General assemblies with electronic means - what boards of directors must now consider
Now the time has finally come: the long-awaited revised stock corporation law came into force on 1 January 2023 and enables further digitalisation steps in the administration of stock corporations. Among the essential innovations are the introduction of general assemblies with electronic means and, as a special type of these, virtual general assemblies.
These new forms of general assembly are linked to narrow legal prerequisites, which we would like to illuminate below.
General assemblies with electronic means - the different types
Under certain conditions, shareholders who are not present at the place of the general meeting may exercise their rights electronically. The general assembly thus takes place physically at a specific location, but shareholders who are not present at the location of the general assembly can participate electronically, for example via the internet or by telephone. Since part of the shareholders participate physically and part of the shareholders participate by electronic means, such general assemblies are referred to as hybrid general assemblies.
A virtual general assembly is a general assembly that is conducted entirely online. This means that all participants connect via the internet and attend the general assembly online.
In both cases, participants can take part in the general assembly via electronic media and, in particular, exercise their vote electronically (so-called "direct voting"). Until now, there was only the possibility to give instructions to a proxy electronically.
The direct electronic participation of shareholders enables them to cast a more informed vote after a discussion or question-and-answer session at the general assembly. This is clearly a strengthening of shareholders' rights. The possibility to attend and vote directly at a general assembly without having to travel to a physical general assembly is also an extension of shareholders' rights and corresponds to modern forms of work and communication.
Common requirements for the conduct of general assemblies with electronic means
For both hybrid and virtual general assemblies, the board of directors must regulate the use of electronic means. Ideally, this should be done in a set of regulations. In doing so, the board of directors ensures that
- the identity of the participants has been established;
- the votes in the General Assembly are transmitted directly;
- every participant can make motions and take part in the discussion;
- the result of the vote cannot be distorted.
Special requirements for hybrid general assemblies
In connection with hybrid general assemblies, the law merely stipulates that the board of directors may provide that shareholders who are not present at the place of the general meeting may exercise their rights electronically. The authority to hold a virtual general meeting thus lies exclusively with the board of directors.
Special requirements for virtual general assemblies
Compared to hybrid general assemblies, the requirements for holding virtual general assemblies are somewhat higher: the law requires an explicit provision in the articles of association authorizing the board of directors to hold a virtual general assembly. Of course, this presupposes that the shareholders approve an amendment to the articles of association to this effect at an ordinary physical or hybrid general assembly. Therefore, before a first virtual general assembly under the new law can be held, a physical or hybrid general assembly must be held at least once more.
If the statutory basis for holding a virtual general assembly has been created, the board of directors must designate an independent proxy in the notice convening the assembly. This takes into account the principle of immediacy: even if a virtual general assembly is held, hardly all shareholders will be able to participate live for scheduling reasons; however, the principle of immediacy prohibits the legally valid casting of votes before the general assembly, which is why absent shareholders must in principle be represented by a proxy even at a virtual general assembly.
The new stock corporation law allows companies whose shares are not listed on a stock exchange to waive the requirement of an independent proxy in their articles of association. This also requires a resolution of the general meeting. For the sake of good order, it should be noted here that this is merely a waiver of the independence of the proxy and not a waiver of the proxy per se. I.e. even if there is a corresponding basis in the articles of association, the board of directors must ensure that shareholders who cannot attend the virtual general meeting are represented by a proxy.
What now - next steps for the Board of Directors
Boards of directors who want to give their shareholders more flexibility and involve them more in the development of the company through the use of electronic means should therefore consider the following steps:
- Issuing regulations for the use of electronic means, which will address how participants can be identified, how votes can be transmitted immediately, how participants can make motions and take part in the discussion, and how voting results cannot be distorted.
- These questions can actually only be answered concretely and conclusively when the board of directors has also looked around for suitable technical means and included their specifications in the enactment of its regulations.
- In order to hold a hybrid general meeting, the board of directors must pass a formal resolution to this effect at a board meeting.
- If the board of directors wishes to hold purely virtual general assemblies in the future, it must propose to the general meeting an amendment to the articles of association to this effect. At the same time, this amendment may also provide for a basis for waiving the independent proxy. Both amendments must be publicly certified by a notary public and entered in the commercial register.
How Konsento supports you
Konsento is a comprehensive platform for the digitalisation of stock corporation law tasks of boards of directors and entrepreneurs as well as their appointed trustees, lawyers, notaries and auditors. Among other things, it includes a module for board meetings and general assemblies, which enables the preparation, execution and post-processing of physical, hybrid and virtual meetings. This module contains agenda templates for board meetings and general assemblies, the wording of which also forms the basis for any necessary public certifications and applications to the commercial register. In particular, Konsento users are provided with templates for the board resolution to hold a general assembly with electronic means as well as for the AGM resolutions to amend the articles of association in connection with virtual general assemblies and the waiver of the independent proxy.
And finally, Konsento provides registered users with a template for a set of regulations for the use of electronic means, which in particular comments on the form of identification, immediacy, the unverifiability of voting results and the procedure to be followed in the event of any technical malfunctions.
Konsento führt seit 2020 – damals noch unter dem Covid-19-Regime – hybride und virtuelle Generalversammlungen durch und stellt im Falle von Statutenänderungen Notare zur Verfügung, welche die Beschlüsse online feststellen und anschliessend beurkunden können.
Book a free demo today and learn more about hybrid and virtual AGMs.
Image attribution: Image by mangoprostrar on freepik