On March 25, 2020, the German parliament adopted a bill to mitigate the impact of the COVID-19 pandemic on shareholder meetings, by providing for the introduction of a virtual general meeting of stock corporations without shareholder attendance. In addition, the legislator extended the period for holding general meetings of stock corporations from eight months to 12 months after the end of the financial year. These measures seek to take account of the restrictions on opportunities for meetings due to the COVID-19 pandemic).

The bill provides in its Article 2 § 1 for the following temporary simplifications for stock corporations (AG), KGaAs and Societas Europaeas (SE):

Introduction of a virtual general meeting 

A virtual general meeting without physical attendance of shareholders is permissible provided a video and audio transmission of the entire meeting takes place. The shareholders must be given the opportunity to exercise their voting rights electronically and, in addition, to grant power of attorney, in particular to the company’s voting proxy.

Further, shareholders must be given the opportunity to ask questions via electronic communications. The bill addresses the practical objections previously expressed against a virtual general meeting, in particular the concern that the management would be practically flooded with questions, by curtailing the shareholders' right to ask questions and obtain information: For example, the board can decide, with the approval of the supervisory board, that questions must be submitted by electronic communications at least two days before the meeting. Furthermore, in deviation from § 131 of the German Stock Corporation Act (AktG), the management decides on the answering of questions at its due judgement and discretion. The explanatory memorandum to the bill expressly states that the management does not have to answer all questions, but can summarize questions and select meaningful questions, and does not have to answer questions posed in foreign languages.

Shareholders who have exercised their voting rights must be given the opportunity to object to the resolutions of the general meeting without appearing at the annual general meeting. However challenging the resolutions adopted at a virtual general meeting, including the answering or non-answering of questions as described above, is virtually impossible. 

Holding a virtual general meeting is expressly not contingent upon whether the company's articles of association have created authorizations in accordance with Art. 118 AktG, in particular for online participation, electronic exercising of voting rights and audio and video transmission, etc. According to the bill, these new measures are also to be permissible independently of an authorization in the articles of association.

12-month period for annual general meetings of stock corporations

Contrary to Art 175 (1) sentence 2 AktG, general meetings of stock corporations need not be held within the first eight months of the financial year, but within the financial year, i.e. within a 12-month period. For SEs, the six-month period pursuant to Art. 54 (1) SE Regulation continues to apply, which is beyond the competence of the national legislator. However, there will hardly be any practical consequences if this period is exceeded, especially since exceeding the period is considered permissible for important reasons.

Advance distribution of the balance sheet profit

Even without an authorization in the articles of association required under Art. 59 (1) AktG, the management may pay certain deductions from the net retained profits to the shareholders. The general meeting will then later only decide on the remaining amount within the framework of the appropriation of profits.

Other amendments 

Other amendments concern the possibility granted to the management to reduce the period of notice for convening a meeting. The convocation period is generally 21 days plus the registration period; proof of shareholding relating to the beginning of the twelfth day prior to the meeting, and receipt no later than the fourth day prior to the meeting, unless a shorter period for receipt is provided for in the notice. In the event of a reduced notice period, pursuant to Art. 125 AktG, notifications must be issued to the shareholders 12 days prior to the meeting or to the shareholders entered in the share register at the beginning of the twelfth day. Consequently, the period for requests for additions to the agenda will also be reduced to 14 days.

Legislative procedure and duration of amendments

The duration of the simplifications under the stock corporation law is initially limited to general meetings to be held in 2020. However, the Federal Ministry of Justice and Consumer Protection may then extend it until December 31, 2021, if this is deemed necessary due to the continuing effects of the COVID-19 pandemic.

Conclusion

Even if the bill provides for simplifications at first glance, its legally compliant and technological implementation is quite demanding. For example, the right of shareholders to speak is not regulated in the bill and the explanatory memorandum obviously assumes that a general debate must also take place at a virtual general meeting. We are pleased to assist you in the legally compliant implementation of the new regulations.

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