LEXIKON

The purpose of corporate law rights of first refusal is to enable shareholders to demand that a co-shareholder transfer their share in the company when certain conditions are met. A common condition is, for example, the insolvency of a shareholder. This is to prevent the insolvency administrator from selling the shares of an insolvent shareholder and an unknown third party from becoming a co-shareholder in the limited liability company.

The Higher Regional Court of Linz (August 27, 2019, 6 R 95/19m; www.ris.bka.gv.at/jus) has put a stop to this practice and ruled that the Insolvency Code precludes such a provision.

In the opinion of the Higher Regional Court of Linz, the right of seizure is legally a “request by the debtor” to which the insolvency administrator is not bound. As a result, when insolvency proceedings are opened against the assets of a shareholder, the share in the company falls into the insolvency estate, the insolvency administrator is not bound by the right of seizure, and the share in the company can be freely realized.