Can our Austrian GmbH directors approve a related-party contract without a shareholders’ vote?

A managing director is generally required to act at arm’s length and in the best interests of the company. This does not automatically preclude entering into agreements with related parties (such as a company owned by the director’s spouse), provided that the terms of the transaction are in line with market conditions and can withstand a proper arm’s-length test. If these duties are breached, the managing director may be held liable for damages. In addition, the transaction itself may be challenged, in particular if it violates Austria’s strict capital maintenance rules. From a tax perspective, such arrangements may also have consequences, in particular if the transaction is requalified as an undisclosed distribution of profit. However, the legal analysis will depend to a considerable extent on the provisions of the company’s articles of association and the exact structure of the transaction. I would be happy to review the details of your case and advise you on the available options.