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Increased protection for shareholders when companies relocate


Freedom of establishment and freedom to provide services are important principles of the European Union and guarantee the mobility of companies within the EU. Companies have the option of relocating their businesses’ registered office after a majority vote of the shareholders. However, discrepancies in national corporate law may result in disadvantages for minority shareholders and others affected by the changes. WU Professor Martin Winner and his colleagues were tasked by the EU Commission to examine how to create corporate legislation that provides adequate protection to shareholders affected by this type of change.

Tax benefits, higher dividends – changing the registered office of a company can bring many advantages. A majority vote of the shareholders is required for this type of relocation. Often, however, moving the company’s registered office abroad can create disadvantages for minority shareholders. WU Professor Martin Winner, head of the Information Law and Intellectual Property Law Group at the Institute for Business Law, explains: “These disadvantages can manifest themselves in a wide variety of areas. Travelling abroad to the shareholders’ meetings is a problem for some people, for example. In addition, minority shareholders may not be familiar with applicable national laws. Of course, the financial aspect is also particularly critical: Minority shareholders may receive lower dividends than before as a result of the relocation of the company seat.” In order to provide minority shareholders with more protection in the future, Winner, together with an international group of experts, took a closer look at the different national laws and court decisions in the member states in order to identify risks and gaps in the current legislation.

Opt-out rights with fair compensation

Winner and the other experts came to the conclusion that, in order to protect shareholders in the event of a relocation, they should be given the option to leave. “The legal issues involved are so complex that shareholders should be given the option of switching to the new legal system or leaving in exchange for a severance payment,” explains Winner. The experts also developed a proposal to ensure fair compensation. The EU Commission reacted accordingly, developing a procedure that will allow shareholders to check whether the amount of their compensation is appropriate. In addition, the team of experts also made recommendations on protecting creditors in the event of a cross-border relocation and on the rights of employees to representation on company boards. “Companies should not simply be able to move abroad in order to prevent employees from sitting on supervisory boards like they would in an Austrian company,” says Winner about the proposal. “These innovations were passed by the EU Parliament in April and will provide more protection for individual shareholders in the future. At the same time, the advantages of mobility within the EU will be maintained,” emphasizes Winner.

Recommendation to the EU Commission

About Martin Winner

Martin Winner

Professor Martin Winner, was born in Mödling, Lower Austria, and studied business administration at WU and law at the University of Vienna, where he earned his doctorate in 2001. His academic career began in 1996, when he started as an assistant professor of business law at WU under Prof. Peter Doralt. He received the APART Grant of the Austrian Academy of Sciences for the research project “Price and Value in Private Law,” which he successfully completed in 2007. He has been head of WU’s Information Law and Intellectual Property Law Group and the Research Institute for CEE Legal Studies since 2009. Winner has extensive international experience, including acting as an advisor to the Albanian Minister of Justice for the reform of business law in the course of an EU Twinning project from 2007 to 2009. He has been chairman of the Austrian Takeover Commission since 2009, and he works in constant cooperation with national and international securities market supervisory authorities. Winner’s research deals mainly with company law and securities market law, intellectual property law, comparative legal studies with a focus on Central and Eastern Europe, as well as general corporate law, contract law, and property law. He has published extensively in international journals such as the European Company and Financial Law Review and the European Business Organization Law Review. Winner is a member of numerous international working groups, including the European Company Law Experts and, from 2014 to 2019, the European Commission’s Informal Company Law Experts Group.

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