The term “cash pooling” refers to a type of cash management within a group of companies, whereby excess liquidity from each of the group companies is usually transferred to a central ‘master account’ of the group parent company. In case of a liquidity shortfall, loans or repayments are effected from the master account to the company which is in need of liquidity. In case of a liquidity shortfall, loans or repayments are effected from the master account to the company which is in need of liquidity. Thereby, a distinction can be made between physical pooling and notional pooling. In notional pooling cash is not physically transferred to a master account.
For cash pooling to be permissible under Austrian law, the participating company must receive adequate benefits for its finance contributions (e.g. economic support of other group companies, interest payments]. The benefits must outweigh the immanent risk of failure, i.e. a loan default, negative balance of the master account or insolvency of the Austrian company. For such assessment, the Austrian Supreme Court [OGH 17 Ob 5/19p] would scrutinize if in the given circumstances a prudent and diligent entrepreneur would have entered into a similar cash pooling agreement and whether the participating company is inter alia able (i) to inspect and receive timely information about the financial situation of the other group companies, (ii) to terminate the agreement (including any pledge agreement) at any time without being bound to conflicting orders of shareholders, and (iii) to decide in its own discretion which amount of its excess liquidity it transfers to the master account.