Germany Update: Virtual Annual General Meeting as a model for the future

Due to the COVID-19 pandemic, the possibility was created in 2020 to hold general meetings exclusively in a virtual setting. The pandemic-related special arrangements expire after 31 August 2022.

Since the response to virtual general meetings was predominantly positive, this is to be permanently anchored in law in the course of the progressive digitization of stock corporation law – as announced in the coalition agreement.

On 9 February 2022, the Federal Ministry of Justice published the draft bill (RefE) of a law on the introduction of virtual general meetings of stock corporations, thus taking the first step at legislative level.

This article is intended to give a first overview of the planned innovations. Although the stock corporation will be considered below, the regulations under the RefE should also apply to the partnership limited by shares (KGaA), the European Stock Corporation (SE) and the Mutual Insurance Association (VVaG).

Temporary statutory provisions as a basic requirement

The virtual Annual General Meeting is intended to form an equivalent alternative to the still possible face-to-face meeting, regardless of the items to be dealt with.

In contrast to the current pandemic-related special regulations, it will be mandatory in the future to have a statutory provision that provides for the virtual Annual General Meeting as a format or authorizes the Executive Board to hold a virtual Annual General Meeting in individual cases (§ 118a AktG-RefE). The latter is expected to be the rule in practice.

In both cases, the provisions of the Articles of Association are to be limited to a maximum of five years in accordance with the RefE and can be renewed by the Annual General Meeting with the corresponding majority.

In order to give the companies time to implement the necessary amendment to the Articles of Association, the Executive Board is to be authorized to convene virtual General Meetings with the consent of the Supervisory Board on a transitional basis until August 31, 2023, even without the basis of the Articles of Association.

Requirements for future virtual general meetings

The basic requirements for holding virtual general meetings due to the pandemicare to be significantly expanded in accordance with the RefE. § 118 AktG-RefE contains, as a central provision of the legislative project, eight core requirements by which shareholder rights are to be ensured or (re-)established in the virtual Annual General Meeting:

1.The entire meeting is to be transmitted with picture and sound.

2.The electronic exercise of voting rights must be ensured.

3.Shareholders must be able to submit motions at the meeting electronically. Countermotions pursuant to Section 126 of the German Stock Corporation Act (AktG) are expressly not included in this.

4.Shareholders receive a right to information at the Annual General Meeting by means of electronic communication. However, the Executive Board may also decide that shareholder questions must be submitted no later than four days before the date of the meeting. In this case, the shareholders receive a right of demand at the meeting.

5.Advance publication of the Executive Board report or its main contents up to six days before the meeting.

6.Shareholders are granted the right to submit comments by means of electronic communication, which are to be made available to shareholders.

7.Shareholders will be given the opportunity to speak by means of video communication.

8.Shareholders are provided with a right to object to a resolution by means of electronic communication.

Mitigation of risks of avoidance due to technical faults

In order not to expose the companies to an incalculable risk of avoidance due to technical malfunctions, the current restrictions on the right of avoidance in Section 243 (3) of the German Stock Corporation Act (AktG) are to be extended. If the company is not accused of intent or gross negligence, a challenge to a resolution should therefore not be based on infringements of rights caused by technical malfunctions.

The RefE aims to ensure that companies do not refrain from holding virtual general meetings out of concern for technical problems.

Incidentally, the avoidance regime remains largely in place, which also applies to resolutions at face-to-face meetings.

Conclusion and outlook

From the point of view of companies, it is to be welcomed that a legal framework for the holding of virtual general meetings should be created regardless of the COVID-19 pandemic. Overall, the RefE creates a successful balance between the company’s interest in the legally compliant conduct of virtual general meetings and the interests of shareholder protection.

Since only one draft bill is available today, it remains to be seen what changes it will make in the course of the further legislative process. Due to the expiry of the pandemic-related special regulations after 31 August 2022, it can be assumed that the legislative project will be advanced rapidly.

Just as interesting as the exact design of the envisaged law will be the question of how and, above all, how quickly AGM service providers will adapt their products to future legal requirements.

By Michael Usselmann, MELCHERS, Germany, a Transatlantic Law International Affiliated Firm.  

For further information or for any assistance please contact germany@transatlanticlaw.com

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