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LEXIKON
Settlement payments made to terminate an action to set aside a transaction do not violate the principle of equal treatment in a squeeze-out
In its decision of October 16, 2025, 6 Ob 183/24s (www.ris.bka.gv.at/jus), the Supreme Court had to address the question of whether a payment by the majority shareholder to a minority shareholder to terminate an action to set aside the squeeze-out resolution violates the principle of equal treatment under stock corporation law and thus gives rise to a claim for damages by other excluded shareholders. The Supreme Court (OGH) ruled that this was not the case, thereby providing important clarity for the practice of shareholder exclusions.
Facts of the Case and Pleadings
In 2007, the general meeting of B* AG, at the instigation of the majority shareholder, the defendant U* S.p.A., resolved to exclude the minority shareholders (squeeze-out) in exchange for an appropriate cash settlement. The plaintiff, K* Private Foundation, was one of these minority shareholders. While the plaintiff did not challenge the resolution, another “major shareholder” filed an action to set aside the squeeze-out resolution and initiated further proceedings. In order to terminate these proceedings and to be able to carry out the squeeze-out, the defendant entered into a settlement agreement with the “major shareholder,” which also provided for a lump-sum payment of EUR 14 million.
The plaintiff viewed this as a violation of the principle of equal treatment. She argued that the payment constituted a disguised additional payment to the cash settlement. If this amount had been allocated to all shares held by the “major shareholder,” the settlement per share would have been significantly higher. The plaintiff sought this difference as damages, arguing that, as a shareholder on an equal footing, she was entitled to the same severance payment.
Legal Basis and the Position of the Supreme Court
Under Section 2(1) of the Shareholder Exclusion Act (GesAusG), departing minority shareholders are entitled to a “reasonable” cash severance payment. In principle, all shareholders must be treated equally for equal shares. This duty of equal treatment derives from Section 2(1), last sentence, of the GesAusG, as well as from the majority shareholder’s fiduciary duty of loyalty.
To review the reasonableness of the cash settlement, the law provides for a separate non-contentious proceeding (Section 6(2) of the GesAusG), the outcome of which applies to all excluded shareholders (erga omnes). However, a challenge to the exclusion resolution itself cannot be based on the grounds that the settlement is too low.
The Supreme Court clarified that a payment made to terminate an action to set aside a resolution does not, per se, constitute a hidden additional payment toward a cash settlement. The decisive factor is the purpose of the payment. Agreeing on a sum of money to resolve unwanted legal proceedings serves an independent economic purpose that differs from compensation for the loss of a share in the company.
This distinction justifies differential treatment
The key point in the Supreme Court’s reasoning lies in the differing positions of the shareholders. A shareholder who files a lawsuit to challenge a resolution is in a position to at least delay the squeeze-out or, if successful, even prevent it entirely. This “hold-out” position, or the “nuisance value,” constitutes a legally relevant circumstance that distinguishes this shareholder from those who do not challenge the resolution.
The majority shareholder’s willingness to make a payment to remove this obstacle is therefore objectively justified. Equal treatment with the passive shareholders is not required with regard to the services the majority shareholder provides to resolve the proceedings that are burdensome for him. The Supreme Court thus follows prevailing legal doctrine, according to which payments in a settlement agreement for a challenge are irrelevant to the assessment of the adequacy of the cash settlement, as long as they are not explicitly promised as a supplementary payment to all shareholders.
Conclusion
The decision provides significant legal certainty. The Supreme Court confirms that the principle of equal treatment is not absolute. Objective reasons can justify different treatment of shareholders. Compensating for the “potential disruption” caused by a plaintiff shareholder through a settlement payment constitutes such an objective reason. Such payments are therefore not to be regarded as a disguised increase in the cash settlement that would trigger claims by other excluded shareholders. For major shareholders, this means that they can enter into targeted settlements to resolve litigation without having to fear a costly subsequent adjustment for all shareholders, provided that the purpose of the settlement is clearly documented and does not serve to circumvent the requirement of equal treatment.
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