Court injunctions on general meetings during the Corona pandemic – Analysis of the ruling of the VG Frankfurt a. M. dated 02.04.2020, case no.: 5 L 744/20.F
The COVID-19 pandemic has presented the economic and corporate law environment with unprecedented challenges. In the spring of 2020, numerous capital market-oriented companies found themselves forced to explore new ways to conduct their general meetings. This led to significant legal uncertainty, particularly regarding the possibilities of challenging or prohibiting general meetings under the conditions imposed by pandemic-related restrictions. The decision of the Administrative Court of Frankfurt am Main (ruling dated 02.04.2020, case no.: 5 L 744/20.F) marks a significant point of reference regarding the legal limits of interim relief for shareholders in this context.
Legal Background: General Meetings under Pandemic Conditions
Statutory Foundations and Governmental Regulations
In the wake of the spread of the coronavirus, legislative measures expanded the possibilities for joint-stock companies to hold general meetings. The law that came into force on 28.03.2020 to mitigate the consequences of the COVID-19 pandemic in civil, insolvency, and criminal procedural law, among other things, paved the way for virtual general meetings, while not reducing the fundamental protection of shareholders’ rights. This left untouched the state regulations that restricted events in the interest of infection prevention.
Conflict Potential: Shareholder Rights vs. Infection Protection
The central question was whether a shareholder could potentially demand a complete prohibition of a general meeting through interim relief – particularly when it is claimed that the infection risk at a face-to-face event could not be managed under acceptable conditions.
Proceedings before the Administrative Court of Frankfurt: Facts and Procedural Considerations
Application for Interim Relief
In the specific case, a shareholder sought a court order under § 123 VwGO, requiring the city of Frankfurt am Main to prohibit a general meeting of a joint-stock company planned for April 2020. The argument presented was that holding the general meeting constituted a disproportionate risk situation in light of the Corona pandemic and the applicable containment regulations.
Review Standard of the Administrative Court
The administrative court needed to examine whether there was a claim under the Infection Protection Act or whether official action was required based on official investigations. It was crucial to determine whether the gathering should be mandatorily prohibited under § 28 (1) IfSG in conjunction with the then-current state ordinance and whether this could be enforced in the interim relief procedure against the municipality. The applicant also referred to his rights under the Stock Corporation Act, particularly the participation and involvement rights as a minority shareholder.
Court’s Decision
The VG Frankfurt denied the interim application. It first clarified that the law on measures in company, cooperative, association, foundation, and condominium law to combat the effects of the COVID-19 pandemic aimed precisely at facilitating the holding of general meetings for companies, for example, through virtual formats. Furthermore, the court stated that in individual cases, a properly implemented hygiene concept and the possibility of reducing the number of participants to the legal minimum of a meeting generally countered any prohibition.
Additionally, the court demonstrated that the applicant had no grounds for an order due to special urgency, as there was no absolute mandatory prohibition of the event based on the underlying regulations, but rather the authorities had discretionary powers.
Key Considerations and Implications of the Decision
Balancing between Minority Protection and Corporate Interests
The decision highlights the tension between minority protection for shareholders and the continuation of essential decision-making processes within joint-stock companies. According to the VG Frankfurt, a complete halt to general meetings is not warranted solely for reasons of general infection protection, especially since individual hygiene concepts and technical alternative solutions are regularly available.
No Unrestricted Right of Prohibition in Interim Relief
The ruling clarifies that interim relief for shareholders is not fundamentally intended to enforce executive general orders or administrative decisions in the sense of a general, unconditional ban on events. Rather, a differentiated proportionality assessment is required, which also considers corporate legal necessities.
Significant Role of Statutory Pandemic Regulations
Both the Stock Corporation Act and the pandemic-related exceptional regulations enacted at federal and state levels influence the judicial review and set clear limits for administrative prohibition orders. This results in a significant hurdle for interim relief applications, provided that companies implement pandemic-relevant protective measures and comply with legal requirements.
Outlook and Significance for Corporate Practice
While the ruling dates back to the early phase of the pandemic, the principles developed in it remain valid for similar future crisis situations. Corporate bodies are well advised to regularly review and implement existing pandemic concepts in a legally compliant manner. Meanwhile, shareholders should note that judicial interim relief against the holding of a general meeting requires careful justification along with evidence of actual and legal unreasonableness.
Contact and Individual Consultation Options
Especially in the sensitive conflict area of shareholder rights during exceptional situations like a pandemic, a qualified assessment of individual cases and potential courses of action is recommended. For further questions regarding participation, contestation, or information rights as well as the organization of general meetings, MTR Legal, with comprehensive experience in corporate, capital market, and company law — also at our location in Berlin — is available for consultation. For more information visit us at Legal Advice in Stock Corporation Law.
