In times of social distancing and exit restrictions, general meetings can be held as “virtual meetings”. With suitable apps, the general meeting can now also “take place” on a smartphone.
Due to the coronavirus crisis, people are expected to keep a physical distance from each other. Lockdowns have severely restricted economic life as well as entrepreneurial activity. However, it is precisely in times of crisis that important business decisions need to be made. Far-reaching measures, such as the sale of the company, require the approval of the shareholders in the case of limited liability companies. Extensive catalogs of transactions requiring approval are often defined in articles of association or management contracts. If half the share capital is lost, a general meeting must be convened in accordance with statutory provisions.
In order to be able to hold general meetings despite lockdown restrictions, the COVID-19-GesG was passed. On this basis, it should be possible to hold general meetings without the physical presence of the shareholders. The law authorizes the Federal Minister of Justice to issue more detailed regulations for implementation(we have reported). The ordinance has now been published since April 8, 2020. The provisions supplement the provisions of the articles of association (only agreed in exceptional cases), which already regulate the holding of meetings and votes without physical presence. The regulation does not only apply to general meetings of limited liability companies. There are further detailed regulations for stock corporations, associations and cooperatives, but these are not covered in this presentation.
“Virtual assembly”
The ordinance refers to “virtual meetings”. They are now permitted if shareholders can participate “from any location by means of a two-way audio and visual connection in real time”. It must be possible for every shareholder to “speak and participate in votes”. The video conferencing solutions currently available on the market are therefore suitable for holding “virtual meetings”. This expressly does not include holding a general meeting via teleconferencing. The following principle therefore applies: the shareholders should also be able to see each other.
However, there is a certain restriction: a “virtual meeting” is also permitted if a maximum of half of the participants are only connected to the meeting acoustically. If shareholders refuse to participate in the meeting by means of an optical connection or do not have any technical means at their disposal, the meeting can still be held. In this case, however, the choice of suitable video conferencing solutions is severely limited. In particular, if shareholders do not have the technical means (smartphone or laptop), they can only participate in the meeting if the software also allows them to dial in by telephone. In any case, however, it is permissible for shareholders (no more than half of them) to switch off the camera and only participate in the meeting acoustically.
Convening requirements
The legal and contractual requirements for convening the Annual General Meeting remain unchanged. However, whether a “virtual meeting” is held and which video conferencing solutions are used is decided by the person convening the Annual General Meeting. If there are no special provisions in the articles of association, this is the management (or a supervisory board if there is one). The latter must give due consideration to the interests of the company and the interests of the shareholders. Depending on the structure of the company or the shareholders, this can have different effects. For example, video conferencing solutions that participants can use free of charge are to be preferred over video conferencing solutions that are subject to a fee.
In addition to the general information (date, time, agenda), the notice convening the General Meeting must also state the organizational or technical requirements for participation in the virtual meeting. In addition to information on where the respective software for the video conferencing solution can be obtained, any access code must also be announced.
The question of the organization of the “virtual meeting” must be separated from the convening of the meeting. The ordinance does not specify who technically organizes the video conference to which others can log in or join. As the management generally does not participate in a general meeting, it can only take over the technical organization of a “virtual meeting” to a limited extent. How this can ultimately be implemented depends on the video conferencing solution chosen.
Checking the participants
In general, the regulation stipulates that if there is any doubt about the identity of a participant, the company must verify the identity of the participant in an appropriate manner. In this case, the company probably refers to the other participating shareholders. As is so often the case, how the verification can take place depends on the individual case. If the shareholder is also visually connected, an ID card can be held up to the camera, if this is necessary at all. If a shareholder is only acoustically connected to the meeting, the identity could be verified by asking specific questions or reading out text messages or emails sent for identification purposes. The possibilities are unlimited, but must not lead to the unjustified exclusion of a participant. Otherwise, any decisions reached are at risk of being challenged.
However, it is almost impossible to check who is actually attending the general meeting alongside the shareholders. There is no doubt that other people may be present in the room at any time outside the camera’s field of view. At best, it can be requested in the course of the invitation that the shareholders go into a closed room and that the camera is positioned to show the entire room as far as possible.
In this context, the general problem of data protection with video conferencing solutions should also be pointed out. The servers of the common software providers are not located in Europe. Furthermore, it cannot be ruled out that the entire general meeting is recorded in the background. If shareholders are located in China, the choice of video conferencing solutions is reduced per se because state Internet surveillance prevents the use of programs from abroad. It is also common knowledge that the Chinese state has access to group chats and video conferences held on Chinese platforms. Overall, care should therefore be taken to ensure that only absolutely necessary matters are discussed in a “virtual meeting”.
Resolution
Resolutions are passed in a “virtual meeting” – as in an ordinary general meeting – by the shareholders casting their votes. If the articles of association do not contain any special provisions, the passing of resolutions is not bound to any special form. In the case of a “virtual meeting”, it is important to ensure that the respective declaration of intent is clearly perceptible to all participating shareholders.
The results of the general meeting should, but do not have to, be recorded in writing. The mandatory attendance of a notary at the general meeting or “virtual” meeting is also not required. However, certain resolutions, such as the amendment of the articles of association, must be notarized by a notary. The appointment of a managing director is generally possible without any formal requirements. However, the appointment resolution must be notarized in order to be entered in the commercial register. It should therefore be checked at the time of convocation whether notarial involvement is required.
Alternative: circular resolution
Of course, shareholders can also consult with each other without holding a formal general meeting. Effective resolutions can also be passed by circulation as before. Please note: All shareholders must agree to the written resolution and if individual resolutions require notarization, the individual votes must be notarized. We have already informed you here that, as of this week, notarization is also possible using electronic means of communication.
The “virtual assembly” option is initially limited until December 31, 2020. It remains to be seen whether this form of general meeting will remain in place once the pandemic has been overcome. In any case, it is a useful addition in the current situation. If you need support in holding a “virtual meeting” or have any other legal questions in connection with managing the pandemic, please contact us on 01/505 77 00 or office@toplaw.at.