How to appoint and remove officers in an Austrian Österreich

To understand the role and appointment of corporate officers in Austrian subsidiaries, it is essential to first understand the types of legal business entities available under Austrian law.

Austrian law distinguishes between Corporate legal entities (Kapitalgesellschaften) and Non-corporate legal forms

Corporate Legal Entities

The principal corporate legal entities under Austrian law are:

• Limited Liability Company (GmbH – Gesellschaft mit beschränkter Haftung)
• Flexible Capital Company (FlexCo – Flexkapitalgesellschaft)
• Stock Corporation (AG – Aktiengesellschaft)

These corporate forms possess their own legal personality, with rights and obligations independent of their shareholders. They may acquire and hold assets, assume liabilities, and engage in legal proceedings. Importantly, only the company's assets are liable for its obligations; shareholders are not personally liable beyond their capital contribution.

GmbH – Limited Liability Company The GmbH is governed by the Austrian Limited Liability Companies Act (GmbHG) and is by far the most used corporate form in Austria. It is particularly well-suited for small to medium-sized enterprises where shareholder liability is to be limited and share transfers are infrequent. Foreign businesses often choose the GmbH as the legal structure for their Austrian subsidiaries. Shareholders are liable only up to the amount of their subscribed share capital.

FlexCo – Flexible Capital Company The FlexCo is a modern sub-type of the GmbH, introduced to facilitate entrepreneurial participation and flexibility. A key advantage is the simplified transfer of shares, which—unlike in a standard GmbH—does not require a notarial deed. Additionally, FlexCos may issue "enterprise value shares" (Unternehmenswertanteile) which carry profit participation rights without voting rights. These are primarily intended to incentivize employee participation and broader stakeholder involvement. However, no more than 25% of a FlexCo’s share capital may consist of such shares, a unique feature of this structure under Austrian law.

AG – Stock Corporation The AG is designed for larger enterprises with dispersed ownership and a need for frequent share transfers. It is governed by the Austrian Stock Corporation Act (AktG). The AG has a more formalized structure, including a mandatory Supervisory Board and Management Board.

Non-Corporate Legal Forms

Non-corporate forms under Austrian law include:

• General Partnership (OG – Offene Gesellschaft)
• Limited Partnership (KG – Kommanditgesellschaft)
• Sole Proprietorship (Einzelunternehmen)

General Partnership (OG) This form involves two or more individuals (or entities) operating a business under a shared name. While not a legal entity in the strict corporate sense, the OG may acquire rights, incur obligations, and participate in legal proceedings. Each partner has unlimited, personal liability for the partnership's obligations. The partnership is represented by its partners, and it is customary to conclude a partnership agreement to define rights and responsibilities.

Limited Partnership (KG) The KG consists of at least one general partner (Komplementär), who has unlimited liability, and one or more limited partners (Kommanditisten), whose liability is restricted to their capital contribution. Limited partners may not participate in the management of the business and do not have the authority to represent the partnership—this is a key distinction from the OG.

Sole Proprietorship (Einzelunternehmen) A business operated by a single natural person, who is personally and fully liable for all business obligations.

All corporate legal entities (GmbH, FlexCo, AG) must appoint at least one managing director/Member of the Management Board responsible for the company’s representation and administration. The managing officer in a GmbH or FlexCo is referred to as a managing director (Geschäftsführer), while in an AG, management is exercised collectively by the Management Board (Vorstand).

Limited Liability Company (GmbH) and Flexible Capital Company (FlexCo)

In both the GmbH and the FlexCo, Austrian company law requires the establishment of two mandatory corporate bodies:

• The Management Board
• The Shareholders’ Meeting (Gesellschafterversammlung/Generalversammlung)

Management Board The management board is one of the two required governing bodies and consists of one or more managing directors. These individuals are appointed by the shareholders and are responsible for the day-to-day operations of the company, including:

• Representing the company in all legal and business matters
• Concluding contracts
• Preparing annual financial statements and management reports

The managing directors may be either shareholders themselves or third parties appointed to the role. In a FlexCo, the same rules apply unless otherwise specified by the articles of association.

Shareholders' Meeting The shareholders’ meeting is the company’s supreme decision-making body. It holds the authority to:

• Appoint and remove managing directors and, where applicable, members of the supervisory board
• Approve the annual financial statements
• Decide on amendments to the articles of association
• Approve profit distribution
• Discharge the management and supervisory board from liability

Under § 36 GmbHG, the shareholders’ meeting must be convened by the managing directors at least once per financial year, unless other persons are authorized to do so. It must generally be held at the company’s registered seat, unless otherwise stipulated in the articles of association.

A shareholders’ meeting must also be convened without delay if circumstances indicate that half of the stated share capital has been lost, or whenever it is required in the interest of the company.

Supervisory Board (Aufsichtsrat) Unlike the AG, the supervisory board in a GmbH or FlexCo is generally optional, becoming mandatory only under specific conditions.

For a GmbH, a supervisory board must be established if any of the following thresholds are met:

• The share capital exceeds EUR 70,000 and
• The number of shareholders exceeds 50 or
• The average number of employees exceeds 300 annually

For a FlexCo, the supervisory board becomes mandatory if at least two of the following thresholds are met:

• Total assets exceed EUR 5 million
• Net annual turnover exceeds EUR 10 million
• The annual average number of employees exceeds 50

Thus, the employee-related threshold for requiring a supervisory board is significantly lower in a FlexCo than in a GmbH.

Prokurist (Holder of Statutory Commercial Power of Attorney) The Prokurist is not a mandatory corporate body but may be appointed to grant broad statutory authority under commercial law (Prokura). Unless otherwise stipulated in the articles of association, the managing directors are responsible for appointing or dismissing a Prokurist. If there are multiple managing directors, such decisions require unanimous consent.

The Prokurist may represent the company in judicial and extrajudicial matters, enter into contracts, hire or dismiss employees, and handle banking transactions within the ordinary course of business. Unless expressly limited, this authority extends to all act’s customary in the operation of a commercial business and has external legal effect.

Stock Corporation (AG – Aktiengesellschaft)

The Aktiengesellschaft (AG) requires the following mandatory corporate bodies:

• Management Board (Vorstand)
• Supervisory Board (Aufsichtsrat)
• Shareholders’ Meeting (Generalversammlung)

Management Board The management board is responsible for running the day-to-day operations of the company and is appointed and supervised by the supervisory board. Where multiple members are appointed, the supervisory board may designate one as Chairperson (Vorstandsvorsitzender), who carries out standard chairing duties and may hold a casting vote (Dirimierungsrecht) in the event of a tie, unless otherwise resolved.

In practice, many AGs designate a Spokesperson of the Board (Vorstandssprecher), primarily responsible for external communications and corporate disclosures.

Supervisory Board Every AG must establish a supervisory board, regardless of size. It is responsible for:

• Appointing, dismissing, and supervising the management board
• Approving certain transactions
• Representing the company in legal actions against management board members

The board must consist of at least three members and no more than twenty, subject to requirements under Austrian stock corporation law. Specific rules apply regarding meeting frequency (minimum of four per year), composition (gender balance, independence), and disqualifying criteria (e.g., criminal convictions or conflicts of interest). Members may not simultaneously serve on the management board or be subordinate employees of the company.

Before an election, nominees must disclose their professional qualifications, any current roles, and potential conflicts of interest. The shareholders’ meeting is tasked with ensuring a balanced and qualified composition, taking into account factors such as:

• Expertise relevant to the company’s business
• Gender diversity and age structure
• International representation (especially in listed companies)
• Legal integrity

Shareholders’ Meeting At least one ordinary shareholders’ meeting must be held annually. Additional extraordinary meetings may be convened as required. The meeting is chaired by a representative of the management board, and resolutions are generally adopted by simple majority, except where supermajority votes or notarial certification are required (e.g., amendments to the articles of association, capital measures).

Corporate Officers and Registration Requirements

Appointment and removal of corporate officers must be properly documented and registered with the Company Register (Firmenbuch). This registration must occur without undue delay and ensures that third parties are properly informed about who is authorized to legally represent the company. It is important to note that legal effectiveness of an appointment or removal under corporate law is independent of the registration; however, registration is required for publicity and third-party protection.

Company with Limited Liability (GmbH)

In an Austrian GmbH, managing directors (Geschäftsführer) may be appointed from among the shareholders or may be external individuals, referred to as external managing directors (Fremdgeschäftsführer). Appointments may be made for a limited or unlimited duration, depending on the contractual terms agreed upon.

There are three main methods by which managing directors may be appointed:

Shareholders’ Resolution: This is the most common method. The shareholders pass a resolution appointing the managing director(s), and the outcome must be registered in the Companies Register (Firmenbuch). Managing directors may be removed at any time by another shareholders’ resolution.

Provision in the Articles of Association: The articles of association may specify the appointment of one or more managing directors.

Court Appointment – Emergency Managing Director (Notgeschäftsführer): If the company lacks the legally required management and urgent action is necessary, the court may appoint a temporary managing director upon application by an interested party. This is a protective mechanism to ensure the company remains represented and functional. Such an application may be filed by any shareholder or even a third party with a legitimate interest. Once a permanent managing director is appointed, the emergency appointment automatically expires.

At least one managing director must be appointed, and in the case of a single-shareholder company (Ein-Personen-GmbH), that person must be a natural person with full legal capacity, meaning at least 18 years old.

The Supervisory Board, if present, may monitor and supervise the managing directors but may not issue binding instructions to them. However, it is responsible for notifying the Companies Register of any changes to the composition of the management or their powers of representation, submitting all supporting documentation.

Persons who have been convicted by an Austrian or foreign court to a custodial sentence exceeding six months for certain business-related criminal offences are prohibited from serving as managing directors for a minimum of three years following their final conviction. To prove eligibility, it is advisable to submit a criminal record certificate. Alternatively, an affidavit (eidesstattliche Erklärung) may be accepted by the competent commercial court.

Corporate Law vs. Labour Law It is important to distinguish between the appointment of a managing director under company law and any employment contract they may hold under labour law. Appointment as a managing director does not automatically create an employment relationship with the company, and vice versa.

Stock Corporation

In an Austrian AG, the founders must appoint the first supervisory board at the time of incorporation, prior to approval of the first annual financial statements. This appointment requires a notarial deed as mandated by law.

The Supervisory Board appoints the Management Board by resolution. Such resolution must satisfy a double majority:

• A majority of votes among supervisory board members
• Support from a majority of the capital representatives
• Additionally, the appointment requires written approval from the chairperson of the supervisory board for it to be valid.

Like in a GmbH, any changes to the composition or representation powers of the management board must be registered in the Companies Register, with appropriate supporting documentation.

Members of the management board are appointed for a maximum term of five years, although reappointment is permitted. This fixed-term limitation distinguishes the AG from the GmbH, where no statutory maximum term applies.

To be eligible for appointment, the individual must:

• Be a natural person aged at least 18
• Have full legal capacity
• Have a clean criminal record
• Not be a member of the supervisory board, as this would constitute a legal conflict of interest

Court Appointment: If no validly appointed management board exists and urgent representation is required, the commercial court must appoint a temporary officer upon application by a shareholder or other interested party, until a permanent solution is in place.

The appointment becomes effective upon

• acceptance by the managing director, and
• delivery of the appointment resolution, unless otherwise specified in that resolution.

Unlike in a GmbH, AG management board members are not subject to instructions from the supervisory board. However, significant transactions, as defined by statute or internal rules, require prior approval from the supervisory board.

Company with limited liability-GmbH

Under Austrian law (§ 16a GmbHG), it is possible for a corporate officer (managing director) of a GmbH to resign from office (“Rücktritt”). Such resignation may be declared either in writing or verbally, as no specific form is legally required.

• The resignation must either be declared during a shareholders' meeting—provided that the matter has been duly included on the agenda in advance—or communicated to all shareholders directly. Any co-managing directors, as well as the chairperson of the supervisory board (if one exists), must be notified accordingly.
• Resignation is permissible without the need to state or prove good cause; a managing director may resign at will.
• The resignation becomes effective 14 days after its declaration, unless the managing director resigns for good cause, in which case the resignation takes immediate effect.

Stock company-AG

As a general principle, even in the absence of an explicit statutory provision, a member of the management board of a stock corporation may resign from office by means of a unilateral declaration of intent, referred to in Austria as a “Rücktrittserklärung”, by analogy to the provisions governing limited liability companies (GmbHs) under the GmbHG.

• It is recommended that the resigning board member communicates the following to the Supervisory Board:
• the fact of the resignation; and
• the specific date and time at which the resignation is intended to take effect.

Such resignation constitutes a mere declaration requiring receipt by the company; it does not require acceptance to be valid."

Company with limited liability-GmbH

In an Austrian limited liability company (GmbH), the removal of a managing director is referred to as “Abberufung”.

By corporate resolution

This removal may be effected at any time by means of a corporate resolution, pursuant to § 16(1) GmbHG, in the same manner as the appointment—namely, by a simple majority of the shareholders present, and without the requirement of good cause.

Pursuant to § 39(5) GmbHG, the managing director is entitled to vote on a resolution concerning their own dismissal. Consequently, a managing director who also holds a sufficient number of voting rights may, in practice, block their own removal. In such cases, the remaining shareholders retain the option to seek removal for cause by initiating legal proceedings.

Special considerations apply where the managing director is also a shareholder (“Gesellschafter-Geschäftsführer”). It is possible to contractually restrict the right of removal to cases involving good cause. Where such a restriction exists and the managing director is removed without cause, they may challenge the resolution in court.

Furthermore, the managing director may be granted a contractual special right to hold office (“Sonderrecht auf Geschäftsführung”). In such cases, removal is only permissible with the express consent of the managing director. If consent is withheld, the shareholders may only effect removal by establishing good cause and pursuing judicial proceedings.

By a court decision

The removal of a managing director may also be affected by court decision, but only for good cause. This judicial route is primarily used in cases where a corporate resolution cannot be validly adopted—for example, because the managing director concerned opposes their own removal and holds the majority of the voting rights, or because they continue to enjoy the confidence of the majority despite legitimate concerns.

Judicial removal may also be pursued specifically against a shareholder-managing director who votes against their own dismissal. In such cases, other managing directors or shareholders may initiate court proceedings, provided they can demonstrate the existence of good cause.

This legal mechanism is also applicable in relation to an emergency managing director, who may be appointed by the court in urgent circumstances. As with their appointment, removal may also be affected by court decision, regardless of the underlying reason.

To safeguard the company’s interests pending a final decision, the court may issue interim measures prohibiting the managing director from continuing to manage and represent the company, if it can be demonstrated that the company would otherwise suffer irreparable harm.

According to Austrian case law, good cause for judicial removal generally includes serious breaches of duty, persistent inability to properly manage the business, physical or mental incapacity due to age or illness, well-founded suspicion of abuse of trust, or a lack of transparency towards the supervisory board. The court proceeding concludes with a binding judgment determining the managing director’s removal.

Additionally, Austrian law provides for the possibility of suspending a managing director from their duties (“Suspendierung”). This measure may be initiated following the same procedural rules as for removal and is typically used where there is a substantiated suspicion of good cause that must first be clarified by the shareholders. Suspension affects only the internal powers and duties of the managing director but does not terminate their external representative authority.

Stock company-AG

Termination of Officers in an AG

Under the Austrian Stock Corporation Act, the Supervisory Board has the authority to revoke a member of the Management Board’s powers only for an important reason. Such a decision must be made through a corporate resolution. This requires a double majority.

An ordinary dismissal, i.e., one without an important reason, is not permissible and is deemed ineffective.

Important Reasons for the Removal of an Officer:

The law outlines three specific important reasons for the removal of the member from the Management Board. However, it is also acknowledged in case law that the managing director may be dismissed for other reasons that are comparable or equivalent to the prescribed reasons in terms of their seriousness and nature. Generally, the following are considered important reasons for dismissal:

Serious Breach of Duty (“Grobe Pflichtsverletzung”) A serious breach of duty occurs when the Member of the Management Board commits, or is strongly suspected of committing, a criminal act, misuses company assets for personal gain, manipulates financial statements, fails to ensure transparency towards the Supervisory Board, engages in disproportionate speculative transactions, or violates confidentiality obligations.

A single gross breach of duty must prompt the Supervisory Board to act immediately and remove Member of the Management Board. Failure to do so is regarded as a tacit condonation of the breach, implying that the Supervisory Board has relinquished its right to remove the Member of the Management Board.

Inability to Properly Conduct Business (“Unfähigkeit zur Geschäftsführung“)

This reason arises when a Member of the Management Board is physically or psychologically unfit to perform their duties. The determination of whether this constitutes an important reason for dismissal is based on objective criteria and requires evidence of a continuous and ongoing inability to manage the business effectively. The Member of the Management Board’s failure must prevent them from acting in the best interest of the company and safeguarding the shareholders' interests.

Withdrawal of Trust by the Shareholders’ Meeting (“Entziehung des Vertrauens durch die Hauptversammlung”) If the Shareholders’ Meeting decides to withdraw trust from the Member of the Management Board, a corporate resolution is required. This withdrawal of trust can occur without any justification and is sufficient to cause the Member of the Management Board’s dismissal. It may be based on circumstances where the Member of the Management Board’s opinions significantly diverge from those of the shareholders, making it impossible to continue working with them. This dismissal is triggered by a decision made by the Shareholders' Meeting, and no further justification is necessary.

These important reasons must always be assessed on a case-by-case basis.

Procedure for Dismissal

For both GmbH and AG, there is generally no time limit within which the dismissal procedure must be initiated. However, it is advisable to act promptly. Delays may result in the court inferring that the important reasons for dismissal no longer render the officer’s continued management untenable.

After the dismissal decision, the removal of the officer must be recorded in the Company Book. This entry can be made either by the other shareholders who voted for the dismissal or by the removed officer. While the registration in the Company Book is mandatory, it is merely a declaratory act and does not affect the validity of the dismissal decision itself.

Company with limited liability-GmbH

From the Company’s Perspective

The arbitrary removal of a managing director (Geschäftsführer) may, in specific circumstances, be challenged by minority shareholders. If the dismissal is groundless or contrary to the company’s best interests, such resolution may be contested based on a breach of fiduciary duty. Furthermore, if the dismissal is objectively arbitrary and has resulted in actual damage to the company, the affected party may pursue claims for compensation.

From the Officer’s Perspective

The position of a managing director in a GmbH is not generally protected against arbitrary dismissal, as no important reason is required for removal. If the removed managing director holds a majority shareholding, they may attempt to oppose the resolution; however, in such cases, the company may seek a judicial ruling to confirm the dismissal.

Should the court find in favour of the managing director and determine that the dismissal lacked legal justification, the managing director may then initiate proceedings against the company for compensation, if damages are proven.

In the special case of a shareholder-managing director (Gesellschafter-Geschäftsführer), § 41 GmbHG allows for statutory limitation of the grounds for removal. If such a managing director is dismissed for cause and believes no valid reason exists, they may challenge the resolution in court and seek a declaratory judgment establishing the absence of an important reason. If the dismissal is found unlawful and damage has been suffered, compensation may be awarded.

Importantly, even where judicial proceedings are initiated to contest a dismissal, the managing director is generally not entitled to retain the office during the proceedings. The removal resolution takes effect immediately. Only a specific court ruling can suspend the dismissal retroactively (ex tunc).

To immediately suspend the effects of a dismissal resolution (Abberufungsbeschluss), the affected managing director must file a court application (Antrag) and demonstrate the urgency of the matter. The managing director must provide plausible evidence that the resolution may cause irreparable harm to him or the company. If the court finds the claim credible, it may issue a preliminary injunction (einstweilige Verfügung) suspending the effects of the dismissal with immediate effect.

Stock Corporation (AG)

From the Company’s Perspective

The legal framework largely mirrors that applicable to a GmbH. Even in cases of resignation, compensation claims may arise. A management board member (Vorstandsmitglied) in an AG may resign at any time, with or without an important reason. However, if the resignation lacks just cause and results in measurable harm to the company, the company may initiate legal action and seek compensation.

Upon resignation, the officer immediately forfeits their position on the Management Board and thereby also breaches their service contract due to labour law, which entails the obligation to fulfil the board's duties. Therefore, careful consideration is required as to the timing and justification for resignation.

To avoid potential liability, the officer must always consider simultaneously terminating the management service contract in an extraordinary manner, if appropriate.

From the Officer’s Perspective

In contrast to a GmbH, the removal of a board member in an AG is only permissible for important reasons, as stipulated under § 75 AktG. The procedure requires two steps:

• The Supervisory Board must determine the existence of an important reason.
• If such reason exists, it must then assess whether removal is appropriate under the circumstances.

Once the resolution is passed, the board member is immediately stripped of their position—irrespective of whether the removal was lawful or not. The removed officer must cease all duties and activities relating to their former role.

However, the officer may challenge the removal without delay by initiating judicial proceedings. The court will examine the merits of the case and issue a ruling:

• If the claim is upheld, the court will annul the removal resolution, and the officer may claim compensation due to the arbitrariness of the company’s decision.
• If the claim is dismissed, the removal is deemed lawful. In this case, even if the officer has suffered harm, no compensation is due, as the damage is considered a "lawful consequence" and thus must be accepted.