For many limited liability companies (GmbHs) and stock corporations (AGs), the sale of a property is more than just a real estate transaction — particularly in the case of project companies, it may effectively amount to the transfer of the company’s entire assets. This is precisely where a risk arises that is easily overlooked in practice: if the required approval of the shareholders or stockholders is not properly obtained, or if the transfer of the property does not comply with the required formal requirements, the transaction may, in the worst-case scenario, be invalid. Unlike the sale of an entire business, real estate transactions are often handled without recognizing that corporate law expertise may also be essential.
The Basic Rules
Managing directors of a GmbH must generally obtain the approval of the shareholders’ meeting before disposing of substantial parts of the company’s assets. The reason is simple: such a sale goes beyond the scope of ordinary business management.
In most cases, a simple majority of the votes cast is sufficient for approval by the shareholders’ meeting. If this approval is not obtained, the transaction will generally still remain valid vis-à-vis third parties. However, the company may have claims for damages against the managing director.
The requirements are stricter if the GmbH is already in liquidation. The liquidator is required to realize the company’s assets in the best possible way. Mostly, it is economically sensible to sell the business or substantial assets as a whole rather than disposing of individual assets separately. Such an overall realization during liquidation requires a resolution of the shareholders’ meeting passed by a three-quarter majority of the votes cast. Importantly, this approval is not merely an internal safeguard. Without such approval, the transaction is not legally effective.
Application of the Stricter Rules of Stock Corporation Law
What is less well known is that similar considerations may also become relevant outside the context of liquidation. This applies particularly where the transaction concerns not just any asset, but effectively the entirety of the company’s assets or a substantial part thereof.
The starting point is Section 237 of the Austrian Stock Corporation Act (AktG). This provision stipulates that a stock corporation may transfer all of its assets only on the basis of a resolution of the general meeting. Such a resolution requires a majority of three quarters of the represented share capital. In addition, the agreement itself must be executed in the form of a notarial deed.
If these requirements are not complied with, the transfer of assets is invalid. In principle, any party involved may demand rescission of the transaction.
In 2018, the Austrian Supreme Court held that Section 237 AktG should also apply analogously to GmbHs. Where a measure interferes so significantly with the company’s structure, shareholders of a GmbH should not be materially less protected than shareholders of an AG.
This decision has created considerable uncertainty in practice. Many questions remain unresolved to this day, including:
What exact majority is required for the approval resolution? Might unanimous shareholder consent even be necessary?
In what form must the shareholder resolution be adopted?
Must the agreement itself also comply with a special formal requirement?
Are additional information and protection mechanisms required?
Particularly Sensitive in Real Estate Transactions
Mistakes in real estate transactions can have serious consequences. If a property has already been sold and registered in the land register, the underlying deed cannot always simply be replaced retroactively with a formally valid document. This creates substantial risks for companies, purchasers, financing banks, and advisors alike.
This issue affects not only future transactions but may also cast existing transactions in a new light. Subsequent remediation is often difficult.
Practical Recommendation
Until the legislator provides clear guidance and consistent case law develops, a cautious approach is advisable. In transactions where a GmbH transfers substantial assets, the stricter requirements should be examined as a precaution and — where appropriate — complied with.
This does not mean that every real estate transaction must be unnecessarily complicated. What matters is a careful analysis of the individual case: Which assets are being transferred? What is the shareholder structure? Can the consent of all shareholders reasonably be expected?
In the case of project companies, the sale of the entire asset base is often intended from the outset. An early analysis of the company’s corporate purpose can therefore be highly beneficial. Appropriate provisions can already be included in the articles of association at the formation stage in order to provide greater legal certainty for future transactions.
It is precisely at this intersection that it becomes clear that real estate transactions are not merely matters of real estate law. If the property being sold constitutes a significant asset of the company, corporate law expertise is equally essential. ATLAS Attorneys at Law combines both areas of expertise and supports companies in implementing such transactions in a legally secure and efficient manner, always with due regard to economic realities.
If you have any questions, please contact
Dimitar Anadoliyski
d.anadoliyski@atlas-law.at
+43 (0)1/29 27 389-12