Austria: Breach Of Fiduciary Duty: Can A Principal Effectively Consent To Actions Of His Or Her Representative And Thus Exclude Criminal Liability?

Last Updated: 17 January 2019
Article by Nikolaus Loudon

One of the most discussed provisions of Austrian business criminal law is breach of fiduciary duty (Untreue) under Art 153 StGB (Strafgesetzbuch – Austrian Criminal Code, StGB). This offence is committed by any person who knowingly abuses his or her authority to – either directly or via a third party – dispose of property belonging to another person; thus causing a financial detriment to the other person (e.g. as managing director or authorized officer).

The perpetrator must act knowingly with regard to the abuse of authority, meaning that he knows for certain that disposing of the property is an abuse of his authority. Furthermore, he must act with at least conditional intent with regard to the damage of the principal, meaning that he was at least aware of a substantial risk that damage will occur and, under these circumstances, still took the risk.

An abuse of power is committed if the perpetrator takes an action to which he is generally entitled in an external relationship but which is subject to certain restrictions in the internal relationship between the principal and the alleged perpetrator (e.g. the obligation to obtain permission in case of contract values beyond a certain threshold). In a previous issue of the DR insider we shed light on situations, in which internal restrictions were not clearly agreed, as numerous managing directors of companies are not bound to such restrictions in their internal relationship with the company. In this issue we want to address the question, whether the principal is entitled to consent to an action that would otherwise constitute an abuse of power and by doing so exclude the criminal liability of the perpetrator.

In case a person and not a company is involved it is quite logical that the principal can give his consent to the actions of the representative. It is the principal after all who determines the internal restrictions of the representative. Therefore, in cases in which the principal gave his prior consent to an action of the representative an abuse of power does not exist as the internal restrictions were extended. However, in cases involving companies this question is more complicated, as the principal is the company itself, which is represented by its management board/managing directors. The management board/managing directors of course cannot give consent to their own actions, because if this were possible the criminal offence of breach of fiduciary duty in the context of companies would not exist anymore.

With regard to companies with limited liability (Gesellschaft mit beschränkter Haftung – GmbH) the Austrian Supreme Court already recognized decades ago, that a sole shareholder, who is also managing director, can give effective consent in order to exclude criminal liability. This follows the principle of an economic approach in criminal law: The offence of breach of trust shall protect the property of the principal's beneficiary. In corporations, the beneficiaries are the shareholders. Therefore, if the sole shareholder gives consent the beneficiary gave consent and suffers no damage; therefore such an action does not result in criminal liability.

In a recent decision (OGH 19.4.2018, 17 Os 15/17k) the Austrian Supreme Court confirmed that also with regard to limited liability companies (GmbH) and joint stock corporations (Aktiengesellschaft – AG) it shall generally be possible for shareholders to consent to the actions of the management board/managing directors and by doing so exclude criminal liability. This decision to some extent adjusts an earlier decision in which the Austrian Supreme Court excluded such consent with regard to joint stock corporations (AG). The new decision leads to clarification. Still, several questions remain unanswered. For example, it is not yet clear, whether such consent has to be given by all shareholders or whether in some scenarios a majority vote shall also suffice. The topic is therefore not yet entirely clear and will need further clarification in the future.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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