COVID-19 and Corporate Law Considerations
Published on 30th Jun 2020
The new Code for Companies and Associations (the "CCA") that was passed in 2019 introduced several key changes to corporate governance. In light of the COVID-19 crisis, the government has issued further guidance on how companies and associations can operate in the current special circumstances.
Application in time
The Royal Decree of Special Powers No. 4 adopted by the Belgian Federal Government on April 9 2020, as amended by the Royal Decree of 28 April 2020 (the "Royal Decree No. 4"), introduces temporary solutions that go beyond the possibilities provided for in the CCA to avoid or reduce the physical presence at board of directors meetings or general meetings.
These exceptional measures provided for by Royal Decree no. 4 apply until 30 June 2020. This means that a general meeting or a board of directors meeting convened before 30 June 2020 may be held in accordance with the exceptional measures set forth by Royal Decree no. 4 as described below.
Director Liability and the board of directors
Directors may incur specific liability in the context of COVID-19. Directors have a duty to carefully and regularly review the impact and manner of dealing with the risks associated with COVID-19 in their own company, in order to ensure, among other things, the survival of the company in the short and long term (for example by making the decision to close the facility during the lockdown and to lay off employees). In this respect, it would, for example, be unreasonable to have the board of directors only meeting quarterly.
Meetings of the board of directors may in principle be held at a distance, via electronic means, without statutory authorisation, provided that a real-time debate and decision-making process is possible. The situation is, however, more complex for general meetings.
Another tool that may be useful in the context of COVID-19 is the use of unanimous written resolutions.
According to the CCA, the board of directors of a company may use unanimous written resolutions even if the articles of association do not expressly provide this possibility and without having to justify the urgent character of the decision. The board of directors may in this context adopt the annual accounts by written resolution. This has been confirmed by Royal Decree no. 4, which provides that the board of directors may adopt unanimous written resolutions in all circumstances. This means that companies that have not yet adapted their articles of association to the CCA may now resort to unanimous written resolutions, even if their articles of association contain specific restrictions in this respect (e.g. an emergency condition as required under the former Companies Code). Please note, however, that these restrictions will in principle become applicable again after 30 June 2020.
Greater flexibility for organisation of the general meeting
The general meeting of shareholders may also adopt unanimous written resolutions without the need for authorisation in the articles of association. Written shareholder resolutions will be particularly relevant for companies that need to have their annual accounts approved in the coming months. In this respect, the COVID-19 pandemic and its consequences may be considered as events subsequent to the closing of the financial year, which are not necessarily of a nature to require an adjustment of the accounts closed on 31 December 2019 (except for a possible case of discontinuity). If these events are significant, they need to be set out in the annexed information and/or in the management report.
If, for one reason or another, the ordinary general meeting cannot be held by unanimous written decision, it is also possible to grant a special discharge to the directors for not being able to convene the meeting on the date provided as set out in the articles of association. However, a postponement of the annual general meeting in the current context could mean that the obligation to submit the annual accounts to the AGM for approval within six months after the end of the financial year and file them with the National Bank of Belgium within thirty days of approval by the AGM would not be met. Royal Decree no. 4 therefore defers these deadlines by a maximum of ten weeks.
Other general meetings may be postponed until the situation has returned to normal, except in the event of the application of the alarm bell procedure when the net assets are negative or threaten to become so, or if the meeting is convened at the request of 10% of the shareholders or the auditor. Royal Decree No. 4 also allows the general meeting to be held by electronic means, even if this is not expressly provided for in the articles of association. Furthermore, Royal Decree no. 4 allows the members of the bureau, the board of directors or, if applicable, the auditor, to participate in the general meeting by electronic means, whereas they should normally have attended in person.
For general meetings that require the assistance of a notary, the physical presence of the notary and a director/member of the bureau and/or the (single) proxy is required to sign the notarial deed.
The Royal Decree n°4 allows the board of directors to impose on shareholders the exercise of their voting rights only at a distance, in combination with a proxy vote, even if the articles of association of the company do not expressly allow distance voting.
As far as proxy voting is concerned, the board of directors can now, pursuant to Royal Decree no. 4, oblige the shareholders to exercise their voting rights through a (single) proxy holder appointed by the board of directors. The existing representation requirements under the CCA remain applicable.
Remote voting forms and proxies can be sent electronically and signed by e-signature as an alternative for wet ink signatures. This may be done by a standard electronic signature (such as a pdf scan of a signature or even a name in an e-mail) and does not necessarily require an advanced or qualified e-signature within the meaning of the European "eIDAS" Regulation.
A company that has convened its annual general meeting before the publication of Royal Decree no. 4 may make use of the exceptional measures provided for by Royal Decree no. 4 and modify the organisation of this general meeting or postpone it, provided that the shareholders are properly informed.
All of this must of course be included and reviewed in the calendar of consultations of employee representatives that must take place before the approval of the accounts of the largest companies.