Greindl & Köck

Liability in the case of a company takeover?

How is liability regulated in the case of a company takeover?

In principle, Section 38 para 1 of the Austrian Business Code (UGB) stipulates that anyone who continues a business acquired from a living person also takes over the business-related legal relationships of the seller. This includes contractual relationships, but also claims arising from tort, enrichment and agency without authority.Since section 38 does not require the use of the company name and because the definition of a company under the Austrian Business Code is broad, companies not registered in the commercial register are often also included.

The transferee of a property or company is also liable under Section 1409 para 1 of the Austrian Civil Code (ABGB). However, the provision restricts this liability to debts that he knew or at least should have known about at the time of the transfer. The liability also extends only up to the value of the assets or business taken over. If close relatives take over the business, they are obliged under para 2 to prove that they neither knew nor should have known of the debts at the time of the transfer.

What constitutes a transfer of a business?

In a recent decision, the Austrian Supreme Court (OGH) stated that there is a transfer of a business if, for example, the business office including equipment, warehouse, operating resources, good will and the customer base are transferred. The transfer of only the core of the business would be sufficient for this purpose.

The Supreme Court assessed the case of a decorator who changed from the commissioning company of her sole proprietor to the newly founded competing company of her spouse. Although the decorator had gained a good reputation with potential clients through her work, her contractual relations were only with the former company, while also using its warehouse. The court found that this was a mere change of the recipient of the work performance which, without any transfer of a warehouse or customer base, was not sufficient. Thus, it was decided that there was no transfer of business.