An overview of the corona regulations for AGMs:
In summary, there are two options for companies and their annual general meeting in 2020: companies whose annual general meeting is planned should examine whether a digital, virtual AGM is possible for them or whether the AGM can be postponed to a later date in 2020.
In the following, we provide an overview of the regulations that make it possible to hold the AGM despite the coronavirus:
Coronavirus emergency legislation – Annual Meeting 2020
The new Coronavirus emergency legislation discusses the effects of the crisis on general meetings; more precisely in Article 2 of the Act on measures in company, cooperative, association, foundation and residential property law to combat the effects of the Corona pandemic, Federal Law Gazette 2020 I, p. 569, 570. In the absence of an official abbreviation, the abbreviation “COVID-AktG” is used here. The provisions of the Corona emergency legislation came into force on 28.03.2020.
Which companies are affected by the Corona Measures Act?
The legislator did not intervene in the German Stock Corporation Act with the Act on Measures for the Corona Crisis, but instead adopted a temporary Act on Measures. This is limited to the period of the Corona crisis. The scope of application concerns all stock corporations and partnerships limited by shares, in large parts also SE and mutual insurance associations (Section 1 para. 8 and para. 9 COVID-AktG).
For which period of time does the corona regulation for the general meeting of shareholders apply ?
The corona rules only apply to the general meetings of companies that take place in the year 2020. An extension by statutory order is possible until 31 December 2021 at the latest if this appears necessary due to the continuing effects of the corona pandemic.
The virtualization of the Annual General Meeting 2020
§ Section 1 (1) COVID-AktG makes use of the possibilities of a virtualization / digitalization of the Annual General Meeting already contained in the German Stock Corporation Act (electronic participation, postal vote, image and sound transmission); in deviation from the German Stock Corporation Act, the Management Board may also take these measures without authorization by the Articles of Association or rules of procedure.
Annual General Meeting without physical presence – Corona special regulation 2020
§ Section 1 (2) of COVID-AktG goes beyond the current instruments of stock corporation law. The Board of Management can decide that the AGM is held as a virtual AGM without the physical presence of shareholders or their proxies, provided that the requirements in para. 2 no. 1-4 are met. According to the explanatory memorandum to the law (BT-Drucks. 19/18110, p. 26), participation in the Annual General Meeting is then only possible by way of electronic connection. This means that, due to the corona virus, the Annual General Meeting 2020 may take place in the form of online participation.
According to the general stock corporation law, such a purely virtual AGM is actually inadmissible (full hM; e.g. Kubis in: MünchKommAktG, 4th edition 2018, AktG § 118 marginal no. 20), since an AGM must legally take place at a single location. The new Corona measures, on the other hand, exclude the right to participate and attend, which is otherwise taken for granted. The corona crisis thus allows a deviation from general stock corporation law for companies.
Decision by the Management Board
The prerequisite for a virtual general meeting is first of all a “decision” by the Executive Board. The structure of this decision-making procedure is not regulated by law; in contrast, the law uses the term “resolution by simple majority” in § 121 (2) AktG. It is unclear whether the decision of the management board under the new corona rule (section 1 (2) COVID-AktG section 121 (2) AktG) applies accordingly or whether the general rule in section 77 (1) AktG applies. It is correct that section 121 (2) AktG is to be applied accordingly to the decision of the Management Board as a result of the factual connection. In addition, section 1 (2) of the COVID-AktG refers to the Management Board as a body, but not to individual members of the Management Board (Rottnauer NZG 2000, 414, 415), even if the convening would be covered by departmental responsibility or power of representation (Kubis in: MünchKommAktG, 4th edition 2018, section 121 marginal 15).
The Corona Measures Act (Section 1 (2) COVID-AktG) contains three “decision options” for the Management Board: Firstly, the exclusion of the physical presence of shareholders or their proxies from the Annual General Meeting. The second is the decision on how to answer the questions. Thirdly, the possibility of a “requirement” that questions be submitted by electronic communication at least two days before the meeting. The corresponding application of Section 121 (2) AktG to all these options for action is appropriate.
When does the Management Board have to make the decisions for the Annual General Meeting?
The Corona Measures Act does not contain any specifications as to when and how the decision communicated by the Management Board will become binding and effective. It is obvious that the decision of the Management Board must be included in the convening notice pursuant to section 121 (3) sentence 1 of the German Stock Corporation Act. This follows from the legal systematics of this provision. If in the normal situation (§ 121 (3) sentence 1 AktG) the place has to be indicated, this naturally serves the purpose of enabling shareholders to actively participate in the General Meeting by physical presence. Accordingly, further information is generally required to enable shareholders to find the venue of the Annual General Meeting (Kubis in: MünchKommAktG, 4th edition 2018, AktG § 121 marginal 39).
This should be reflected in § 1 (2) COVID-AktG. It follows indirectly from § 1 para. 2 sentence 2 aE already: If the Management Board sets a target with regard to the questions, the shareholders must have the opportunity to prepare for this. This can best be done in the notice convening the meeting. For this reason, the notice of meeting should include the exclusion of the physical presence of shareholders from the General Meeting.
Technical information for shareholders on the virtual Annual General Meeting
In order to enable the exercise of shareholder rights pursuant to paragraph 2 nos. 1-4, the notice of meeting should also contain technical information on this,
- how the shareholders can receive the image and sound transmission,
- in which manner the exercise of voting rights is possible,
- how the shareholders can make use of the question possibility and
- in which way the possibility of an appeal is granted.
The intensity and clarity should be comparable with the information already required for listed companies pursuant to Section 121 (3) No. 2 AktG. Of course, it should be noted that § 1 para. 2 COVID-AktG, as explained, is not limited to listed companies, which does not, however, exclude the possibility of extending the level of concretisation of this norm to § 1 para. 2 COVID-AktG.
According to the Coronavirus special provision (§ 1, Subsection 6, COVID-AktG), decisions of the Board of Management under § 1, Subsection 1, Subsection 5, require the approval of the Supervisory Board; for the Supervisory Board, the Coronavirus provision (§ 1, Subsection 6, P. 2, COVID-AktG) provides for a simplification with regard to the adoption of resolutions, even if the Articles of Association do not contain any stipulations in this respect. Such reservations of consent are not new (see §§ 59 para. 3, 111b para. 1, 114 para. 1, 202 para. 3 sentence 2, 204 para. 1 sentence 2, 205 para. 2 sentence 2). The legislative objective is to prevent abuse and to preserve the supervisory board’s supervisory competence (BT-Drucks. 19/18110, p. 27).
At what point in time must the approval be available and what legal consequences follows from its absence?
The coronavirus regulation is in the already existing cases is not clear. For example, Section 111b para. 1 of the German Stock Corporation Act expressly refers to the prior consent of the Supervisory Board; the conclusion that in the absence of such a reference, subsequent consent would also be effective, however, is not concluded in the case of Section 59 para. 3 of the German Stock Corporation Act (where this temporal addition is missing) (apparently generalgM; Bayer in: MünchKommAktG, 5th edition 2019, AktG § 59 marginal 10 mwN).
Recommendation on the effectiveness of decisions
It is unclear whether a violation leads to the invalidity of an order pursuant to Section 1 (2) COVID-AktG. A reason for ineffectiveness could be that the legislator tends to realize another intended result (violation does not lead to ineffectiveness) with target provisions (§ 202 para. 3 sentence 2 AktG). On the other hand, the principle applies that faulty management does not affect the external relationship (e.g. in relation to section 204 (1) sentence 2 AktG): Koch in: Hüffer/Koch, AktG, 14th edition 2020, AktG § 204 marginal no. 8). An express effect on the external relationship is regulated in Section 114 para. 1 AktG. Thus, according to the current state of knowledge, at any rate the systematic nature and, furthermore, the urgency of the matter indicate that a violation of section 1 (6) COVID-AktG does not affect the validity of “decisions” under section 1 (2) COVID-AktG. Of course, the urgent recommendation can only be to obtain such consent and, to be on the safe side, also to reproduce it in the convening notice, for example as follows
“The Management Board has decided, with the consent of the Supervisory Board, that the meeting will be held as a virtual general meeting without the physical presence of the shareholders or their proxies…”
In view of the fact that, in order to reduce the risk of infection, a meeting of shareholders must be prevented, the question arises as to whether, in the case of a decision pursuant to Section 1 (2) of the COVID-AktG, the place of the general meeting need not be indicated in exceptional cases. This is because the normative purpose of § 121, Subsection 3, Sentence 1, German Stock Corporation Act (possibility of finding it) could contribute here to the fact that shareholders, out of habit or in refusal of the procedure pursuant to § 1, Subsection 2, COVID-AktG, nevertheless go to the specified place and possibly try to gain access under protest. This is unacceptable according to the standard purpose of § 1 para. 2 COVID-AktG (protection of health). Therefore, § 121, Subsection 3, Sentence 1, AktG must be interpreted in such a way that the postal address of the “place of assembly” does not have to be given in the cases of § 1, Subsection 2, COVID-AktG. Furthermore, an explicit warning notice is recommended:
“The decision of the Management Board to hold the Annual General Meeting without the physical presence of the shareholders serves to protect the participants from health risks resulting from the holding of mass events during the COVID 19 pandemic. For this reason, the exact location of the place in the city of Cologne where the Executive Board, the Supervisory Board, the chairman of the meeting, the notary public and the proxies of the Company are located will not be disclosed. Shareholders who are nevertheless present there will not be granted access; the Company will make use of its domiciliary right. We strongly advise, also for the protection of your health, against trying to locate or visit the location of the above-mentioned premises.
The individual requirements pursuant to Section 1 (2) sentence 1 COVID-AktG are also worth discussing. According to No. 1, the vid
eo and audio transmission of the entire meeting must be made. This is probably based on Art. 8 (1) lit a of the Shareholders’ Rights Directive, according to which a “direct transmission” of the General Meeting is possible. In the explanatory memorandum to the Act, the legislator makes it clear that it actually means the entire meeting, including the general debate and the votes (Bundestag printed paper 19/18110, p. 26). It is obvious that this is more than the hitherto widespread transmission of the speech of the chairman of the management board (on this subject by Holten/Bauerfeind AG 2018, 729, 733). There are no longer any provisions in the currently valid version of the GCGC (see, by contrast, Section 2.3.3 GCGC in the version dated February 7, 2017, which only mentioned the possibility of pursuing, not participating in, the speech).
COVID-AktG does not stipulate that a transfer must be made exclusively to the shareholders. Certainly, it should also be possible for a transmission to be received by those persons whose participation in the General Meeting is usually permitted (such as media representatives; see Kubis in: MünchKommAktG, 4th edition 2018, AktG § 118 marginal 109). However, if such persons are not granted the right to participate, there is of course no obligation to make the video and audio transmission available to such persons. It is questionable whether the Management Board can make the video and audio transmission of the entire meeting accessible to anyone. In the case of an Annual General Meeting held in person, it is up to the chairman of the meeting to decide whether to admit guests (Kubis in: MünchKommAktG, 4th edition 2018, AktG § 118 marginal 109, 113). There, the chairman of the meeting will exercise due discretion with regard to criteria such as shortage of space etc., customary practice and the interests of the company.
There is no shortage of space on the Internet; the transmission to the general public is in principle possible without any restrictions. It is unclear whether the management board can also decide that the video and audio transmission of the entire meeting can be made not only to shareholders but also to the general public; it is also unclear whether this decision is not to be made by the chairman of the meeting (in parallel to the attendance vote). To be on the safe side, one should proceed conservatively here and only grant “access” to those persons who would also typically be admitted as guests at a general meeting (deserving employees, representatives of the press etc.). The decision should be announced by the board of directors and confirmed by the chairman of the meeting. In any case, the chairman of the meeting should be authorised to revoke the “access” at any time (this also applies to the presence of Kubi in: MünchKommAktG, 4th edition 2018, AktG § 118 marginal 116).
Conclusion: Coronavirus and its impact on the Annual General Meeting 2020
With the new Corona Measures Act, it is possible to have the Annual General Meeting held despite the corona crisis. Companies can now hold them virtually. The Annual General Meeting is necessary for companies to decide on necessary action measures and to be able to react effectively to the consequences of the corona crisis.
We would be grateful for feedback at email@example.com. We hope to be able to update this contribution to the Annual General Meeting during the corona crisis soon.