Coronavirus Pulls the Rug from under General Meeting Season
Only a fraction of listed companies managed to hold their annual general meetings normally before the coronavirus pandemic flipped the script on how meetings are traditionally organised. This has caused bigger changes than just having to skip the coffee service after the meeting.
Watching, but Not Participating, Via Video
We are not yet in the age of the fully virtual general meeting, because the Finnish Limited Liability Companies Act requires that a physical meeting be held. There is little doubt that the coronavirus pandemic will give a boost to digitalisation in this field, too.
In the current circumstances, listed companies have begun offering their shareholders the opportunity to watch the general meeting via a real time video feed. However, this is not the same as actually participating in the general meeting, and it does not enable shareholders to exercise their rights in the meeting.
At least one new service that enables real-time remote participation has come onto the market, but as far as we know, it is yet to be tested, at least by listed companies. There is certain to be a great deal of interest in a service like this, but there may still be questions relating to reliability and price.
Remote Watchers Can Exercise Their Rights Via Advance Voting or Proxy
A real-time video feed can be combined with electronic advance voting or a centralised proxy service—or both. In a centralised proxy service, the company offers its shareholders a proxy document containing voting instructions. Shareholders can use this document to authorise a party appointed by the company to act as their proxy representative in the general meeting.
Both of these options make it possible for shareholders to exercise their rights within certain limits, while also reducing the number of people present at the meeting venue.
Shareholder Rights Must Be Secured
Whatever alternative form of participation is used, special attention must be paid to ensuring that the shareholders’ rights are not overly restricted due to the emergency circumstances. The Ministry of Justice has also been giving thought to this issue, and temporary amendments to corporate legislation are in the works.
The government proposal on the amendments has been submitted to the parliament. The amendments are meant to make it easier to hold general meetings in the current circumstances. Whether or not they will succeed or just give rise to new questions remains to be seen.
Change of Venue
In many listed companies, grand halls have been replaced by the company’s own head office. Even if the meeting is still held in the Finlandia Hall or in Messukeskus, the chairperson’s gavel is likely to echo in a nearly empty room.
According to the Limited Liability Companies Act, the general meeting must be held in the municipality of the company’s registered office, unless the articles of association provide for a different municipality. Holding the meeting anywhere else requires a very weighty reason. Legal literature mentions orders of the authorities, natural disasters or war preventing the meeting from being held as such reasons.
The current circumstances and the restrictions imposed because of them will, at least in some cases, most likely justify holding the general meeting in a municipality other than that of the company’s registered office or the one stated in the articles of association. According to the legislative materials of the act, even in such a situation, the meeting must be held as close as possible to the registered office and be accessible via easy means of transport.
Temporary Legislative Amendment Allows Postponement
The intensification of the pandemic and the restrictions imposed by the authorities have forced company boards to think about postponing general meetings that have already been convened and also about when to hold a postponed meeting.
It is unlikely that postponing the general meeting past the deadlines provided for in articles of association or Limited Liability Companies Act will lead to liability for damages in the current situation. Any remaining doubts should be cleared by the temporary amendment, which is intended to allow general meetings to be postponed past the normal deadlines.
Postponing the general meeting also means postponing any resolution on dividends. On the other hand, many companies will have to reconsider their dividend proposals anyway, as future outlooks have become murky.
In our next posts, we plan to dive more deeply into the future temporary amendments as well as questions concerning dividend payment.
Issues relating to organising general meetings this spring were discussed in a webinar we held on Friday, 17 April 2020.