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What effects does the current situation have on planned general meetings? ​Can general meetings be held? And are there any delays in company registrations?

Datum: 
Mittwoch, 10. Juni 2020

What effects does the current situation have on planned shareholders' meetings? Can shareholders' meetings be held? And are there any delays in registrations with the commercial register?

Overview

Questions and answers:

When should we hold our annual shareholders' meeting this year?

According to the stock corporation act the management board must convene an annual shareholders' meeting, which must take place within the first eight months of the financial year (ordinary shareholders' meeting). The "program" of the annual shareholders' meeting includes, among other things, the discussion of the annual and consolidated financial statements (already approved by the supervisory board) or the resolution on the appropriation of the balance sheet profit.   If the financial year of a stock corporation corresponds to the calendar year, the annual shareholders' meeting pursuant to the stock corporation act must take place until the end of August. In the course of the 2nd Covid-19 Act the period for holding the annual general meeting of a stock corporation has been extended by four months to twelve months. Accordingly, the annual shareholders' meeting does not have to take place within the first eight months of the financial year, but within the first twelve months of the financial year of the respective stock corporation. If the financial year corresponds to the calendar year, annual shareholders' meetings could even be held until the end of December.

For stock corporations whose financial year ends on 30 April 2020 or later, the change in the law does change anything: for these companies, the period of eight months remains, because the provision on the extension of the period expires again at the end of 31 December 2020.

European Companies (SEs) may also hold their annual general meeting later, namely within the first 12 months of the financial year instead of within the first six months. On 28 May 2020 a corresponding regulation of the European Commission came into force.

By when must the accounting documents for the annual shareholders' meeting be available?

Under corporate and stock corporation law, the management board of a stock corporation must prepare the accounting documentation in the first five months of the financial year for the previous financial year and submit them to the supervisory board, which must examine the documentation within two months of receipt, make a statement to the management board about such documentation and submit a report to the shareholders' meeting.

Within the scope of the 4th Covid-19 Act, it has now been determined, in deviation from the above, that the five-month period granted to the management board may be exceeded by a maximum of four months if, as a result of the Covid-19 pandemic, it is not possible for the management board to prepare the accounting documentation in the first five months of the financial year and submit them to the supervisory board. It is not expressly stipulated whether and to what extent the management board must explain in individual cases which concrete circumstances caused by Covid-19 led to the fact that the five-month period could not be complied with.

This provision shall apply to accounting documentation for which the deadline for preparation has not yet expired on 16 March 2020. It shall cease to apply upon expiry of 31.12.2020 and shall be applied for the last time to accounting documentation for balance sheet dates prior to 1.8.2020.

We would like to hold a "virtual" shareholders' meeting in the coming weeks. What should be taken into account?

Everyone is currently talking about the "virtual" shareholders' meeting, i.e., a shareholders' meeting that is held without the physical presence of all or individual participants.

The shareholders' meeting of a stock corporation does not necessarily have to be held via an acoustic and optical two-way connection. Instead, it is admissible if the individual shareholder is able to watch and listen to the course of the meeting in real time via an acoustic and optical connection (it is sufficient if not more than half of the participants only listen); however, the individual shareholder must be able to make requests to speak and participate in votes by other means during the meeting (e.g., by electronic, written transmission of questions or motions which are then read out by the chairman; voting via special voting software). Reasonable time limits may be set during the meeting for the submission of requests to speak (questions and resolutions). Shareholders who are this way able to exercise their rights are in any case participants in the sense of stock corporation law and shall therefore be included in the list of participants.

In addition to the virtual conduct of the annual shareholders' meeting, a transmission of the annual shareholders' meeting and/or a vote by letter is also admissible, even if this is not provided for by the articles of association.

Under certain conditions (listed company; stock corporation whose shares are traded on an MTF; more than 50 shareholders), it may be prescribed that the filing of a motion for a resolution, the casting of votes and the raising of an objection in the virtual shareholders' meeting can only be carried out by special proxies appointed by the company.

The decision as to whether a virtual meeting should be held and which interconnection technology should be used is taken by the convening body, i.e., usually the management board. In doing so, both the interests of the company (e.g., in an orderly course of the meeting) and the interests of the participants (e.g., their technical means) must be adequately taken into account.

The invitation to the meeting must announce the holding of a virtual meeting. More detailed information must be provided at the latest together with the documents for the annual shareholders' meeting in accordance with section 108 para 3 or 4 Austrian Stock Corporation Act as of the 21st day before the meeting. If the respective company is listed on the stock exchange, this information must be provided on the company website. A private company may display this information at its registered office instead, and must send it to any shareholder upon request.

If there is reason to doubt the identity of a participant (e.g., because the participant is not known personally), the company must take appropriate measures to verify the identity (e.g., by asking the participant to hold a photo ID in front of the camera).

Where technical problems occur during the transmission of the annual shareholders' meeting, grounds for damages and the contestation of resolutions in principle only exist if these problems are attributable to the sphere of the company. However, the smaller the group of participants in a virtual meeting, the more the company will have to interrupt the virtual meeting in order to allow these participants to re-establish the connection.

We would like to hold the annual shareholders' meeting in the coming weeks. What options are there to make it easier to hold an annual shareholders' meeting?

In general, the following points should be taken into consideration when preparing for shareholders' meetings to be held in the coming weeks or months:

  • Check the possibility of an alternative date.
  • Keep in mind that there are regulations that prohibit indoor events if a certain number of participants is exceeded (currently the limit is 100 people, but this may change). Kindly note that regulations issued by the administrative authorities could further limit the number of persons staying in a room (e.g the discussion on the controversial "Easter Decree").
  • When selecting the premises where the shareholders' meeting is to take place, take into account that  the minimum distance between persons is possible .
  • Plan precautions to protect the participants, such as hygiene measures.
  • Prepare Q&A's on current issues relating to Covid-19 that you will publish on your website in advance, such as precautions you have taken to protect the shareholders.
  • Check the legal, technical and personnel requirements for (extended) online participation in the annual shareholders' meeting or a virtual shareholders meeting.
  • Prepare a plan to be able to react to unexpected situations spontaneously. This may concern a short-term absence of the board members or the notary public at the shareholders' meeting or the occurrence of symptoms of illness of any of the participants during the shareholders' meeting.

Can a shareholders' meeting be postponed?

A shareholders' meeting of a stock corporation or a limited liability company can be postponed or cancelled. In principle, the corporate body who has convened the respective shareholders' meeting is authorized to do so. In the case of a shareholders' meeting of a stock corporation, this will be the management board, or alternatively the supervisory board; in the case of a shareholders' meeting of a limited liability company, this will be usually the managing director(s).

The postponement of the annual shareholders' meeting of a stock corporation may not be arbitrary, but must be objectively justified. The protection of the shareholders and employees of the company against infection with the coronavirus (Covid-19) constitutes undoubtedly an objective reason. Nor is it in the interest of the company if a large number of shareholders cannot attend the annual shareholders' meeting due to e.g. "curfews" or travel restrictions.

The reasons leading to the decision to cancel or postpone the shareholders' meeting should be documented according to general rules. If the cancellation or postponement is due to an official order of an authority, a reference to such order will suffice.

What should be considered if a shareholders' meeting is postponed?

There are no special formal requirements for the mere cancellation of a shareholders' meeting which have to be observed. It is advisable to use the same communication channels as those chosen for convening the shareholders' meeting. Finally, it is important that communication channels are chosen that reach the largest possible number of shareholders (e.g. via the company's website).

If the shareholders' meeting is not only cancelled but also postponed, the postponement constitutes the convening of a new shareholders' meeting, which is why the postponement must be made within time to ensure that it meets the requirements for convening a new meeting. In this case, the formal requirements, which generally apply to stock corporations or limited liability companies, must also be observed.

What alternative dates are available for shareholders' meetings?

With respect to limited liability companies, known obstacles of the shareholders must be taken into account when setting a date for shareholders' meetings. Thus, travel restrictions or other measures that make it difficult or impossible for shareholders to attend the general meeting must be taken into account when determining a (substitute) date for shareholders' meetings.

When determining a substitute date for a shareholders' meeting, it must be taken into account that there is no unreasonably long period of time between convening of the meeting and the shareholders' meeting. Anything over two months should be treated critically.

For the duration of measures relating to coronavirus (Covid-19), which significantly restrict the freedom of movement of shareholders or their representatives, it appears justified - also under the previous legal situation – to postpone the annual shareholders' or general meeting even beyond the 8-month period provided for by law (for stock corporations or limited liability companies) or the 6-month period provided for by law (for SEs).

Pursuant to a proposal for change of legislation (2nd Covid-19 Act), the period for holding the shareholders' meeting of a stock corporation shall be extended so that it does not have to take place within the first eight months of the financial year, but within the first twelve months of the financial year of the respective company. Therefore, if the financial year corresponds to the calendar year, shareholders' meetings could even be held until the end of December instead of the end of August (please see above).

Do shareholders' meetings of limited liability companies have to be held physically or is a video conference also possible?

The following distinction must be made: there are shareholders' meetings, which must be recorded by a notary public, e.g. if a change of the articles of association, a capital increase or a merger is to be decided upon. Shareholders' meetings that can be held without the involvement of a notary public can also be held e.g. via video conference, provided that all shareholders agree. If the involvement of a notary is required, shareholders' meetings can also be held on the basis of (written) powers of attorney. This can, for example, make it possible to carry out a project in the case of planned restructurings of a group.

The 4th Covid-19 Act now explicitly provides that general assemblies can be held without the physical presence of the participants until the end of 2020 and that resolutions are passed in a co-called "virtual meeting". This allows, in particular, also those resolutions to be adopted which must be passed in a shareholders' meeting and certified by a notary public. Details are regulated by an ordinance of the Federal Minister of Justice.

A virtual meeting may be held if it is possible to participate in the meeting from any location by means of a two-way audio and optical connection in real time. It must be possible for each participant to speak and take part in votes. However, it is sufficient if not more than half of the participants are only connected to the meeting acoustically (e.g., via telephone).

The invitation to the virtual meeting shall specify the organisational and technical requirements for participating in the virtual meeting.

If there is reason to doubt the identity of a participant (e.g., because the participant is not known personally), the company must take appropriate measures to verify the identity (e.g., by asking the participant to hold a photo ID in front of the camera).

Where technical problems occur during the transmission of the annual shareholders' meeting, grounds for damages and the contestation of resolutions in principle only exist if these problems are attributable to the sphere of the company. Since the number of shareholders and thus also the number of participants is usually rather small in the case of limited liability companies, the company will have to take noticeable connection problems even of only individual participants as a reason to interrupt the virtual meeting in order to enable these participants to re-establish a connection.

Can we also pass a circular resolution instead of a shareholders' meeting of a limited liability company?

Also here applies the following: there are certain resolutions that must be passed in the course of a shareholders' meeting recorded by a notary public, e.g. amendment of the articles of association, capital increase or merger. Other resolutions can be passed by circular. In some cases, however, the notarization of the signatures of the shareholders is required, especially for resolutions that must be filed for registration with the commercial register, such as the appointment of managing directors. Other resolutions may also be passed informally by way of a circular resolution. For example, resolutions on the approval of transactions or instructions to the managing directors can also be passed by e-mail.

What happens if one of the shareholders of a limited liability company refuses to agree to a resolution by circular?

In principle, a prerequisite for resolutions to be passed by circular is that all shareholders agree to this form of resolution. If a shareholder does not agree, a shareholders' meeting must be convened. From the duty of loyalty, it can be assumed that shareholders are increasingly required to agree to resolutions by circular. However, this is not enforceable in the short term. The question may arise, however, whether a claim for damages exists against such a shareholder if damage is caused by a refusal without good reason to consent to a resolution by circular, for example because a business transaction that is advantageous for the company is not approved.

What if we cannot hold the annual general meeting in time?

With the 4th Covid-19 act, the deadline for holding the annual general meeting has been extended to one year, i.e. it must be held within 12 twelve months as of the end of the financial year. This extension of the period applies even if a shorter period is stipulated in the articles of association.

Do shareholders' meetings of a stock corporation have to be held physically?

Due to the most recent developments, which also include a general ban on public assembly and travel restrictions, it is practically impossible for stock corporations to hold shareholders' meetings in the conventional way in most cases at this point in time. However, the right of shareholders to participate physically in shareholders' meetings cannot be waived, even in times of the coronavirus crisis. The Stock Corporation Act generally provides for possibilities to hold shareholders' meetings online (i.e. satellite meeting, remote participation or remote voting).

In the case of remote participation, shareholders are able to participate in the shareholders' meetings by means of a two-way audio and, if necessary, optical connection in real time (i.e. video conference), so that shareholders can follow the meeting and, if the chairman gives them the opportunity to speak, can address the shareholders' meetings themselves. In the case of remote voting, on the other hand, shareholders submit their votes to the company electronically (e.g. voting via the internet (with individual access codes or other authentication) or e-mail).

The articles of association may also provide that shareholders may participate in the shareholders' meeting through voting by letter. For this purpose, the company must provide shareholders with a form including all announced proposals for resolutions.

According to the planned change in the law by the 4th Covid-19 Act, board meetings, e.g., supervisory board meetings, can be held without the physical presence of the participants during the coronavirus crisis. Thus, supervisory board meetings - even without the corresponding provision in the articles of association - do not have to be physically held. For details please see "We would like to hold a "virtual" shareholders' meeting in the coming weeks. What should be taken into account?"

Do supervisory board meetings have to be held physically or is a video conference also possible?

In general, supervisory board meetings of a limited liability company or stock corporation can also be held by means of a video conference. Subject to any contrary provision in the articles of association or the rules of procedure of the supervisory board, the decision as to whether a resolution of the supervisory board shall be taken without a physical meeting is the responsibility of the chairman. A distinction must be made between a simple and a qualified video conference:

  • A so-called qualified video conference exists if all participants can see and hear each other, the audio-visual quality allows an authentic recording of the details of human mimic, gesture and intonation and the communication is secured against access by unauthorized persons. Such a qualified videoconference is equivalent to a physical meeting and therefore counts as one of the four meetings required by law.
  • In addition, there are other conference types which do not meet the above-mentioned criteria, but which in principle enable the participating persons to receive visual and audio transmission in real time. These simple video conferences are not equivalent to the physical meeting of a supervisory board meeting and therefore do not count as one of the four meetings required by law.

Thus, if it is not possible to organize a qualified video conference, an informal consultation can be held with the help of the above-mentioned media (telephone conference, video conference), for example, and then a corresponding written circular resolution can be passed.

To be able to hold a supervisory board meeting by means of a simple video conference, all members of the supervisory board must agree, i.e. the members of the supervisory board may object to a supervisory board meeting being held by means of a simple video conference. However, a qualified video conference is equivalent to a physical meeting and therefore the supervisory board members have no right to object.

Kindly note that pursuant to a change in legislation (4th Covid-19 Law) to allow meetings of shareholders and board members of companies to be held without the physical presence of the participants and that resolutions are passed by other means until the end of 2020. If the proposal is implemented in this way, supervisory board meetings in general (and possibly also shareholders' meetings) would no longer have to be held physically, even without a corresponding provision in the articles of association. We will inform you on any changes in this respect.

We are currently unable to hold the quarterly meeting of the Supervisory Board. Is that a problem?

According to the 4th Covid-19 Act, non-compliance with the legal regulations requiring quarterly meetings of the supervisory board is explicitly not a legal breach until the end of April 2020 if it is not possible to hold the meeting due to Covid-19 in time. After that, such meetings can and must take place again in any case.

Do board or managing director meetings have to be held physically or is a telephone or video conference also possible?

The form of decision-making for meetings of the executive board of a stock corporation or the managing directors of a limited liability company is not defined in more detail by law. Accordingly, physical presence is not absolutely necessary, so that the decision-making process can also be organized via modern means of communication (video conference, telephone conference, e-mail, fax, etc) with sufficient reliability and the opportunity for each member to participate.

Are there any delays in registrations with the commercial register?

Yes, delays are to be expected for registrations with the commercial register, because the courts are also currently only very limited staffed.

Is it a problem that there are delays with the commercial register?

A distinction must be made as to the consequences of this:

  • There are registrations with the commercial register, which are constitutive, i.e. their registration is a prerequisite for their effectiveness, such as changes to the articles of association, capital increase or merger.
  • However, there are also registrations with the commercial register, which are merely declarative, i.e. their registration is not a prerequisite for their effectiveness, such as submission of annual financial statements, change of managing director or change of shareholder. With respect to limited liability companies, the shareholder registered as shareholder with the commercial register is considered as shareholder of such company. However, the company can admit the new shareholder, e.g. to shareholders' meetings, even before such date. However, this may be relevant in the case of a dispute between shareholders. Delayed registration can also be an issue in the case of a change of managing director, in particular in the context of a dispute. Facts which are subject to registration (such as the deletion of a managing director) and which are not registered cannot be invoked against a third party; i.e. if a managing director has been dismissed but his dismissal has not yet been registered with the commercial register, he could still conclude contracts for the limited liability company - assuming the good faith of the contractual partner. However, in doing so he makes himself liable for damages.

We cannot make it to the notary right now. What are the options?

In corporate law, a notary is often required, for example for the transfer of shares, holding a general meeting or signing numerous applications for registration with the commercial register.

In principle, this requires personal appearance in front of a notary public. In order to prevent the further spread of Covid-19, it is currently necessary to reduce personal contacts between people to the bare minimum. However, this does not change anything about the need for notarial services, especially in the area of drawing up deeds. For this reason, pursuant to the 4th Covid-19 Act and in accordance with the technical requirements available, notarial documents can also be drawn up by a notary using an electronic communication facility until the end of the year.

For this purpose, the notary must be connected to the party before and during his signature or signature performance using an electronic communication facility through an optical and acoustic two-way connection without interruption and for such a long time that the notary can clearly and seamlessly follow the signing process.

Our newly founded limited liability company has recently been registered with the Austrian commercial register. We are now obliged to notify the Austrian beneficial owner register of the limited liability company's beneficial owners within four weeks. Given the current situation, are there any statutory mitigation measures? 

The 3rd Covid-19 act offers a mitigation opportunity, so that companies in the current situation do not have to suffer financial disadvantages (coercive and administrative penalties) due to a failure to meet obligatory deadlines. For this reason, the deadlines for reporting data in accordance with section 5 para 1 of the WiEReG (such as the initial notification of beneficial owners or notification of changes) and the deadline for imposing a penalty in accordance with section 16 para 1 of the WiEReG are interrupted. The prerequisite for an interruption is that (i) the deadlines have not expired by 16 March 2020 or (ii) the start of the deadline falls within the period from 16 March 2020 to the end of 30 April 2020.

These deadlines shall begin to run again on 1 May 2020. In addition, it has been stated that a further extension of the deadline (until 31 December 2020 at the latest) can be provided for by ordinance.

Your contact persons:

Christoph Brogyányi
Partner and Head of the Company Law Practice Group
T +43-1-533 4795-480
christoph.brogyanyi@dorda.at

Bernhard Rieder
Partner and Head of the Company Law Practice Group
T +43-1-533 4795-42
bernhard.rieder@dorda.at



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