Directors’ Duties in Austria

>> Liabilities and Penalties in Austria

Exercise your responsibilities carefully as the penalties for failure to do so can be severe.

     You are personally liable to the company for damages caused by your acts or omissions in the exercising of business functions and breaches of legal or contractual duties. In general, you will not be liable where the act or omission resulted from a previous shareholders’ resolution.

     You will be liable when the company’s assets become insufficient for the satisfaction of its creditors. But it should be noted that (i) such liability will only exist where the insufficiency of assets resulted from a breach of the legal or contractual provisions aimed at protecting the company’s creditors; and (ii) no presumption of guilt exists in this ambit – in other words, you will only be liable if the company’s creditors are able to prove that you acted with intent or, at least, negligently.

     Separately, you are liable for the tax debts of the company, when the company’s funds are not sufficient to meet them. Such liability being joint and several between yourself and the other directors, in respect of tax debts arising.

     In general, you will only be individually liable for breaches of health, safety and environmental law should the breach give rise to criminal offenses, such as causing environmental damage or human disease.

     It should be noted that you can be criminally liable for offences such as theft, fraud or extortion, among others, and are civilly liable to the company, the shareholders and third parties for the damages caused by criminal conduct.

Either the breach of duty itself, or the imposition of one of the sanctions described above, may lead to disciplinary action being taken against you and/ or limitations upon you being able to continue in your role.

Civil action can be brought against you by third parties. This liability is, in general, based on tort law, ie if you breach a legal or contractual provision that is aimed to protect third parties (against the loss occurred, if any) and on particular liability provisions (such as Section 56 paragraph 3 and Section 64 paragraph 2 of the Act on Limited Liability Companies).

Moreover, civil action can be brought against you by shareholders, too. In general, this liability is based on the same principles as for third parties, however, there are specific provisions which aim to protection shareholders (eg Section 26 of the Act on Limited Liability Companies).

Limitation of liability

Directors cannot limit their responsibilities unless a general meeting grants them full and unqualified discharge from their personal liabilities. Where there are multiple directors their duties can be allocated to one director. This director is then internally liable for all violations of these duties, however the other directors are still legally required to monitor the actions of the responsible director and might still be held liable for the decisions of the delegated director.

Within certain limits, the company can indemnify a director of his liability. However, this it is not possible for criminal charges or liabilities resulting from a director’s gross negligence or wilful misconduct.

Delegation of authorities

The director can delegate duties to comply with administrative regulations (eg workers protection) to a special responsible representative. If these duties are delegated then the director is only liable under criminal law if he intentionally did not prevent the violation.

If the director delegates certain duties to a third party, eg a book keeper, the director might be held liable where there has been irresponsibility in selecting the third party and/or a lack of appropriate monitoring of such third party.

Directors and officers (“D&O”) insurance

Directors often obtain liability insurance  coverage and it is usual for the company to pay the premium.

Latest version updated 22nd March 2018

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