The impact of the coronavirus pandemic extends to German stock corporation law. To ensure that businesses remain capable of functioning effectively, stock corporations can now also hold virtual general meetings.
The general meeting is a key governing body within a German stock corporation that facilitates communication between the executive and supervisory boards and shareholders. Its primary function is to adopt resolutions. The German Stock Corporation Act (Aktiengesetz, AktG) provides that general meetings require personal attendance. The stock corporation’s governing bodies and shareholders or their representatives are supposed to convene in person, discuss issues, and pass important resolutions.
With the coronavirus still at large, it is virtually impossible to hold a general meeting that requires physical attendance. A number of corporations have postponed their 2020 annual general meeting indefinitely. This has resulted in important resolutions being shelved and a delay in dividend payments.
To ensure that businesses remain capable of functioning effectively despite the severe restrictions on gatherings due to the coronavirus pandemic, we at the commercial law firm MTR Rechtsanwälte can report that Germany’s federal government has made it possible for stock corporations to hold virtual general meetings.
Pursuant to a resolution of the executive board and subject to the approval of the supervisory board, a general meeting can be held online without the need for the shareholders to be physically present. This does not require an amendment to the articles of association. In addition, the notice period for calling a general meeting has been shortened from 30 to 21 days.
The executive board will also be able to arrange advance payments on the net profit, and the eight-month deadline is to be extended so that it will be possible for the general meeting to be conducted during the financial year.
Shareholders will only be able to participate electronically in the virtual general meeting. The plan is to enable them to exercise their voting rights through electronic participation or postal voting. A virtual general meeting nevertheless entails severe restrictions on shareholders’ rights. For instance, they lose their right to have the executive board respond to their questions and have to submit questions two days before the meeting. In this way, shareholders lose their right to information and, at the same time, the scope for challenging resolutions of the virtual general meeting is severely restricted.
The crisis surrounding the coronavirus has thus led executive and supervisory boards as well as shareholders into completely uncharted territory, which unsurprisingly raises legal issues. Lawyers with experience in the field of stock corporation law can advise stock corporations’ governing bodies and shareholders alike.
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