Various European countries have already passed emergency legislation which, among other things, enables companies to hold annual general meetings in the 2020 AGM season also without physical presence rights and obligations. The German legislator is now also creating corresponding special regulations for the current crisis. The draft of the “Gesetz zur Abmilderung der Folgen der COVID-19-Pandemie im Zivil-, Insolvenz- und Strafverfahrensrecht” of 23 March 2020 provides for substantial facilitations for holding annual general meetings in 2020, which are currently of considerable practical importance. According to current plans, the act will likely be passed on 25 March 2020.

In details, the act will regulate the following:

Extension/reduction of deadlines

The period for holding annual general meetings will initially be extended from eight to twelve months after the end of the financial year. It is therefore sufficient if the annual general meeting for the previous year is held by the end of the current financial year. However, this does not apply to the European company (SE) legal form, in which case a decision of the executive board to extend the deadline requires the approval of the supervisory board.

In addition, the 30-day notice period for convening the AGM may be shortened by nine days by the executive board with the approval of the supervisory board. Moreover, the notice period will not be extended by the number of days of the registration period (generally six), meaning that there is a significant reduction from what is in effect 37 days, to 21 days. In such cases, proof of shareholding must accordingly relate to the beginning of the 12th day before the meeting in the case of listed companies and, in the case of bearer shares in the company, be received no later than the fourth day before the annual general meeting, unless the executive board provides for a shorter period in the notice convening the annual general meeting. Deviating provisions in the articles of association shall be irrelevant. The deadlines for notifications pursuant to section 125 of the German Stock Corporation Act (Aktiengesetz - AktG) were also shortened accordingly. 

In addition, the deadline for the receipt of requests for additions to the agenda was reduced to 14 days before the meeting for listed and non-listed companies. 

Other deadlines under stock corporation law, such as those for making countermotions accessible, are not expressly adjusted by the act. 

Online AGMs also permissible without provision in articles of association 

The draft legislation provides that annual general meetings can also be held using electronic media in 2020, if the authorisation actually required is not included in the articles of association or the rules of procedure for the annual general meeting. The possibility of transmitting the AGM with audio and video, generally via Internet, is of practical relevance. In addition to the actual connection for the purpose of (passively) following the annual general meeting online, shareholders may also be enabled to participate in the meeting and thereby exercise all or some of their rights, including voting rights, via electronic media. Furthermore, supervisory board members may be enabled to participate in the AGM by means of video and audio transmission.

Contrary to the principle that the annual general meeting is a face-to-face event and therefore every shareholder must be able to physically attend, the executive board, with the approval of the supervisory board, can now also order that the annual general meeting be conducted entirely virtually, i.e. without the attendance of shareholders or their proxies. In such case 

• the entire meeting must be transmitted with audio and video, 
• exercise of shareholders' voting rights must be enabled via electronic communication (postal voting or electronic participation) and via proxies, 
• the shareholders must be given the opportunity to ask questions via electronic communication, and 
• shareholders who have exercised their voting rights via electronic communication must be given the opportunity to object to a resolution of the annual general meeting. 

According to the wording of the bill, it is sufficient to provide the opportunity of granting voting rights via electronic communication (postal vote) for the period until the beginning of the annual general meeting. In addition, the executive board decides at its own reasonable discretion on the manner in which questions will be answered in a virtual annual general meeting. The shareholders' right to ask questions may also be limited to those submitted via electronic communication at least two days before the meeting. If both the exercise of the right to ask questions and the right to vote are limited to the period prior to the meeting, the executive board may limit its response to questions at the meeting at its own reasonable discretion, while the results of the vote are already determined. This aids the providers of annual general meeting services and the management in holding the meeting. However, the connection between answering questions and voting is completely removed. It is not definitively clear whether lawmakers actually want this AGM format or whether it is a justifiable form of AGM organisation. 

Furthermore, the draft legislation expressly provides that an objection to a resolution of the annual general meeting held online, cannot, in particular, be based on a violation of the above provisions on the virtual annual general meeting, unless the company can be proven to have acted intentionally.

Advance payments on unappropriated profit also permissible without provision in articles of association

The executive board shall now be able to decide, also without authorisation by the articles of association, with the approval of the supervisory board, to pay an advance on the unappropriated profit to the shareholders. However, the restrictions under law and the articles of association on the amount of the advance payment must still be observed. The advance may not exceed half of the amount remaining from the net income for the period after subtraction of the amounts to be allocated to revenue reserves in accordance with the law and the articles of association. Nor may the advance exceed half of the prior-year unappropriated profit.

Supervisory board approval resolutions 

Notwithstanding any conflicting provisions in the company's articles of association or the rules of procedure of the supervisory board, the necessary resolutions of the supervisory board to make use of the simplified rules for approving decisions of the executive board may be adopted in writing, by telephone or in a comparable manner without the physical presence of the members of the supervisory board. Objections by individual members of the supervisory board to this form of resolution are therefore irrelevant.
 

Dr Mirko Sickinger, LL.M. is lawyer and partner at the law firm Heuking Kühn Lüer Wojtek in Cologne. He focuses on capital market law and corporate/M&A. The transactions he has advised on include IPOs and secondary offerings, bond placements, public takeovers and acquisitions of privately held companies. Dr Mirko Sickinger, LL.M. is the author of “Kallmeyer Umwandlungsgesetz” and “Münchener Anwaltshandbuch Aktienrecht”.

Lena Pfeufer is lawyer and partner at Heuking Kühn Lüer Wojtek in Cologne.