COVID-19 - virtual meetings of shareholders
04/30/2020 - Reading time: 3 minutes
Attorney at Law
Since the Second COVID-19 Act (2. COVID-19-Gesetz) (Federal Law Gazette I No. 16/2020) entered into force, for the purpose of preventing the spread of COVID-19, meetings of shareholders and meetings of officers of a corporation and of other company forms may also be held without physical presence of the participants and decision-making may also take other forms.
The Federal Minister of Justice issued a statutory order (Verordnung) further regulating the holding of meetings under company law without the physical presence of the participants and passing of resolutions in a different manner (Federal Law Gazette I No. 24/2020). This article gives a short overview of the specifics that must be observed when holding virtual shareholders’ meetings and passing resolutions within the scope of such meetings.
Pursuant to the explanatory decision issued by the Federal Minister of Justice (file no. 2020-0.223.429), the statutory order applies to all company forms referred to in section 1 (1) Company law-related COVID-19 Act (Gesellschaftsrechtliches COVID-19-Gesetz, COVID-19-GesG). Hence, for the purpose of preventing the spread of COVID-19, meetings of shareholders and meetings of company officers of a corporation, a partnership, a cooperative, a private foundation or an association, a mutual insurance foundation, a small insurance foundation or a savings bank may also be held without the physical presence of the participants and resolutions may also be passed in a different manner. Applying this statutory order mutatis mutandi to company-like entities (such as, for example, the judicial support agency (Justizbetreuungsagentur)) is also possible.
The purpose of the statutory order is to prevent physical meetings between the participants of meetings of all sorts. Within this context, the term “meetings” refers to large shareholders’ meetings or general meetings of shareholders as well as to smaller panels, such as meetings of the supervisory board. Furthermore, the term includes not only meetings regulated by law, but also meetings which are provided for in the memorandum or the articles of association.
Individuals who are usually present during these meetings may now participate remotely. In addition to shareholders of corporations, the statutory order also applies to board members and supervisory board members who may attend the general meeting of shareholders virtually.
With the Fourth COVID-19 Act, the legislator also provided for the possibility to carry out notarisations without the physical presence of a notary at shareholders’ meetings where the participation of a notary is generally mandatory.
The statutory order regulates only the specifics resulting from the convening and holding of virtual meetings. In addition, the statutory provisions and regulations under company law continue to be applicable. In the event of any non-consistency, however, the statutory or-der - as lex specialis - shall prevail. Thus, the already available possibilities of convening meetings without the presence of the participants (such as holding a supervisory board meeting via video conference) or passing resolutions in a different manner (such as by circulation) are not restricted.
Within the meaning of the statutory order, a virtual meeting is a form of video conference where all participants may speak and cast their votes. Where participants lack the technical means for such optical and acoustic two-way communication in real time, a mere acoustic connection - as is the case with telephone lines - is considered sufficient. However, a mere acoustic participation is permissible only for half of the participants at the most. When determining the quorum, these participants, too, have to be counted in.
The technical requirements for participation and organisational requirements, if any, - such as prior registration - must be communicated in detail already upon convening the virtual meeting.
What is the procedure for verifying the identity of the participants? Verifying a participant’s identity is necessary only in case of doubt as to the his/her real identity. The identity can be verified, for example, by the participant holding up a photo ID in front of the camera.
In case of technical issues occurring during the use of electronic means of communication, the enterprise is responsible only to the extent that these are attributable to the company’s sphere of responsibility (section 2 (6) Company law-related COVID-19 Statutory order (Gesellschaftsrechtliche COVID-19-Verordnung, COVID-19-GesV)). In addition to affecting claims for damages against the company, this has also implications for the passing of valid resolutions. With regard to small groups of participants, virtual meetings must be suspended in case of connectivity issues to enable the affected participants to re-establish a connection.
Special provisions for general meetings of shareholders of stock corporations
General meetings of shareholders of stock corporations are usually characterised by a large number of participants. Regular video conferences are thus not suitable for holding general meetings of shareholders.
In order for stock corporations to hold a virtual general meeting of shareholders, the pos-sibility to participate in the meeting from anywhere by way of an acoustic and optical connection in real time is sufficient; in this case, the individual shareholders are only able to follow the meeting, while speaking at the meeting and participating in decision-making is enabled in a different manner (section 3 (1) COVID-19-GesV).
However, to meet the shareholders’ right to information and the right to submit applications, a time slot must be reserved during the meeting for submitting questions in writing and applications to the company using electronic means. The questions and applications shall be read out by the chairperson. Special voting software may be used for the purpose of decision-making.
In addition to holding a virtual general meeting of shareholders, a listed company’s general meeting of shareholders may - also in the absence of a basis under the articles of association - be broadcasted publicly (section 102 (4) Austrian Stock Corporation Act (Aktiengesetz, AktG)) and/or votes may be cast by mail (section 127 AktG). Due to the legal basis, there are no concerns with regard to data protection.
If a virtual general meeting of shareholders was only announced upon convening the meeting, it is sufficient to provide detailed information on the virtual holding of the meeting as early as 21 days before the general meeting takes place and to announce such providing of information upon convening the meeting (section 108 (3) to (5) AktG).
In case of listed stock corporations, companies of which shares or stocks are traded via a multilateral trading facility (MTF), or companies with more than 50 shareholders, it is envisaged that only a special proxy may submit resolution proposals, cast votes and file an objection within the context of the virtual general meeting. The company must propose at least four suitable persons who are independent of the company to take the role of special proxies, of which at least two must be attorneys-at-law or notaries (section 3 (4) COVID-19-GesV). Thus, shareholders must authorise one of these proxies to participate in the general meeting. The company bears the costs incurred in connection with commissioning the special proxies.
Until a certain point in time during the virtual meeting, shareholders must be given the opportunity to contact their proxy (for example for the purpose of changing instructions or submitting questions). The shareholders must be enabled to exercise the right to information themselves.
In case of disruptions in communication, the contesting of resolutions is only possible to the extent that the company is at fault for the disruptions (section 102 (5) second sentence of the AktG).
These provisions regulating a stock corporation’s holding of general meetings apply mutatis mutandis also to mutual insurance foundations (section 3 (5) COVID-19-GesV).
If a stock corporation announced the convening of its general meeting already before the statutory order was issued, announcing specific organisational and technical information with regard to the holding of the virtual general meeting as late as 14 days prior to the general meeting is sufficient (section 5 (2) COVID-19-GesV). Unless such information is made available on the company’s website, it must be communicated to the shareholders, without requesting to do so being necessary, for example, by way of registered letter or email.
Special provisions for general meetings of cooperatives and associations
Similarly to stock corporations, cooperatives and associations also have very large memberships. For this reason and in parallel to the regulations applying to stock corporations, a possibility for cooperatives and associations to hold virtual general meetings was created.
In cases where holding a virtual general meeting is not possible or not expedient, the board may order voting on certain resolution items to take place in writing without this being provided for in the articles of association (section 4 (2) COVID-19-GesV).
A voting procedure in writing shall be announced according to the regulations applicable to invitations to the general meeting. Proposed resolutions must be published, and members must be given the opportunity to make statements and submit questions in writing up to 72 hours prior to voting. The answers along with the questions and the members’ statements must be published as well (section 4 (3) COVID-19-GesV).
For the purpose of the actual voting, the members must be provided with a ballot paper along with the announcement of the meeting which must be completed with their name and their vote and sent by mail or placed in the cooperative’s or association’s mailbox on the day of the voting at the latest to exercise their voting right with effect.
If the requirement to verify the members’ identity with absolute certainty can be met, written statements and questions may also be submitted and votes cast by way of electronic means (section 4 (5) COVID-19-GesV).
Entry into force
The statutory order entered into force on 22 March 2020, with retroactive effect, and will remain in force until 31 December 2020.
Update – Postponing a general meeting of the members of an association
Associations must hold a general meeting at least every 5 years (section 5 (2) first sentence Associations Act (Vereinsgesetz, VerG). In deviation from the above and in accordance with the Eighth COVID-19 Act which was adopted by the National Council on 28 April 2020, the general meeting of the members of an association may now be postponed until the end of 2021. This possibility applies to meetings with more than 50 persons entitled to attendance.
The decision to postpone a general meeting or to hold a virtual meeting is at the discretion of the respective association’s management body.
The option to clarify urgent questions already before the postponed meeting by way of conducting a voting procedure in writing pursuant to section 4 (2) to (6) of the Company law-related COVID-19 Statutory order (Federal Law Gazette II No. 140/2020) remains unaffected by the above.
The changes also do not affect the right of a tenth of all members to demand that a general meeting is convened. In such a case, most likely a virtual general meeting pursuant to section 4 (1) of the COVID-19-GesV will have to take place.
These supplements to the Company law-related COVID-19 Act enter into force with retroactive effect as from 22 March 2020. The supplementary provisions on the postponement of a general meeting of the members an association shall be in effect until expiry of 31 December 2021.
Attorney at Law