Austria: breach of trust — a recent Supreme Court ruling has broad implications for stock corporations

Austria’s breach of trust provision found its way back into the limelight only recently via the prominent criminal proceedings against the former management of LIBRO AG, a leading non-food retailer. The case involved the trial of LIBRO AG’s former management for distributing a special dividend in the amount of ATS440m (£27m). In the following appellate proceedings, Austria’s Supreme Court took the chance to elaborate on whether the pay-out of a dividend to a 100 per cent parent company constitutes a breach of trust.

On 30 January 2014, the Austrian court made its eagerly awaited ruling on the charges against the former management of LIBRO AG (12 Os 117/12s). The charges related to the acquisition and subsequent going public of the former Librodisk Handelsaktiengesellschaft, later LIBRO AG. The purchase of the shares was executed in 1997 by means of a purchasing special-purpose vehicle (SPV) that was then merged downstream as a transferring company with LIBRO AG as absorbing company. The positive market value of the transferrable assets required for the merger was partially achieved by the distribution of a special dividend to the 100 per cent parent company in the amount of ATS440m.

In 2002, LIBRO AG had to file for the opening of insolvency proceedings. A criminal investigation was opened shortly afterwards and progressed slowly but steadily. In 2009, the Public Prosecutor’s office of Wiener Neustadt filed an indictment against the former management of LIBRO AG, claiming, among other things, that the distribution of the special dividend to the 100 per cent parent company had violated capital maintenance rules and constituted a breach of trust within the meaning of section 153 of the Austrian Criminal Code…

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