How many voting channels do digital general assemblies have?

Summary

• Strict legal requirements apply to general meetings. This also applies in particular to the use of electronic means for virtual and hybrid general meetings.
• Purely virtual general meetings are subject to higher formal hurdles than hybrid general meetings, which is why virtual general meetings will account for a negligible share of all general meetings held, at least in the next 1-2 years.
• Furthermore, principles of company law, such as the principle of immediacy, also remain valid for these new forms of general meetings.
• Furthermore, individual shareholders must not be disadvantaged by the use of electronic means due to the principle of equal treatment and the inalienable shareholder rights.
• These general conditions result in at least two, and in the case of hybrid general meetings even up to five, different voting channels, which must be observed for the legitimacy of AGM resolutions.
• From the perspective of boards of directors, shareholders and notaries, it is crucial that these complex requirements are implemented with user-friendly, intuitive and well-coordinated processes.

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Online AGMs as digital collaboration platforms with different user groups and tasks

Since the Covid 19 pandemic, digitalisation has been advancing at a rapid pace and is affecting all areas of life. One of these digitisation trends are cloud-based collaboration platforms that allow different users with different tasks to work together. One particular form of collaboration between different stakeholders are general meetings, which are attended by board members, shareholders, proxies and, depending on the subject matter, notaries, fiduciaries and auditors. Since 1 January 2023, new rules for virtual and hybrid general meetings have been in force under Swiss company law, which provide the legal basis for the use of collaboration platforms specially developed for this purpose, referred to in legal jargon as "general meetings by technical means".

Such platforms must take into account the requirements of the different user groups and enable them to carry out the tasks assigned to them by law or contract or to exercise their legal rights, as the case may be. In order to avoid the contestability of resolutions, the narrow legal framework must be adhered to. The bar is particularly high for resolutions on amendments to the articles of association, because they must be publicly certified by a notary public and submitted to the commercial register for registration.

As a result, a company must keep several voting channels open to its shareholders, including analogue ones, even at digital AGMs. But let's take it one step at a time: 

Online GMs and their legal requirements

In the case of digital AGMs, a distinction must first be made between purely virtual and hybrid AGMs. Purely virtual general meetings do not have a physical meeting place and take place exclusively online. In contrast, hybrid AGMs have a physical meeting location and allow shareholders who are not physically present to additionally participate and contribute via online channels. 

Since 1 January 2023, general meetings may only be held purely virtually if the articles of association of the company concerned explicitly provide for this. If a public limited company holds purely virtual general meetings without a basis in the articles of association, the resolutions passed in this way are invalid. Therefore, in order for the company to create the basis for virtual general meetings in its articles of association, it must first still hold at least one physical or at least hybrid general meeting. As a consequence, this means that purely virtual general meetings will be the absolute exception in the next one to two years. 

General Meetings may be held by hybrid means if the Board of Directors of the Company decides to use electronic means. An amendment to the Articles of Association is not necessary. 

However, the board of directors must regulate the use of electronic means in regulations for both virtual and hybrid AGMs.

No prior voting without a proxy!

The principle of immediacy continues to apply to both virtual and hybrid general meetings. In somewhat simplified terms, this means that shareholders who cannot attend the general meeting in person or electronically for scheduling reasons must instruct a proxy in order to be able to vote and elect validly. However, direct advance voting without instruction of the proxy will most likely not be accepted by the notaries public and commercial registers. 

Experience shows that at every general meeting there are always shareholders who do not instruct the proxy electronically, although the necessary technical means exist, and instead send him instructions on paper. 

Experience has shown that there are still shareholders who vote in the traditional way, even at face-to-face meetings or at the physical meeting place at hybrid AGMs: even if electronic means could be used for on-site voting, individual shareholders still prefer to vote by show of hands. 

Due to the principle of equal treatment and the inalienable rights of participation, shareholders must not be disadvantaged by the use of electronic means, which is why analogous forms of voting and instruction must also be provided in modern, hybrid general meetings if the need arises.  

Traditional voting channels in modern online AGMs

As a result, purely virtual general meetings lead to at least two voting channels: 

• live online during the AGM 
• Electronic instruction of the proxy 

Hybrid general meetings, on the other hand, can have up to five different voting channels: 

• Electronic instruction of the proxy 
• analogous instruction of the proxy
• live online during the AGM
• electronic instruction of the proxy 
• Raising of hands and electronic means of the BoD secretary in the room collecting these votes. 

This poses challenges not only for the board of directors and proxies, but also for the provider of electronic means. This is because the latter must take into account all the voting forms and channels actually used by shareholders and proxies in the interest of the legality of the passing of resolutions and bring the votes back together in a pool so that the results can be counted. 

It pays to go for a sophisticated solution

However, providing a single voting function that allows direct voting before and during the AGM will not be sufficient to meet the legal requirements. Not even in the case of a purely virtual AGM. 

In the interest of a higher participation rate, more broadly based company resolutions and thus strong corporate governance, the introduction of general meetings by technical means is nevertheless always worthwhile for a company. However, the voting preferences of shareholders and the legal requirements for legitimate AGM resolutions must be taken into account. 

Konsento has developed sophisticated processes and electronic tools with a focus on simple and intuitive usability in order to provide the best possible support for the board of directors, shareholders and notaries. The web-based software has been tried and tested in numerous general meetings and board meetings and provides a solid basis for the public notarisation of the resolutions passed by notaries who also participate online.

Book a free demo today for more information.