In a previously unpublished decision of the Princely Supreme Court of July 2023, the Supreme Court dealt with the question of whether persons who have been removed from office under the law of the registered office of the foreign company are authorized to represent the company in Liechtenstein. The Supreme Court’s decision illustrates the particular risks and hurdles involved in cross-border disputes under company law.
In the underlying case, persons A and B were effectively dismissed as managing directors of a foreign company by shareholder resolution. As persons A and B continued to act on behalf of the company in Switzerland and abroad (including Liechtenstein) despite their dismissal, interim injunctions were issued at the registered office of the foreign company, according to which persons A and B were also prohibited from acting as representatives of the company in Switzerland and abroad and from taking legal action. In addition, it was determined with third-party effect that persons A and B may not be regarded as executive bodies of the company. Arbitration proceedings were also conducted to justify the preliminary injunction.
At the same time, however, there were still conflicting entries in the foreign commercial register for some time, in which A and B were still entered as managing directors. A and B referred to this entry in the commercial register.
A and B subsequently took actions on behalf of the company in disregard of the interim injunctions issued against them at the company’s registered office, which led to irreparable disadvantages and damage. In particular, they withdrew lawsuits and appeals that the company had filed in proceedings in Liechtenstein. A and B relied on the foreign commercial register status for their power of representation.
The true representatives of the foreign company subsequently take various actions on behalf of the company to reverse the actions taken by A and B or to have them declared invalid.
The Princely High Court granted the applications and declared the actions of A and B invalid. The Princely High Court agreed with the foreign company that the interim injunctions issued at the place of the company’s registered office have factual effect and are therefore also to be regarded as relevant in Liechtenstein.
However, the Supreme Court came to a completely contrary conclusion. The Supreme Court stated that in the absence of existing conventions on the recognition and enforcement of interim injunctions, foreign interim injunctions cannot take effect in Liechtenstein. Accordingly, the interim injunctions issued by the foreign courts against A and B had no effect. Only the arbitral award of the arbitral tribunal, in which the question of the dismissal of persons A and B is decided in the main proceedings, is also to be recognized and enforceable in Liechtenstein on the basis of the New York Convention.
Until then, it would have to be based on who is entered in the foreign commercial register. This is regardless of the fact that the entries in the commercial register are only declarative.
Furthermore, the Supreme Court also considered it irrelevant that, according to the law at the company’s registered office, the resolution of the shareholders’ meeting already effectively led to the dismissal of persons A and B and that the contradictory commercial register status at the company’s registered office would be irrelevant.
The decision of the Supreme Court impressively shows that particular caution is required in cross-border corporate disputes, especially in the case of a disputed exchange of directors and officers. This is because even if persons are effectively dismissed under the law of the company’s registered office and can no longer take effective legal action for the company there, this does not apply to Liechtenstein. According to current case law, persons who have already been effectively dismissed abroad could nevertheless take effective legal action for the company in Liechtenstein, which could lead to irreparable damage and disadvantages for the company.
Accordingly, it is advisable to take measures in Liechtenstein to ensure the effectiveness of foreign decisions in cross-border corporate law disputes that have a connection to Liechtenstein.
The litigation team of Niedermüller Attorneys at Law, led by Dr. Matthias Niedermüller, regularly deals with cross-border corporate disputes and can assist in taking the necessary measures in Liechtenstein.
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