Quick Bites: Germany has new regulations for virtual general meetings

On 27 July 2022, the Act on the Introduction of Virtual General Meetings of Stock Corporations came into force. This created the legal basis for holding virtual general meetings in the future.

What is the aim of the law?

Through the introduction of the law, the digitalisation in German stock corporation law continues to advance. After the special regulations to bridge the Covid 19 pandemic expired on 31 August 2022 the law lacked a basis to be able to hold virtual general meetings in the future The legislator has now solved this.

When?

New legislation: The law came into force on 27 July 2022.

There is now a transition period until 31 August 2023 during which companies can react to the new legal regulations.

Interim period: For general meetings convened up to and including 31 August 2023, the executive board may decide, with approval of the supervisory board, that the meeting shall be held as a virtual general meeting pursuant to section 118a German Stock Corporation Act (AktG).

Who is affected?

The possibility regulated in the AktG to continue to hold virtual general meetings in the future exists for stock corporations (AG) as well as the related legal forms: partnership limited by shares (KGaA) and European stock corporation (SE).

What is to be done?

Basis in the articles of association: The newly created legal regulations require that a basis is included in the articles of association of the companies in the future. Here it is left to them to decide whether they

• permit virtual general metings in principle or
• merely create a basis of authorisation for the executive board.

The corresponding amendments to the articles of association must be implemented by 31 August 2023. Otherwise, the option of a virtual general meeting will no longer apply.

This must also be taken into account in the case of start ups.

Time limit: It should also be noted that the law determines a time limit of five years for the basis in the articles of association.

So far, it is unclear whether a simple confirmation resolution by the general meeting or an amendment to the articles of association is required for the recurring legitimisation of the basis in the articles of association.

Essential contents

It is possible for stock corporations and its related legal forms to continue to hold general meetings without the physical presence of shareholders or their proxies at the place of the general meeting.

• Section 118 a 1 AktG and the modified sections 121 132 AktG set out the main requirements for holding a virtual general meeting
• The specifications refer to, among other things:
   
  • Participation rights and obligations
  • The exercise of the right to speak, the right to make motions and the information right
  • The exercise of voting rights and their transferability
  • The exercise of the right to object
  • Technical requirements
  • Measures regarding preparation
• The regulations for listed and unlisted companies differ slightly.
• The new regulations on the virtual general meeting differ from the special regulations during the Covid 19 pandemic. According to the new regulations, shareholders' rights can be exercised in a virtual general meeting in the same way and to a large extent in a comparable form as in a physical general meeting.

 

First assessment

The legislator is making progress with the new regulations in the digitalisation of company law.

It is important to emphasise, however, that there are deviations from the virtual general meeting known through the Covid 19 pandemic: The "new" virtual general meeting is strongly influenced by the traditional physical general meeting.

The new regulations still shift information processes to a large extent to the run up to the general meeting. On the other hand, the new format improves shareholder rights and leads to an intensification of the exchange with shareholders (qualitatively and quantitatively). In particular, the existence of shareholder rights before and at the general meeting will lead to additional effort on the part of the companies.

Against this background, it remains to be seen how many companies will decide to hold a virtual general meeting in the future. The advantage lies above all in the omission of the physical meeting and the associated costs as well as a better balance from a sustainability point of view.

For companies with a manageable and consensual group of shareholders (including the "one shareholder company"), the approximation of shareholder rights to the physical general meeting will have less significance and the virtual general meeting will (as before) offer notable advantages.

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