AUSTRIA Law and Practice Contributed by: Clemens Hasenauer and Albert Birkner, CERHA HEMPEL
9.3 Common Defensive Measures If an intention to make an offer has not yet been announced, the management board may implement defensive measures to protect against hostile takeo - vers. These measures can include imposing a limit on voting rights or establishing long-term contracts with management board members, provided they comply with applicable Austrian stock corporation law. However, if the bidder’s intention to make an offer has already been announced, any defensive meas - ures taken will require approval from the shareholders’ meeting. Such measures may include, among other actions: • the inclusion of change-of-control clauses in cer - tain contracts; • the issuance of securities; • the purchase or disposal of own shares; • the disposal of important assets of the company; or • significant changes concerning the company’s finance structure. 9.4 Directors’ Duties The Takeover Act does not provide specific duties for administrative bodies when enacting defensive meas - ures. However, based on the rules of general Austrian stock corporation law, preventative measures taken by the management board must be in the interest of the target company. Should preventative measures be based on a resolution adopted by the shareholders’ meeting, such rules of general Austrian stock corpora - tion law do not apply. 9.5 Directors’ Ability to “Just Say No” A baseless rejection of a takeover offer is not permit - ted, as it is not in the company’s best interests in most cases. After the offer document has been published, the management board (and the supervisory board) of the target company must prepare a statement regard - ing the takeover offer, encompassing an economic assessment of the offer price and a recommendation to the target company’s shareholders. The manage - ment board is at liberty to explain in its statement why a takeover offer should not be accepted and it ought to underscore its position by putting forward a coun -
shareholders. In addition, shareholders may initiate special audits to review (potentially conflicted) busi - ness activities. However, in Austria, it is rare for con - flicts between shareholders and the managing board to end up in court. Conflicts among shareholders – which may arise from time to time – also do not often end up in court. Con - flicts, if any, between majority and minority sharehold - ers sometimes result in the legal challenge of majority resolutions filed by minority shareholders. Both friendly and hostile takeovers are allowed under the Austrian Takeover Act. Nonetheless, friendly take - overs prevail in practice. Either way, one of the general principles of the Act requires the management board and the supervisory board of the target company to remain neutral in the interests of the shareholders and not, in any way, prevent the shareholders from decid - ing on the proposed takeover or from seeking to influ - ence the decision of the shareholders. 9.2 Directors’ Use of Defensive Measures In the event of a takeover offer, the administrative bod - ies of the target company (management board and supervisory board) must not take any measures which would likely deprive shareholders of the opportunity to make a free and informed decision about the offer. No measures must be taken that frustrate the outcome of the offer from the moment the bidder’s intention to launch an offer becomes known until publication of the results of the offer and, in the event that the offer is a success, until implementation of the offer. However, measures that could frustrate the outcome of the (hostile) takeover are permissible if the target company’s shareholders’ meeting explicitly approves the measure in question. The Takeover Act mentions the issuance of securities that could prevent the bid - der from acquiring control of the target company. The target company’s administrative bodies are also free to seek out competing bidders (“white knights”) with - out obtaining the consent of the shareholders’ meet - ing. 9. Defensive Measures 9.1 Hostile Tender Offers
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