Digitalization was on the rise even prior to the SARS-CoV-2 outbreak but the German legislator so far struggled to introduce the legal framework that was necessary to foster the further development of digitalization. With the outbreak of COVID-19 into a world-wide respiratory pandemic and the subsequent pressure on the German economy, the German legislator thankfully reacted quickly. Even though it cannot be a permanent status for a healthy democracy that the political opposition rests its job, in this case the reluctance of the opposition made fast legislative responses possible that are absolutely necessary in order to contain this pandemic. The German legislator passed a law (Gesetz über Maßnahmen im Gesellschaftsrecht zur Bekämpfung der Auswirkungen der COVID-19 Pandemie) within just a few days that went into effect on the 28th of March 2020 and will stay in effect until the 31st of December 2021. This legislation is supposed to lessen the impact that COVID-19 has on the German economy and includes the possibility for German stock companies to hold the annual shareholder meeting in a digital manner, even if the company’s statute does not set out this possibility. The regulation initially is only applicable to shareholder meetings that take place in 2020, but the law includes the option to extend this possibility up to the 31st of December 2021.
DIGITAL SHAREHOLDER MEETINGS AS A SUITABLE SOLUTION FOR THE FUTURE
According to the transitional regulation, the executive boards of German stock companies as of 28th of March may decide that the participation and voting in the annual shareholder meeting takes place by means of electronic communication. According to the old law – or more precisely: the temporarily suspended law – the executive board of a German stock company only had this option if it was explicitly stated in the company´s statute. Naturally, this option was basically never included in the statutes of long running, older companies. Even though such companies may also be interested in the digitalization of their annual shareholder meetings and the subsequent voting with regards to the indisputable cost-efficiency, the actual implementation of this into the company´s statute and the correct technical execution of digital meetings and votes are initially associated with investments in both cost and effort. Because of the COVID-19 pandemic and the current contact ban that practically leads to a ban on any form of assembly, the digital conduction of this year’s annual shareholder meetings seems to be the only option. Stock companies will therefore now have the possibility to gather experience with digital annual shareholder meetings.
DO THESE SIMPLIFICATIONS ONLY APPLY TO STOCK COMPANIES?
The German legislator also implemented simplifications for GmbHs, namely the possibility of digital shareholder resolutions. Throughout the duration of the temporal law, shareholder resolutions may be passed in text form (e.g. via e-mail) without the generally necessary consent to this form of all GmbH shareholders. The transitional provisions regarding annual shareholder meetings of stock companies also apply accordingly to partnerships limited by shares, European companies (SE) and for the most part to mutual and mutual-type associations. 2020 will show if and how companies can handle digital annual meetings and voting. The legislator might implement a permanent option for digital meetings and voting after the pandemic is finally over, if the experiences that are now gathered are positive.
Attorney Lutz Auffenberg, LL.M. (London)
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