The Royal Decree contains various provisions on co-ownership (chapter 1) and company and association law (chapter 2), those commented below, in the context of the fight against the COVID-19 pandemic. The measures foreseen in chapter 2 of the Royal Decree may be applied even if they are not contemplated by the Articles of association or are prohibited by them.
GOAL OF THE MEASURES FORESEEN BY THE ROYAL DECREE ON COMPANY AND ASSOCIATION LAW ?
These measures temporarily allow companies and associations as well as legal persons established under specific legislation (in case they have a board or a general meeting of shareholders) to organise general shareholder’s meetings and board meetings in more flexible ways. For that specific purpose and for certain aspects only, these measures allow to deviate from the provisions of the Companies and Associations Code and the Articles of association (please see our previous insight on the impact of the COVID -19 crisis on corporate matters).
MANDATORY OR OPTIONAL REGIME ?
The Royal Decree sets out an optional regime. Companies that choose not to make use of the options offered must fully comply with the rules applicable under the Companies and Associations Code.
MEASURES LIMITED IN TIME ?
The measures provided by the Royal Decree apply to general shareholders’ meetings and board meetings that should have been held or must be held between 1st of March 2020 and 3rd of May 2020, or in relation to which the convening notice was or must be sent or published between those same dates. The 3 May 2020 deadline may be extended by the king.
FIRST OPTION PROVIDED BY THE ROYAL DECREE FOR THE ORGANISATION OF THE GENERAL SHAREHOLDERS’ MEETINGS ?
A first option is that the board may compel the participants to the general shareholder’s meetings:
- to vote remotely in advance of the meeting[1]; and
- to vote by proxy through a proxyholder which may be appointed by the company (In case a shareholder would have already appointed his/her/ its own proxy holder, the votes or abstentions will nevertheless be taken into account if the proxy granted to this proxy holder contains specific voting instructions)
In listed companies, the voting forms and proxies must reach the company no later than the 4th day prior to the meeting. An e-mail with a scan or a photo of the forms or proxies is sufficient .
Even without an authorization in the Articles of association, any company can make available to the participants in its general shareholders’ meeting an electronic means of communication as pointed out in Article 7:137 of the Companies and Association Code that must allow the shareholders to be directly, continuously and simultaneously informed of discussions.
This possibility may be contemplated in smaller companies. In larger companies, this option will likely not be used as the technology required is not widely tested and would imply the electronic verification of the identity of the shareholders who attend remotely and provide for the possibility to vote electronically.
However, even if the meeting cannot be held remotely, this does not preclude the possibility for a company to, for example, make a livestream of the shareholders’ meeting passively available to its shareholders.
WHAT ABOUT THE RIGHT TO ASK QUESTIONS ?
In case shareholders wish to exercise their right to ask questions, the board, if it has requested the participants to vote remotely or by proxy, may also compel them to provide such questions in writing before the meeting.
In such case, questions must be answered in writing and at the latest prior to the vote. The shareholders or members must be informed of the answers. Listed companies must publish the answers on their website. If the meeting is broadcasted live, the questions can also be answered orally during the meeting or recorded for later broadcasting (e.g. by audio or video conference).
IS THE PHYSICAL PRESENCE OF SOME OF THE PARTICIPANTS NEVERTHELESS REQUIRED ?
If the board of directors has opted for a remote vote process or a vote by proxy, the members of the bureau of the shareholders’ general meeting, the directors, the (single) proxyholder and the statutory auditor are not required to be physically present. They can attend the meeting remotely through teleconference or video conference.
WHAT ARE THE SPECIFIC MEASURES FOR EXTRAORDINARY SHAREHOLDERS’ MEETINGS ?
For resolutions that must be enacted in a notarial deed, the physical attendance of the notary and one director/member of the bureau and/or the single proxyholder is required to sign the deed.
WHAT ABOUT THE CONVENING FORMALITIES ?
The usual convening proceedings will apply. However, listed companies are exempted from the obligation to send convening notices and other documents by regular post.
Non-listed entities are also exempted from the obligation to send the documents by regular post or to make these documents available at the registered seat. They may send the convening notices and accompanying documents to their shareholders or members by e-mail.
Legal entities that had already convened their general shareholders’ meetings can still amend the modalities of the meeting and the voting procedure without having to comply again with the convening formalities. However, in such case, they must inform the shareholders or members concerning this change in the most efficient way (e.g. via the website, e-mail).
Listed companies must announce the change via a press release and on their website at the latest six days before the meeting.
WHAT ABOUT THE SECOND OPTION, THE POSTPONEMENT OF THE GENERAL SHAREHOLDERS’ MEETING TO A LATER DATE?
As second option, the Royal Decree allows the board to postpone the date of the meeting, even if the meeting was already convened. In which case the shareholders must be informed in due time.
This possibility is particularly relevant for the annual general shareholders’ meetings, which may be postponed for up to 10 weeks after the statutory deadline (The deadlines in relation to the adoption of the annual board report and the approval and filing of the financial statements will be consequently also postponed by up to ten weeks). Other general shareholders’ meetings can be postponed indefinitely (until a new decision is taken by the company).
Listed companies must announce the postponement at the latest 4 days prior to the scheduled date.
The postponed meeting requires a new convening notice, in relation to which the usual convening formalities apply (unless the crisis measures are still applicable then).
The postponement of the meeting is not possible (i) when the shareholders’ meeting is convened in the context of the alarm bell procedure (capital impairment) where the net assets are, or risk to become, negative, (ii) at the request of the shareholders, members pursuant to the provisions of the Companies and Associations Code or (iii) at the request or by the statutory auditor. In these cases, the board can still apply the mechanisms listed above ( option 1).
SPECIFIC MEASURES FOR BOARD MEETINGS ?
Even in the absence of a specific provision in the Articles of association, board meetings can be held by communication means allowing collegial deliberations (e.g conference call or video conference). Unanimous written decision-making is also possible, even if prohibited by the Articles of association.
For board resolutions that must be enacted in a notarial deed (e.g. resolutions concerning the use of the authorised capital), the physical presence of one board member or representative (designated by the board by virtue of a proxy) before the notary is sufficient.
[1] For the SA, the board of directors makes available the form for voting or publish it via the company’s website. For the SRL, its Articles of association must be complied with and in the absence of a specific statutory provision, the conditions for remote participation must be complied with (Article 7:146 of the Companies and Associations Code, except if derogations are foreseen by the Royal Decree) (the tool used must be able to verify the participant’s identity and allow for direct and uninterrupted debate)