Admissibility and Tasks of the Advisory Board in Family Businesses Under Austrian Law

Abstract

The establishment of an advisory board is becoming increasingly popular in Austrian family businesses. Austrian company law, however, provides neither an explicit legal basis for the establishment of an advisory board nor a definition of what constitutes an advisory board. The permissibility of establishing additional bodies is a function of private autonomy and freedom of organisation in the articles of association. An advisory board constituted under the law of obligations can be distinguished from an advisory board as an optional body of the company. Rights and obligations differ depending on the basis on which the advisory board is established. Furthermore, depending on the tasks assigned, advisory boards close to the shareholders can be distinguished from those that are close to the directors and those that are close to the supervisory board. Certain tasks that can be assigned to an advisory board are particularly important in family businesses. Involving the advisory board in the company succession process at an early stage is essential, as the advisory board can support this emotional decision with its advice. In family businesses, disputes between shareholders can quickly escalate as they lead to emotional family disputes. To prevent such an escalation, an advisory board can serve as a moderator and mediator. However, it should be noted that not all tasks may be transferred to an advisory board. Depending on the type of company, some tasks are mandatory responsibilities of the respective body. In some cases, the composition of the advisory board is also decisive. This article discusses which tasks may be delegated to an advisory board in a GmbH (Gesellschaft mit beschränkter Haftung – private limited company) or in a partnership.