We previously wrote in this blog about legal alternatives to the physical presence of shareholders at a general meeting (see “Out of sight, but not out of mind: alternatives to physical attendance at general meetings”).
A tool commonly used, and often advised by us, is the technique of the general meeting in writing (“éénparige schriftelijke besluitvorming”). In practice, however, we find that there are still often misconceptions about what written decision-making is and is not, and will go into this in more detail in this blog post.
The general meeting of a company or a non-profit organization (“vzw”) has a number of powers in which it must make decisions, for example approving the annual accounts or appointing and dismissing directors.
A general meeting can reach a valid decision through two procedures, which are independent of each other:
- The traditional way, namely a physical meeting of shareholders at which, after deliberation, the decision is taken; or
- The general meeting in writing.
A physical meeting of shareholders
A physical meeting means that a physical meeting is timely and properly convened by the board and all shareholders (and directors and statutory auditor) are invited to this meeting. They are therefore generally present at the same place at the same time and participate in the deliberation and voting on an item to be decided.
A record is then made of the proceedings of this meeting and the decisions taken therein, being the minutes of the meeting. Minutes therefore contain a record of what took place during a physical meeting. This should not be a verbatim record and can be limited to the decisions taken. However, the decision is taken during the meeting and the minutes only contain a reflection of this.
Some shareholders may have participated in the meeting ‘remotely’ (e.g. by videoconference), or may have given a proxy to another shareholder or even voted in advance by letter. These are all modalities of a physical meeting.
The general meeting in writing
The general meeting in writing is a completely different way of decision-making.
If all shareholders agree on a decision to be taken, they can validly take this decision by means of a written resolution. This technique also exists within VZWs where the decision is taken by the members of the general meeting. We refer below to shareholders only for convenience.
This means that a written document is drawn up in which the decision to be taken is written out. This document is then signed by all shareholders. This signing should not be done at the same time or place.
A document can be circulated among the shareholders and once the last shareholder has signed the document, the decision is validly taken. This document thus does not contain ‘minutes’ circulated for signature as minutes are the written record of a physical meeting (and the decision taken at that meeting). In written decision-making, there is no deliberation at all.
Of course, the shareholders must agree beforehand that they want to take a certain decision, and this will necessarily involve some form of discussion (e-mails, telephones, text messages, etc.), but this discussion is not compulsory and in any case without formality.
The main difference with the minutes of a written meeting is thus that minutes reflect the decision-making during a meeting that has already taken place and therefore constitute nothing more than the description of what has been decided, whereas in the case of a general meeting in writing, the decision itself is adopted through the signature of the document by all shareholders.
So you can somewhat compare a general meeting in writing to an agreement that, if necessary after some negotiation, is circulated and validly entered into as soon as all “parties” (read: shareholders) have signed it.
This method of decision-making is possible for any decision except amendments to the articles of association. However, it is necessary that all shareholders agree with the decision to be taken. So it is not sufficient that (only) a majority agrees.
The written decision can also be used to approve the draft annual accounts. It is not necessary to take this decision on the statutory date of the annual general meeting, but this must always be done within six months of the end of the financial year.
Also note the following:
- A general meeting can only approve draft annual accounts prepared by the board of directors for submission to the general meeting. A prior decision of the board is therefore always necessary to adopt draft annual accounts. The general meeting cannot draw up annual accounts itself.
- The board of directors is required by law (and often articles of association are even more strict) to submit draft annual accounts to the general meeting for approval within six months of the end of the financial year. Therefore, if you, as a director, are not sure that the shareholders will approve the draft (in a timely manner) by way of general meeting in writing, you, as a director, would do well to still physically convene the general meeting in time to fulfil your obligations as director.
An additional advantage of the general meeting in writing is that it can be used without the intervention of the directors. A physical meeting can (only) be convened by the board of directors (or the statutory auditor if there is one). Furthermore, the directors and the statutory auditor are legally required to be invited. Directors therefore always have well in advance knowledge of the agenda items at a physical general meeting. This could be undesirable if shareholders wanted to dismiss a director (non-shareholder) without alerting the latter in advance. However, bear in mind that such a dismissal can only take effect as soon as it has been notified to the dismissed director.
However, directors and “other entitled parties” (e.g. the auditor) can receive a copy of the written decisions already taken upon simple request. There is no legal mechanism by which directors automatically receive a copy of decisions taken, but in practice, the board will usually be responsible for implementing a decision of the general meeting, so it will be practically necessary to communicate the decision taken.