claims for compensation in M&A litigation. Thus, the damage is calculated by comparing the financial situation of the harmed party (eg, the corporation) as a result of the event giving rise to liability with the financial situation in which it would have been without such event. Usually, a court-appointed expert calculates the damage. The parties have the opportunity to orally question the court-appointed expert, which may be supported by private expert opinions provided by the parties. Damages may also be estimated at the discretion of the court (eg, difficulties of gathering evidence). Law stated - 19 May 2022

Settlements What are the special issues in your jurisdiction with respect to settling shareholder M&A litigation?

In general, there are no special legal issues with respect to settling shareholder M&A litigation. If, however, proceedings are financed by litigation funding specialists, the latter is usually granted a contractual right of approval with regard to settling the proceedings. When a claim for compensation is asserted against a board member, the settlement of the dispute is only permitted and effective if five years have passed since the claim arose, the general meeting approved the settlement and no minority of 20 per cent of the share capital objects to the settlement. In addition, stringent capital maintenance rules apply in Austria. As such, any benefit granted to a shareholder or a shareholder’s affiliate must be at arm’s-length terms. If capital maintenance rules are violated, the transaction is null and void and benefits contributed to the shareholder have to be reclaimed by the company. The corporation may not waive such repayment claims against the shareholder or a shareholder’s affiliate. The settlement of these claims is only permitted under certain circumstances (fulfilment of the rules for capital contribution). Law stated - 19 May 2022

THIRD PARTIES Third parties preventing transactions Can third parties bring litigation to break up or stop agreed M&A transactions prior to closing?

In general, Austrian law does not permit third parties to bring a claim to break up or stop an agreed M&A transaction prior to closing. Law stated - 19 May 2022

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Third parties supporting transactions Can third parties in your jurisdiction use litigation to force or pressure corporations to enter into M&A transactions?

In principle, the Austrian legal system is very reserved with regard to third parties interfering in affairs of others. Thus, third parties may in general not use litigation to force or pressure corporations to enter into M&A transactions. Law stated - 19 May 2022

UNSOLICITED OR UNWANTED PROPOSALS Directors' duties What are the duties and responsibilities of directors in your jurisdiction when the corporation receives an unsolicited or unwanted proposal to enter into an M&A transaction?

Pursuant to the Austrian Takeover Act the management board must act in the interests of all shareholders or other holders of equity securities as well as in the interests of employees, creditors and the public after the corporation receives a takeover bid (board neutrality rule). However, the corporate welfare pursuant to the Austrian Stock Corporation Act may not be taken into account during the bid phase. Further, the management as well as the supervisory board of the target are prohibited from taking any measures that could prevent the success of a takeover bid. This means that the management (and supervisory) board shall be prohibited from providing information with regard to the bid that is inaccurate, incorrect, incomplete or misleading and which is likely to deprive the shareholder of making a free and informed decision. In general, the management board requires the approval of the general meeting for all measures that could prevent the success of a specific takeover bid during the bid phase (prohibition on frustrating action). If the management board has already adopted measures before the bid phase, the measures may be carried out, provided the implementation has already begun. Statutory exceptions to the prohibition on frustrating action are the search for a white knight and the submission of an opinion by the management and supervisory board. In addition, the management and supervisory board must prepare a reasoned statement on the takeover bid without undue delay. The reasoned statement must include an assessment of whether the consideration offered and the other contents of the takeover bid adequately take into account the interests of all shareholders and other holders of equity securities and what effect the takeover bid is likely to have on the target, in particular employees, creditors and the public interest. Law stated - 19 May 2022

COUNTERPARTIES' CLAIMS Common types of claim Shareholders aside, what are the most common types of claims asserted by and against counterparties to an M&A transaction?

The most common types of claims asserted by and against counterparties to an M&A transaction are claims for breach of contract, breach of representations and warranties, purchase price adjustment disputes and earn-out claims. Law stated - 19 May 2022

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Lexology GTDT - M&A Litigation

Differences from litigation brought by shareholders How does litigation between the parties to an M&A transaction differ from litigation brought by shareholders?

Claims by parties to an M&A transaction differ from claims brought by shareholders in so far as claims by parties to an M&A transaction primarily serve to enforce breaches of contractual obligations (eg breach of contract, breach of representations and warranties, purchase price adjustments, earn-out claims, claims for agreement by the counterparty to the trustee’s disbursement of the escrow amount). Typically, the seller is the defendant and the buyer is the claimant. On the other hand, in litigation brought by shareholders under corporate law (eg, claim for rescission of shareholders resolutions), the defendant is typically the corporation. Law stated - 19 May 2022

UPDATES AND TRENDS Recent developments What are the most current trends and developments in M&A litigation in your jurisdiction?

Currently, court proceedings are pending in Austria to clarify whether individual shareholders of a joint-stock corporation are entitled to bring individual claims against the corporation in the context of infringements of their membership rights (eg, interference of participation in decisions reserved for the general meeting, infringement of subscription rights, violation of the principle of equal treatment of all shareholders). So far, the Austrian Supreme Court has not explicitly ruled on whether the Holzmüller -doctrine, requiring a shareholder resolution where substantially all assets are transferred to a subsidiary, which has already been in place in Germany for decades, also applies under Austrian corporate law. Furthermore, there has been a recent trend in M&A transactions to provide for arbitration clauses. Especially in the context of cross-border transactions, arbitration clauses offer the advantage that arbitral awards may be recognised and enforced under the New York Convention and arbitral tribunals generally are required to comply with overriding mandatory rules to a lesser extent. Law stated - 19 May 2022

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Lexology GTDT - M&A Litigation

Jurisdictions Austria

Fellner Wratzfeld & Partner

Belgium

Ashurst LLP

China

Jincheng Tongda & Neal

Japan

Mori Hamada & Matsumoto

Mexico

Creel Abogados

Nigeria

G Elias

Singapore

Sim Chong LLC

South Korea

Kim & Chang

Sweden

Advokatfirman Hammarskiöld

Switzerland

Lenz & Staehelin

Taiwan

Lee and Li Attorneys at Law

United Kingdom

Baker McKenzie

USA

Kirkland & Ellis LLP

Zambia

Dentons Eric Silwamba Jalasi & Linyama

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Lexo­lo­gy: M&A Litigation - Aus­tria

Lexology: M&A Litigation - Austria