Managing director dies: no duty to plan ahead

Many GmbHs have exactly one person who represents them externally: the sole shareholder, who is also the only managing director. If that person dies or becomes unavailable, the business comes to a standstill. In decision 8 ObA 40/25b of 24 June 2026 the Austrian Supreme Court clarified what this means for employees — and at the same time made clear that the company is under no obligation to make provision for that event.

The case

The claimant had worked for a GmbH as office manager since 2013 and was latterly its only employee. The sole shareholder and managing director died unexpectedly in April 2023 after roughly a month in hospital, during which he had been placed in an induced coma. From May 2023 salaries were no longer paid; the claimant could not pay them to herself because she had no signing authority over the account. There was no longer a managing director, and the estate, now the sole shareholder, was unable to act without an appointed curator.

On 22 June 2023 the claimant declared her early resignation for cause (vorzeitiger Austritt) in writing. Only in August 2023 was a curator of the estate (Verlassenschaftskurator) appointed, who in December 2023 also became managing director of the GmbH. The claimant sought from the company, in addition to the outstanding pay, termination compensation (Kündigungsentschädigung) for the period up to the end of September 2023. The company, she argued, was at fault for her resignation, not least because the managing director had made no provision whatsoever for the event of his incapacity.

The court of first instance upheld the claim in full; the court of appeal dismissed the claim for termination compensation. The Supreme Court confirmed that decision.

Resignation justified, compensation nonetheless denied

It was undisputed that the claimant was entitled under § 26 of the Salaried Employees Act (AngG) to resign early because her pay had been withheld. Termination compensation under § 29 Abs. 1 AngG, however, requires more than a justified resignation: the employer must be at fault. Where pay is withheld, § 1298 of the Civil Code (ABGB) places the burden on the employer to plead and prove that it is not at fault. The company discharged that burden here.

No duty to make provision for one's own death

The claimant had not specified what arrangements the managing director should have made. The Supreme Court holds that the mere possibility of making arrangements does not give rise to an obligation to do so, even taking the employer's duty of care into account. There is no legal basis for requiring the managing director of a GmbH, absent concrete indications of a risk to his life, to make arrangements during his lifetime for the continued payment of wages in the event of his death.

The court points out that the law itself has made adequate provision for the absence of a managing director: § 15a of the Limited Liability Companies Act (GmbHG) provides for the appointment of an emergency managing director.

The emergency managing director under § 15a GmbHG

Where the managing directors required to represent the company are lacking, the court must in urgent cases appoint them, on application by an interested party, for the period until the deficiency is remedied. That the company's employees are also entitled to make such an application is settled case law; the Supreme Court confirms it here. They are, however, under no obligation to do so: no duty to apply for an emergency managing director can be derived from the employment relationship, and failing to apply does not amount to contributory fault under § 32 AngG.

The estate unable to act

From § 15(1) GmbHG — a company must have one or more managing directors — the courts have derived an incumbency on the shareholders to arrange without delay for the appointment of a new one. The sole shareholder here was the deceased's estate, which could not act without a curator. In the Supreme Court's view the company may rely on that circumstance. The sphere of the company and that of its members are, it is true, to be kept apart under the separation principle. But appointing a managing director is a matter of internal decision-making, and the shareholder's inability to take part in it remains within the company's own sphere — so that the question of attributing someone else's conduct does not arise at all. Fault presupposes that someone could have acted: as long as no representative had been appointed for the estate, nobody could appoint a managing director, and no accusation of fault against the company can be derived from the omitted appointment.

Any delay on the part of the curator, who was appointed only in August 2023, could not have caused a resignation already declared on 22 June 2023. The court of appeal was therefore right to deny fault on the part of the company.

What owner-managed companies should take from this

There is no legal duty to make provision, but commercially it is still advisable. The case exposes the gap: around three and a half months passed here before the estate had a representative, and around seven and a half before the company had a managing director again. During that time nobody could authorise salaries, sign contracts or pay invoices. A second managing director or an authorised signatory with registered commercial power of attorney (Prokurist), signing authorities for recurring payments and a clause in the articles of association covering the loss of the managing director can close that gap. What else needs to be considered when handing over a business is summarised in our article on business succession.

For employees: if pay is withheld, early resignation may be justified (§ 26 AngG). The outstanding pay is owed in any event; termination compensation on top of that is available only where the company is at fault for the resignation — not where it is unable to act through no doing of its own. The more effective route may be an application for the appointment of an emergency managing director, which, under settled case law, employees too are entitled to make. Through it the company can regain a person entitled to authorise salaries.

For heirs: the estate becomes shareholder upon death but can do nothing without a representative. Anyone who stands to inherit should press ahead with the probate proceedings (Verlassenschaftsverfahren). Heirs who have made a declaration of acceptance of the inheritance (Erbantrittserklärung) and can prove their right of inheritance may represent the estate themselves under § 810 ABGB; otherwise the appointment of a curator should be prompted so that the company becomes able to act again.