The COVID-19 virus causes many disruptions in the everyday life but also raises questions concerning the organisation of the general meeting of shareholders, most importantly in companies with a widely dispersed share ownership. In particular, one of the measures taken to prevent the spread of the COVID-19 virus is the prohibition of public gatherings. This effectively makes a physical general meeting impossible.
To mitigate the legal uncertainty surrounding the organisation of the general meeting, the Belgian government, like in a number of other jurisdictions, stepped in, on 9 April 2020, through a Royal Decree issued under its emergency powers.
This client briefing provides a high-level overview of the relevant applicable legal principles to the organisation of a general meeting of shareholders of companies organised as an NV/SA or a BV/SRL in the light of current circumstances, and the steps taken by the legislator to address the existing issues.
1. Principle: Physical meeting
As a rule, the general shareholders meeting should be held in the form of a physical meeting of the shareholders of the company, usually at the registered office of the company. As indicated, this is no longer allowed.
2. (Imperfect) alternatives under the Companies and Associations Code
2.1 Non-physical meeting
Under the Companies and Associations Code, there are several possibilities to limit the number of attendants on a general meeting of an NV/SA or BV/SRL. However, none of them are flawless and without legal risk in case of non-compliance:
A first way for a shareholder to exercise his voting rights without having to attend the general meeting is by appointing a proxy who can vote in his or her place. If all shareholders appoint the same proxyholder, one person can represent all shareholders on the meeting.
However, shareholders cannot be compelled to appoint a proxy nor can they be compelled to appoint the same proxyholder. Furthermore, even in case they do, the proxyholder, the members of the bureau of the general meeting, the directors and the statutory auditor will still have to attend the general meeting physically, even though in practice one could accept that some of them be excused. As such, at least a limited number of people will have to gather.
If the articles of association allow it, and subject to certain conditions, it is also possible for a shareholder to cast his votes directly in advance of the general meeting.
As with proxies, even if all shareholders vote in advance and decide not to physically attend, which they are not compelled to, the bureau, directors and statutory auditors will still have to convene in person. Furthermore, this solution is not 100% legally waterproof if the articles of association do not foresee this possibility.
Remote participation in a shareholders meeting
There is a possibility for shareholders to participate in a general meeting remotely. If the articles of association of the company allow it, and subject to certain conditions, the shareholders can follow the meeting live and vote in real time by means of electronic communication methods.
Again, (i) shareholders cannot be compelled to participate remotely, (b) the bureau, directors and statutory auditors will still have to gather in person, and (iii) a permission by the articles of association is required. Furthermore, as indicated below, the technology to organise a (large) remote shareholders’ meeting is not yet really tested in Belgium.
In case of non-compliance, for example (i) when holding a remote meeting or remote vote without statutory permission or (ii) forbidding physical attendance by shareholders while compelling to appoint a proxy, or (iii) allowing all of the bureau, directors and the statutory auditors to not physically attend, a (limited) risk exists that the decisions taken on such meeting can be declared null and void.
2.2 Postponement of the general meeting voting
Another possibility to avoid having to organise a general meeting is the postponement of it. It is accepted that the governing body of the company (often the board of directors) may delay the calling of or adjourn and even cancel a convened general meeting that has not started if circumstances, most likely also the Covid-19 virus circumstances, justify it. Such delaying, adjournment or cancellation when it relates to the annual general meeting that must be held at the time stipulated in the articles of association would then result in a technical violation of the articles of association.
Even if postponement is possible, it is unsure how long the corona crisis will last and certain decisions to be taken by the general meeting cannot wait for an extended time (for example the approval of the annual accounts which needs to occur, by law, within six months following the closing date of an accounting year with tax filings to be done within a month following the approval of the accounts). In view of these uncertainties and mandatory deadlines, some companies do not want to rely on the rather vague powers of the directors to adjourn the general meeting when called.
3. Intervention by the Belgian Government
Given those uncertainties in relation to the organisation of the shareholders’ meeting, the Belgian government, making use of its broad powers to issue emergency legislation, stepped in through the Royal Decree no. 4 of 9 April 2020 containing various provisions on co-ownership and company and association law in the context of the fight against the COVID-19 pandemic which allows to deviate from the Companies and Associations Code, effective immediately.
Non-physical shareholders’ meeting
The directors of a company can compel the shareholders to exercise their voting rights (i) by remote voting in advance of the general meeting, and (ii) through a (single) proxyholder designated by the company. In such case, the company can (and likely most often will) forbid the physical attendance of the shareholders at the meeting.
If those shareholders want to exercise their right to ask questions, the company can compel them to provide such questions in writing to the company before the shareholders’ meeting.
Furthermore, the (single) proxyholder, the members of the bureau of the general meeting, the directors and the statutory auditor can attend the general meeting remotely through teleconference or videoconference. This means that effectively nobody has to be physically present at the meeting.
In case of shareholders’ meeting which requires the assistance of a notary public, the physical attendance of the notary and one director/member of the bureau and/or the single proxyholder is required to sign the deed.
The Royal Decree also allows to hold the shareholders’ meeting remotely (e.g. through videoconference) even without the statutory permission which is normally required (see above). This will be feasible in smaller companies. It is, however, expected that in larger companies this option will not be used as the kind of technology required for such large operations is not widely tested. Such technology would a.o. require 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.
In case a meeting was already convened, the company can still make use of this option and alter the organisation of the planned meeting. Of course, the shareholders have to be informed about this.
Secondly, the Royal Decree allows companies to postpone the general shareholders’ meeting to a later date of its choice, even if the meeting was already convened (in which case the shareholders must be informed).
In such case, the obligation to have the financial statements of the company approved by the general shareholders’ meeting and filed with the National Bank of Belgium is deferred with maximum 10 weeks. Certain specific financial reports to be published by listed companies are also deferred for the same time.
Effectively, the annual general shareholders’ meeting can be postponed with 10 weeks without legal risk. Other general shareholders’ meetings can be postponed indefinitely (until a new decision is taken by the company).
Certain general shareholders’ meetings such as those convened by the statutory auditor or the shareholders directly and the meeting which has to be convened in case the net assets of the company drops, or threatens to drop, below zero cannot be postponed.
The Royal Decree allows to deviate from the Companies and Associations Code in the way as described above in case of shareholders’ meetings (i) which have been called (but have not been held yet) or will be called in the period 1 March 2020-3 May 2020 (even if the effective date of the meeting is after 3 May 2020), (ii) which must be held between 9 April 2020-3 May 2020, and (iii) which should have been held in the period 1 March 2020-9 April 2020 but did not take place. The 3 may 2020 deadline is further prolonged to 30 June 2020.