Out of sight, but not out of mind: alternatives to physical attendance at general meetings
The need for legal alternatives to physical attendance at general meetings of companies or (international) non-profit organizations (“(I)VZW”), became more relevant than ever the past year. The Company’s Code, respectively the CCA, already included an array of options to address this problem even before it became an issue within the context of the Covid-19 crisis, some of these options only applicable to companies. The Law of 20 December 2020 (Belgian Official Gazette of 24 December 2020) on various temporary and structural provisions on justice in the context of the fight against the spread of the coronavirus COVID-19, introduces a certain number of both temporary and permanent flexibility-enhancing measures, including additional options for (international) non-profit organizations (“(I)VZW”).
Below, we list the different options that are currently existing under company and association law, which can be used as an alternative to the traditional default decision-making procedure of a physically held general meeting:
- The general meeting in writing (“éénparige schriftelijke besluitvorming”)
The CCA enables private companies (‘BV’) (art. 5:85 CCA), limited partnerships (‘CV’) (art. 6:71 CCA) and public limited companies (‘NV’) (art. 7:133 CCA) to hold so-called “general meetings in writing”. The Law of 20 December 2020 has extended this possibility to non-profit organizatons (‘VZW’) (art. 9:14/1 CCA) and international non-profit organizations (‘IVZW’) (art. 10:6/1 CCA).
This mechanism allows shareholders, respectively members, to adopt resolutions in writing (if necessary even on different dates), without the need to organize a physical general meeting. In that case, it is, in principle, not necessary to involve directors and statutory auditors. There are, however, two conditions to be met: the shareholders, respectively members, agree to the application of this possibility; and they unanimously approve the resolutions to be adopted. In this event, the (legal and, if applicable, statutory) convocation formalities should not be complied with. There is no need for an explicit authorization by the articles of association for the possibility to hold such a general meeting in writing . However, this option can be restricted or excluded by the articles of association.
It also has to be pointed out that the general meeting in writing cannot be used for decisions concerning amendments to the articles of association (regardless of the fact that such a decision is taken by a private deed, as it is the case for a ‘VZW’, or an authentic deed). It can however, for example, be used to approve the annual accounts.
The written decision-making procedure of the general meeting proves its value for smaller companies and ‘VZW’s’, where it is (often) much more likely that the shareholders, respectively members, are unanimous about the resolutions to be adopted, and where it is easier to organize ways to obtain the necessary written approvals. In the case of ‘IVZW’s’, the usefulness of this procedure could be rather limited. This type of association was already governed by an extensive contractual freedom. In addition, it is also often characterized by a large number of members. Given the required unanimity, it will not be easy for most of the ‘IVZW’s’ to reach an unanimous written decision. The same applies for companies and ‘VZW’s’ having a rather large number of shareholders/members.
- Representation by proxy
Shareholders of a ‘BV’ (art. 5:95 CCA), a ‘CV’ (art. 6:80 CCA), an ‘NV’ (art. 7:142 CCA) and members a(n) ‘(I)VZW’ (art. 9:15 CCA in case of a ‘VZW’ – general contractual mandate rules in case of an ‘IVZW’) can also be represented by a proxy at the general meeting. By means of a special power of attorney, this proxy will have the same rights as the shareholder, respectively member, that/who he represents at the general meeting. Contrary to what applies for a ‘BV’, ‘CV’ and ‘(I)VZW’, an ‘NV’ cannot exclude this right by a prohibition clause in its articles of association.
In the case of a ‘VZW’, the power of attorney can only be granted to another member, unless the articles of association explicitly provide the possibilty to grant a power of attorney to a third party. In the case of a ‘BV’, ‘CV’, ‘NV’ and ‘IVZW’, the proxy of attorney may be granted to a third party, unless the articles of association provide otherwise. The articles of association may also impose further restrictions to the right of proxy (for instance, by imposing requirements to the power of attorey, by restricting the number of powers of attorney that a proxy may be granted, …).
However, this option does not provide an entirely adequate solution to the obligation of “social distancing”, as general meetings are (with compliance with the (legal and, if applicable, statutory) convocation formalities), still supposed to be held ‘physically’ (presence of the bureau of the general meeting and invitation of the members of the governing body and the statutory auditor).
It is generally accepted that the members of the governing body cannot be represented by a proxy at a general meeting (the so-called ‘intuitu personae’ mandate). Provided that they have been convocated validly, or provided that they have waived the convocation formalities, the general meeting can, in principle, be held in their absence (unless the person in question is a member of the bureau and unless this situation should erode the demand rights of the shareholders).
- Prior vote casting
If authorized by the articles of association, it is also possible to cast a vote prior to the date that the general meeting will take place (art. 5:89 § 4 and 5:95 CCA in case of a ‘BV’, art. 6:75 §4 and 6:80 CCA in case of a ‘CV’, art. 7:146 §1 CCA in case of an ‘NV’, art. 9:16/1 §2 CCA in case of a ‘VZW’, art. 10:7/1 §2 CCA in case of an ‘IVZW’). The articles of association must include a detailed procedure for this type of prior voting. If an ‘NV’ decides to organize a prior vote casting by correspondence or by electronic means, it also has to take into account the additional legal provisions of article 7:416 CCA.
In this specific case, it will still be necessary to hold a physical general meeting (see above).
- Remote participation to the general meeting
Finally, the CCA offers the governing body the possibiliy to allow the shareholders, respectively the members, to remotely participate in the general meeting, by means of an electronical communication tool provided by the company or the ‘(I)VZW’ (art. 5:89 in case of a ‘BV’, art. 6:75 CCA in case of a ‘CV’, art. 7:137 CCA in case of an ‘NV’, art. 9:16/1 CCA in case of a ‘VZW’, art. 10:7/1 CCA in case of an ‘IVZW’). In this event, the remote participation of the shareholders, respectively members, will be equivalent to their physcial attendance (in the light of the requirements for attendance and majority). Initially, this option could only be used if authorized by the articles of association. Given the fact that the articles of association of many legal entities did not foresee this statutory authorization, this option did not allow to address the practical problems due to Covid-19. The new Law of 20 December 2020 eliminates this additional requirement. The amended CCA allows to hold a general meeting by electronic means of communication, without requiring a statutory authorization.
There are however a certain number of considerations to be taken into account regarding the practical organization of a remote virtual general meeting. First of all, the used electronic means of communication must (i) allow to verify the identity and the capacity of the participants; (ii) enable the participants to follow the discussions directly, similtaneously and in a non-interrupted manner (‘live’) and (iii) allow the shareholders/members to exercize their voting rights. There are no requirements regarding the specific type of means of communication to be used, provided that it satisfies the above-mentionned conditions. This implies that the general meeting can be validly held by using Zoom, Teams or Skype, provided that all the conditions are met. In this sense, we consider that a general meeting can also be held via conference call in the case of (smaller) legal entities where everyone knows each other well and where the identity and the capacity of the participants can not be questioned.
Until 30 June 2021, it is not required that the used electronic means of communication enables the shareholders, respectively members, to participate ‘live’ in the deliberations and submit questions (up to that date, the tool must only allow them to follow the deliberations ‘live’ and exercize their voting rights). However, the governing body must state in the convocation notice the reasons why the company or the ‘(I)VZW’ is not equipped with this type of electronic means of communication. In case of general meetings held after the aforementioned date, the governing body must assert the possibility to participate ‘live’ in the deliberations and to submit questions, otherwise the procedure cannot be used.
Another requirement states that the procedure for remote participation to the general meeting, must be clearly detailed in the convocation notice and, if applicable, on the company’s website. If technical problems occur during the general meeting, they must be recorded in the minutes.
But here again, it is still required that the (legal and, if applicable, statutory) convocation formalities are observed and that the members of the bureau physically attend the general meeting. The members of the governing body, provided that they are not a member of the bureau, as well as the statutory auditor, may participate remotely in the general meeting. A shareholder or member, remotely participating, can be represented by a proxy if need be (see above).
Today’s business landscape benefits from the enhanced flexibility to organize general meetings in companies and ‘(I)VZW’s. We can only welcome this relaxation of the law, not only as a measure to fight COVID-19, but also in terms of the many practicial advantages that these options bring to the decision-making process.
Kim Van Herck and Soetkin Goossens, intui lawyers