COVID-19 – New Regulations for Holding Annual General Meetings in Germany

Overview


The protective governmental measures to prevent the spread of the COVID-19 pandemic, in particular, the restrictions on the assembly of persons, affects the ability of companies to act. For the time being, Stock Corporation (Aktiengesellschaften) cannot hold general meetings in the physical presence of their shareholders. However, the presence meeting is required by law for the stock corporation, in particular for the annual general meeting (AGM) to pass a resolution on the appropriation of the balance sheet profit.

 

In Depth


The legislator has taken action and with the bill to mitigate the consequences of the COVID-19 pandemic, inter alia, in company law, companies now have various options to act in spite of the restrictions on the right of assembly.

The law is due to come into force in March and will apply retroactively from March 1 2020. It provides the following simplifications, limited to the calendar year 2020, for resolutions to be passed at AGMs:

Holding a virtual Annual General Meeting

This year, the management board of a stock corporation can enable online participation in the AGM without the authorization of the articles of association of the respective company. The AGM can then take place virtually without any physical presence of the shareholders if;

  • the video and audio transmission takes place of the entire meeting,
  • it is possible for shareholders to exercise their voting rights via electronic communication (postal voting or electronic participation) as well as by issuing a power of attorney,
  • the shareholders are given the opportunity to ask questions by means of electronic communication, and
  • shareholders are given the opportunity to object to a resolution of the AGM without appearing at the AGM in person.
  • The Management Board may permit the participation of shareholders or their proxies in the AGM using electronic means of communication and of Supervisory Board members by means of video and audio transmission even without authorization in the Articles of Association.
  • The management board must allow and respond to requests for information from shareholders at its dutiful discretion.

Formal Facilitations

  • The AGM adopting annual financial statements and resolving on the appropriation of the balance sheet profit may be convened at any time during the financial year (instead of the first eight months of the financial year, as usually required by law), provided that this date is still in 2020. If the financial year of a stock corporation corresponds to the calendar year, an AGM can be held until December 31 2020.
  • Shortened notice period – In deviation from the 30-day period, the management board is entitled to convene the AGM no later than the 21st day before the day of the meeting.
  • In the case of listed companies, the proof of shareholding must refer to the beginning of the twelfth day prior to the AGM and must be received by the company no later than the fourth day prior to the AGM, unless a shorter period is stipulated in the invitation.
  • In the case of convening a AGM with a shortened deadline, any announcements to intermediaries have to take place twelve days before the AGM; the same applies for announcements to those registered in the commercial register at the beginning of the 12th day before the AGM.
  • Requests for additions to the agenda have to be sent to the company at least 14 days before the AGM (instead of 24 or 30 days for listed companies).

Supplementary Regulations

All mentioned measures need the approval of the supervisory board, who is entitled to take the decisions without physical presence of its members, but in writing, by telephone or in a comparable manner regardless of the regulations in statutes or rules of procedure.

The option for appealing against resolutions of the AGM, in particular due to deficiencies in the electronic communication options or the implementation of the virtual AGM itself, are limited as far as possible.

Even without any authorization under the statutes, the Board of Directors may resolve to pay an advance on the net retained profits (interim dividendZwischendividende), subject to the other legal requirements.

Practical IMPLEMENTATION OF THE VIRTUAL GENERAL MEETING

  • The AGMs‘ service provider have, in recent years, developed a number of tools with which the registration for the AGM and the granting of proxies are automated and moved to the virtual room.
  • With postal voting, the legislator has made the first cautious moves towards moving away from an AGM in which shareholders were only present. The current issues arising from COVID-19 accelerate this development. Above all, legal uncertainties and the shareholders‘ right of challenging, which is very pronounced in Germany, has led to companies not using their technical capabilities to full extent.
  • Technically, it is already possible to stream an AGM live in a protected space. With the use of an Internet Proxy Voting System, as different suppliers have it, the shareholders may already send changes in instructions to the proxies during the debate if necessary.
  • What is new in this respect is that not only the instruction to the present proxy, but also direct voting could be handled via the system.
  • The explicit authorization of the virtual AGM removes uncertainties as to which part may be transferred from the presence meeting.
  • The exclusion of the right of challenging in the event of technical faults, as well as the possibility of making completely virtual resolutions, reduce the risk of ineffective resolutions – and not at least reduces the effort required to repeat a resolution.