The virtual annual general meeting is here!
Annual General Meeting without physical attendance of the shareholders possible
For the first time, the German legislator has made virtual general meetings without the attendance of shareholders possible. This means that AGMs can also be held in times of COVID-19. The management board can demand that questions be submitted in advance.
As part of a COVID-19 legislative package, an amendment to the German Stock Corporation Act since March 28, 2020, allows, among other things, the shortening of invitation periods for Annual General Meetings ("AGMs") as well as purely virtual AGMs. With the virtual AGM, the legislator is breaking new ground:
Online participation in AGMs already possible
Since 2009, the law has provided for various ways in which shareholders can participate in AGMs without physical attendance. A transmission of the AGM in picture and sound can be provided for. It is also permissible to participate in the voting in writing or by means of electronic communication (postal vote). Finally, shareholders may also actively participate in the AGM and exercise their rights by means of an "interactive 2-way direct connection in real time", i.e., depending on the details in the individual case, they may ask questions, view the list of participants or vote (electronic participation).
At the time, the German legislator had granted the companies far-reaching freedoms in view of making use of the opportunities offered. Companies could provide for corresponding options, but did not have to. However, the prerequisite for video and audio transmission, postal voting and electronic participation is almost without exception that the statutes regulate this possibility or at least that there is an authorization to do so.
Purely virtual AGM so far impossible
However, the possibility of completely excluding the physical attendance of shareholders did not exist until now. Even if a company made electronic participation possible, the AGM had to be held as a face-to-face event in order to allow shareholders to participate physically.
Purely virtual AGM now possible / facilitation of participation
At all AGMs that take place in 2020, the Management Board can now, with the approval of the Supervisory Board, even without authorization by the Articles of Association or rules of procedure provide for
- a picture and sound transmission,
- a vote by electronic communication (postal vote), and/or
- an electronic participation of the shareholders.
Furthermore, Supervisory Board members may also be connected via picture and audio transmission, irrespective of any authorization.
Above all, however, the Management Board may limit shareholder participation to a purely virtual AGM without physical presence.
All this applies to ordinary and all extraordinary general meetings.
Requirements for a purely virtual AGM
In order for a general meeting to be held on a purely virtual basis, it is necessary that
- the entire meeting is transmitted in picture and sound,
- shareholders' voting rights can be exercised via electronic communication (postal voting or electronic participation) and proxy voting,
- the shareholders are given the opportunity to ask questions by means of electronic communication, and
- shareholders who have exercised their voting rights are given the opportunity to object to resolutions of the AGM.
Answering questions / questions in advance
In view of the anonymity and the associated risk of unacceptable questions, the legislator has provided that not all questions have to be answered; the Management Board decides on "whether" and "how" at its due discretion. It may select and summarize reasonable questions and give preference to questions from shareholder associations and larger investors. It may also require that questions be submitted electronically no later than two days before the meeting.
Motions submitted by shareholders?
Whether shareholders can submit motions in substance or procedure in such a virtual AGM depends on the type of communication the company chooses for the AGM; in the case of a postal vote, the submission of a motion is excluded.
Notary Public / Organs
The notary public recording the AGM shall be present with the chairman of the meeting; the same applies to the Executive Board. The (other) members of the Supervisory Board may be connected via picture and audio transmission.
Limitation of the risk of challenge
In the case of a virtual AGM, the law excludes numerous grounds for challenges. A challenge can therefore neither be based on the decision to hold a virtual AGM per se nor on certain technical defects. However, deficiencies in content or procedure can still lead to challengeability.
KGaA / SE
The aforementioned regulations also apply to the KGaA and essentially also to the SE.
Why virtual AGMs?
The Executive Board will have to consider whether it would like to hold the Annual General Meeting within the usual time frame despite the COVID 19 pandemic-related restrictions. Irrespective of the technical challenges that may possibly be associated with this, a virtual AGM may be appropriate in this case in particular, be it in order to circumvent restrictions on the holding of the AGM that might otherwise stand in the way of holding the AGM or in order to avoid random majorities that might otherwise arise.
Finally, the possibility of limiting the right to ask questions to those previously submitted should considerably simplify the procedure of the AGM.