Legal Updates

Registration for Social Security Does Not in Itself Prove Employment

VwGH Ra 2026/09/0018 | 03.06.2026

The unauthorized employment of a foreign national is punishable under Section 28 para 1 no 1 of the Austrian Act on the Employment of Foreign Nationals. Whether employment exists depends on the true economic substance under Section 2 para 4 of the Act. The formal appearance of the facts is not decisive.

In the specific case, a managing director was fined. He was accused of unlawfully employing a Turkish national for two days in December 2022. The sole basis for the penalty was the employee’s registration for social security. The managing director argued that the actual start of employment was only on 02.01.2023. Before that date, the man had only attended to personal administrative matters. The Supreme Administrative Court of Austria (VwGH) annulled the penalty imposed on the managing director in its decision of 03.06.2026 (Ra 2026/09/0018). Registration alone does not prove employment. The Administrative Court (Verwaltungsgericht) should have made additional factual findings of its own.

For practical purposes, this means that employers should document the actual start of employment. They should also register employees for social security only once they have actually started working.

12. August 2026

Death of the sole managing director: Limits of the duty to take corporate precautions

OGH 8 ObA 40/25b | 24.06.2026

The unexpected death of the sole shareholder and managing director temporarily rendered the company unable to act. As a result, the salary of the company’s only employee could no longer be paid. The employee therefore lawfully terminated the employment relationship with immediate effect. Among other claims, she sought compensation in lieu of notice, arguing that the managing director should have taken precautions for the event of his death.

The Austrian Supreme Court (OGH) rejected the existence of a general duty to take such precautions. While a limited liability company (GmbH) must always have a managing director under Austrian law, this does not give rise to a general obligation to implement precautionary measures unless there are concrete indications of an imminent risk. In the absence of a managing director, the law provides for the appointment of an emergency managing director.

In the present case, the company was not at fault. Following the managing director’s death, the sole shareholder was initially unable to act and therefore could not appoint a new managing director. At that time, no estate curator had yet been appointed either. Consequently, the company could not be held responsible for failing to appoint a new managing director. The temporary absence of management alone does not constitute corporate fault.

29. July 2026

Electronic service to an outdated e-mail address

OGH 2 Ob 16/26f | 19.05.2026

In the case at hand, a statement of defence and a default judgment were served electronically on a business owner. The documents were sent to an e-mail address registered in the official participant directory. However, that e-mail address had since come to be used by another company. The court of first instance revoked the confirmation of the default judgment’s finality and enforceability, holding that the electronic service had not been legally effective.

The Austrian Supreme Court (OGH) upheld this decision. According to the Court, the decisive factor is whether the recipient is actually able to retrieve the electronic notification and has access to the relevant e-mail address. Accordingly, a failure to update the e-mail address in the participant directory does not automatically result in legally effective service.

However, this decision has been criticised in legal literature and is inconsistent with the case law of other Higher Regional Courts. Critics argue that the decision creates a significant potential for abuse in favour of recipients. Regardless of the OGH’s ruling, it is therefore advisable to keep the participant directory up to date at all times and to notify any changes to the electronic address without delay.

15. July 2026

Arbitration clause in an M&A transaction: Does a defect affecting one seller also affect the others?

OGH 4 Ob 200/25b | 26.03.2026

Several individuals jointly sold their shares in a limited liability company (GmbH) to a purchaser. The share purchase agreement contained an arbitration clause requiring disputes to be resolved before an arbitral tribunal rather than the ordinary courts. Nevertheless, one of the sellers filed a claim before an ordinary court for part of the purchase price. He argued that the arbitration clause was invalid because other sellers had defects relating to the required form or powers of attorney when concluding the arbitration agreement.

The Austrian Supreme Court (OGH) rejected this argument. The decisive question is whether the sellers constitute a so-called “necessary joinder of parties.” If this is not the case, as the OGH held here, the validity of the arbitration clause must be assessed separately for each individual seller. Consequently, a defect affecting one seller does not invalidate the arbitration clause for the remaining sellers.

Practical takeaway: In M&A transactions involving multiple sellers, the validity of the arbitration clause should be documented carefully for each seller individually. A formal defect affecting one seller does not automatically jeopardize the arbitration clause for the other sellers.

1. July 2026

No access to the general meeting: Supreme court on shareholder rights under EU sanctions

OGH 6 Ob 60/26f | 22.04.2026

A Russian company controlled by a sanctioned individual was excluded from the general meeting of a Societas Europaea (incorporated in Austria). The company subsequently appealed the resolutions passed at the general meeting before the courts. The Austrian Supreme Court (OGH) has now dismissed the claim.

The decision was based on a judgment of the Court of Justice of the European Union (CJEU) issued shortly beforehand on 12.03.2026 in Case C-465/24. The CJEU held that sanctioned shareholders are to be excluded entirely from participating in shareholder meetings and from exercising voting rights. This exclusion applies categorically and without regard to the subject matter of individual resolutions. The right to appeal resolutions before the courts, however, remains unaffected.

In practise, this means that boards of directors and managing directors would be well advised to review the relevant sanctions lists prior to every shareholder meeting.

17. June 2026