Due to the COVID-19 pandemic, companies cannot hold their general meetings as usual. The increasingly stringent requirements imposed by the health authorities cannot be reconciled with the presence of many participants at a general meeting. Against this background, many companies have already postponed their upcoming Annual General Meeting. However, this can cause considerable problems if, for example, the distribution of a dividend or important capital or structural measures are to be decided at the general meeting. After several European countries have remedied this with the option of a purely virtual general assembly, the German legislator is now also reacting. On the 25th.

According to the law passed by the Bundestag, the following facilities for the AG, KGaA and SE are to be temporarily created:

General meeting without attendance

So far, stock corporations have only had the option of enabling online participation for shareholders in addition to the attendance general meeting (so-called hybrid AGM). The law now provides that the board of directors can also order a general meeting without the presence of shareholders and representatives.

A prerequisite for a general meeting without presence is that

1. The entire assembly is broadcasted in audio and video , d. H. including general debate and vote,

2. shareholders can exercise their voting rights via electronic communication (absentee voting or electronic participation) and by proxy,

3. the shareholders are given the opportunity to ask questions by electronic communication,

4. those shareholders who have exercised their voting rights in accordance with number 2 are given the opportunity to object to resolutions passed by the general meeting.

There are additional essential facilities for answering the questions required under No. 3.

On the one hand, the board can stipulate that the questions must be submitted by electronic communication at least two days before the meeting. This would relieve the burden on the implementation of the general meeting, since the answers to the questions could already be prepared comprehensively before the general meeting. An answer at the Annual General Meeting can even be omitted if the questions on the company's website are answered in advance. In addition, the Board of Directors can limit the question to those shareholders who have registered.

On the other hand, the board of directors should be able to decide which questions to answer and how to answer them, according to “due judgment”. This is to enable the board of directors not to have to answer all the questions asked. The Executive Board can summarize the questions and select meaningful questions in the interest of the other shareholders. He can prefer shareholders' associations and institutional investors with significant votes. This restriction of the right to information is intended to ensure that the general meeting is not overwhelmed by a flood of questions asked online and is therefore unable to make decisions.

At a general meeting without presence, only the chairman of the meeting, the board of directors and the notary would have to be "present". All shareholders could be excluded from participation "on site" and the possibility of electronic communication referred. Regardless of this, however, the company's proxy can be present to exercise proxy voting rights.

In addition to the possibility to exclude the presence, there is also the possibility to exclude all application rights during the general meeting. If the general meeting is only carried out by means of electronic postal voting and proxy voting rights (ie not by means of complete electronic participation), all of the right to propose will lapse “in” the meeting. Applications can only be made if (electronic) participation by shareholders. This is a considerable relief, since disruptive actions by activist shareholders during the general meeting are excluded. Only the possibility to object is mandatory for the participating shareholders. This is a prerequisite so that shareholders can take legal action against resolutions of the Annual General Meeting.

In order to rule out legal uncertainty with regard to the use of the new possibilities, the law also provides for the limitation of the possibility of contestation with regard to technical shortcomings. A contestation should only be possible with intent. The same applies with regard to the shareholders' limited right to information.

Online participation

In this context, the Executive Board should be given the opportunity to grant shareholders the option of electronically exercising their rights even without authorization to the Articles of Association (!). this concerns

- the participation of shareholders in the general meeting by electronic communication (electronic participation),

- voting by electronic communication (postal vote) and

- the approval of image and sound transmission.

In addition, the Executive Board can provide for the participation of members of the Supervisory Board at the Annual General Meeting by means of image and sound transmission, even without a corresponding provision in the Articles of Association.

These regulations are intended to ensure the possibility of holding an unrestricted general meeting for those stock corporations whose articles of association so far do not contain such authorization.

Notice period

In addition, regardless of the respective articles of association, the Executive Board should have the option of convening the Annual General Meeting in just 21 days instead of the previous 30 days. This is intended to help companies that have had to postpone their general meeting and now want to make up for it quickly. Proof of shareholding must refer to the twelfth day before the Annual General Meeting and must be received no later than the fourth day before the Annual General Meeting for bearer shares.

However, we recommend caution when making use of the shortened call-up period, as this requires banks and service providers to deviate from the previous and well-established procedure. It is also not entirely clear what significance the registration period should have in this context.

Deadline for holding the general meeting

The board can also decide not to hold the general meeting within the first eight months, as has been mandatory up to now. The deadline is to be extended until the end of the financial year.

However, this extension of the deadline does not apply to the SE, as the deadlines are regulated here by European law. These companies will therefore not have the option of postponing them to a later date than previously permitted. The general meeting must continue to be held within the first six months.

Dividend payment

The Executive Board should also be able to decide to distribute a discount on the balance sheet profit to the shareholders without authorization from the articles of association. This is intended to relieve those companies whose shareholders have already announced the payment of a dividend. With the advance payment of a discount, time can be saved for the preparation of an unannounced general meeting.

All of the measures presented here require the approval of the Supervisory Board, which, regardless of the contrary provisions in the Articles of Association or the rules of procedure, can decide on them without the need for a face-to-face meeting.

CONCLUSION

The presenceless general meeting is now a reality. However, this requires extensive preparations on the organizational and technical side in order to create the statutory requirements. In particular, it will be necessary to clarify the ways in which shareholders can object. The objection must be filed electronically during the Annual General Meeting, which requires, at least for this purpose, a two-way communication option with an upstream examination of the authorization to object. A technically simple solution does not always have to be the best way and in any case must be accompanied by a well thought-out general meeting organization. For example, a simple "click" to contradict the AGM Internet portal could be too easy an exercise and tempt shareholders to just try it. A more sophisticated solution is recommended here. From conversations with HV service providers, we know that the necessary technology for the new requirements will be available. One should, however, proceed with caution in the specific design.

As with every general meeting, the primary goal must be to secure the necessary majorities. In the current situation, this requires extensive communication with investors in addition to legal and technical preparation. Against this background, the available legal design options should be individually adapted to the respective situation.

The Bundestag passed the law today, March 25, 2020. The approval of the Federal Council is scheduled for March 27, 2020. The regulations are to take effect on the day after the announcement and automatically expire on December 31, 2021.

Our experience with the full online participation of shareholders in a general meeting during the past seven years has shown that the technical and legal implementation of the new requirements is entirely possible. We very much hope that this design of the Annual General Meeting will now prove itself in the practical test and that there will be a permanent alternative to offering online participation in the Annual General Meeting at all companies (so-called hybrid AGM).