Article:

Impact of the Corona crisis on Annual General Meetings (AGM)

25 March 2020

In the middle of the intensive preparation phase for the 2020 AGM season, German listed stock corporations are now suddenly confronted with the issue of the effects of the corona crisis, which is currently keeping the German economy and the capital market on tenterhooks. More and more companies are reacting by cancelling the Annual General Meeting planned for the coming weeks, e.g. RWE AG or Adidas AG. 

The decision to cancel or postpone the Annual General Meeting is generally taken by the companies at their own discretion, subject to respective official orders to cancel major events, which the Executive Board must follow. In particular, the decision should be based on the current recommendations of the public health authorities and be made in consultation with them. A cancellation or postponement of the Annual General Meeting may be necessary in particular if the Annual General Meeting is to be held in a risk area or if a significant risk of infection is to be expected due to the number of participants.

The current draft of the law to mitigate the consequences of the COVID 19 pandemic provides for a temporary suspension of the statutory period of eight months after the end of the financial year, so that general meetings can also be held after this date. However, risks in connection with the contestability of resolutions of a "delayed" general meeting are generally not to be feared, even if the general meeting should only take place after the expiry of the statutory period. Failure to meet the deadline also has no influence on the legal validity of the annual financial statements and the subsequently adopted resolution on the appropriation of profits, provided that the delay is based on a justifiable reason. Liability risks for the members of the Executive Board and the Supervisory Board could arise in the event of a culpable failure to meet the deadline, which is unlikely to occur in this context. In any case, complete and comprehensible documentation of the decision-making process and its basis is indispensable.

Under stock corporation law, an "online annual general meeting" is basically also possible in such a way that shareholders can join the general meeting online and exercise their rights by means of electronic communication. On the one hand, however, this procedure requires a corresponding basis in the Articles of Association and, on the other hand, these modalities must be announced with the timely convening of the general meeting. In many cases, it will therefore not be possible to implement this in the short time available. However, the current draft of the law to mitigate the consequences of the COVID 19 pandemic provides for facilitations, at least for the current AGM season, to the extent that a decision for this procedure can be made even without a basis in the Articles of Association. Furthermore, the time limits for convening the general meeting can be shortened to up to 21 days. However, the "online general meeting" must not be confused with the "virtual general meeting", where there is no meeting at a physical location. This is inadmissible under stock corporation law, as the law is based on the idea of a general meeting in the sense of a physical meeting of shareholders. It is therefore not possible to exclude the physical right of shareholders to participate, so that the "online general meeting" can be used as an option (not an obligation) alongside the physical general meeting, but cannot replace it. However, under certain conditions, in particular the video and audio transmission of the entire meeting and the possibility to ask questions via electronic means of communication, the current draft of the law to mitigate the consequences of the COVID 19 pandemic will temporarily enable the Board of Management to hold a virtual general meeting as an exception.

Should the Annual General Meeting nevertheless be held in view of the Corona crisis, additional measures before and during the Annual General Meeting, such as refusal of admission or exclusion from the meeting for participants with relevant symptoms of illness, must always be considered with particular care on a case-by-case basis, as there are significant risks with regard to the contestability of resolutions due to violation of the right to participate. 

A number of questions also arise for non-listed stock corporations in connection with the holding of general meetings, especially when it comes to amending proposals for the appropriation of profits already submitted with the formal invitation in order to prepare the company for the challenges ahead.

We would be pleased to assist you with all legal questions in connection with the planning and conduct of your annual general meeting. Please do not hesitate to contact us at any time.