Abusive exercise of the right to inspect books and obtain information

Overview

In its decision, the Austrian Supreme Court once again confirmed the requirements for denying shareholders of a limited liability company the right to access the company’s books and elaborates on the possibility of restricting those rights, by making the access to information dependent on the signing of a confidentiality agreement.

Every shareholder has a statutory right to access the books and accounts of the company. In addition, a shareholder is also entitled to a comprehensive right to information vis-à-vis the company, as developed by case law of the Austrian Supreme Court. The shareholder does not have to further justify the exercise of this right in detail, since the performance of the shareholder's duties – in particular the examination and supervision of the management – requires comprehensive information on all matters concerning the company.

However, the shareholders do not have an unlimited additional right to information rather it can be restricted if the exercise of the rights would violate statutory prohibition or would qualify as an abuse of rights. The exercise of the individual right to information qualifies as an abuse of rights if the shareholder pursues interests outside the company and the use of this information would lead to a not inconsiderable disadvantage for the company. According to established case law, this may be the case, for example, if by exercising his right to information a shareholder merely wants to obtain business information in order to subsequently use this information for a competing company. If the company refuses its shareholder the right to information on the basis of an (expected) abuse of rights, it bears the burden of assertion and proof. The threat posed by the shareholder’s access of the disputed business documents and their (competitive) relevance must be specifically asserted by the company.

With its decision, the Supreme Court once again confirmed these principles and also pointed out that the demand to sign a confidentiality agreement in order for the shareholder to be granted access to the books and information is excessive and not justified, if there is no concrete evidence of a risk of abuse.

Facts of the case

In the case at hand, the company refused to allow a shareholder to inspect business documents on the grounds of an alleged abuse of rights by the shareholder. In order to grant access to business documents, the company demanded signing of a confidentiality agreement by the shareholder, which provided for a liability without fault of the shareholder and a (minimum) contractual penalty of EUR 3,000 for every breach of contract. The shareholder thereupon asserted his comprehensive right to inspect books and access information in court.

Decision of the Supreme Court

The Supreme Court confirmed the ruling of the lower courts, according to which the company's allegations did not go beyond general accusations. The company was not able to establish any concrete risk of abuse or substantial possible damage to the company. In this context, the Supreme Court pointed out that the concrete allegations of misuse must not only contain information on the possible damage to the company but also the relevance of the disputed business documents.

The Supreme Court also stated that in the absence of an allegation of a risk of abuse, there is no basis for restricting the shareholder’s right to information by demanding a confidentiality agreement. Moreover, a provision contained therein, which provides for a liability without fault for any breach of contract and a minimum contractual penalty of EUR 3,000, is to be considered excessive.

Conclusion

The decision of the Supreme Court consolidates the previous case law on the comprehensive right of limited liability company’s shareholders to access books and obtain information regarding the company. Although it remains to be seen whether the company can demand the signing of a confidentiality agreement if there is a (possible) risk of misuse of business documents, the Supreme Court points out that a liability without fault clause and a minimum contractual penalty contained therein would be excessive in any case.