Covid-19: Impact on board and shareholder meetings

26 Mar 2020

The rapid spread of the novel coronavirus (COVID-19) is a public health challenge that has affected thousands of individuals globally in more than 140 countries. As a general precaution and in order to mitigate and reverse the virus’s spread, governments worldwide are increasingly turning towards mandatory ‘lockdown’ periods in which the movements of all people inside their jurisdiction are limited to what is essential.

These measures will also directly affect the functioning of corporate bodies of Belgian companies. If physical meetings of boards of directors and shareholders become impossible, organizations will have to look for alternative ways of organizing their meetings, in order to not jeopardize their business continuity.  

Electronic meetings – board and shareholder meetings can be held “virtually”, using electronic means of communication (i.e. via a conference call or using video-conferencing software).

Contrary to electronic board meetings, organizing an electronic shareholder meeting requires that the articles of association allow such remote participation. The chosen electric means must allow for a verification of the identity of every participant. The participants must be able to follow the discussions and to exercise their voting rights through the electronic instrument. The procedure for attending such electronic meeting needs to be clearly described in the convocation notice calling the general meeting. Technical difficulties or incidents must be recorded in the meeting minutes.

The members of the panel, the directors and the statutory auditors must be physically present and therefore cannot take part electronically. Although this can generally be remedied by using waiver letters, it seems recommendable that at least one person is  physically present at the place where the meeting should be held (so-called “hybrid” general meeting of shareholders).

Belgian law also allows shareholders to cast their vote electronically or by correspondence in advance, on the condition that the articles of association allow this possibility.

The electronic board meetings must always be organized in such a way that all participants are invited duly (and in a timely manner) and that all participants are given the possibility to actually deliberate and decide on the agenda items. Minutes can be drafted afterwards and circulated for approval and signature. Except in certain cases (e.g. where wet ink signature is required), it is generally accepted that the minutes can be signed in counterparts or using an electronic signature (i.e. DocuSign).

Written resolutions – Both board resolutions and shareholder resolutions can be adopted in writing, provided that all board members or shareholders unanimously agree with the resolutions to be passed in their respective meetings and there are no objections to this means of decision-making. Signing of the written resolutions needs to be done by all board members or shareholders. The decision is presumed to have been adopted upon signature by the last signatory. Whenever a notary deed is required (e.g. capital increase) to record the shareholders’ approval, written resolutions are not permitted.

Written resolutions are infeasible from a practical perspective for listed companies, as these are usually companies with a large number of shareholders. 

Power of attorney (proxy) – While this arrangement will not eliminate the requirement of physical presence, it can reduce the total number of participants to the meeting. 

Generally, it is possible for a board member to grant a proxy to another board member (no third party is allowed) to represent him or her at the board meeting, although the total number of proxies awarded to a director can be limited by the articles of association. Shareholders can generally award proxies to both other shareholders and third parties to represent them at the meeting, except if the articles of association provide otherwise. For listed companies, additional requirements need to be complied with.

Postponement Whenever feasible, meetings should be postponed to a later date if the arrangements described above are not deemed adequate and if the meetings are not urgent.  

Besides, the board of directors of a company also has the right to defer the decision on the approval of the annual accounts (ordinary general meeting of the shareholders) by an additional three weeks (five weeks for listed companies), but this right needs to be exercised during the general meeting of the shareholders and is subject to certain conditions.

In looking for alternative solutions, it is always important to examine the company’s articles of association, as these often contain specific requirements that might impact the alternatives listed above. It seems, however, that the Belgian Government is currently working on certain specific crisis measures that will allow for more flexibility in this respect (allowing alternatives despite the terms of the articles of association).

The question will also undoubtedly pop up if the current crisis qualifies as an “event of force majeure” allowing companies to take actions that are in breach of the articles of association and/or Belgian company law.

PwC Legal is ready to assist you and your legal, financial and company secretarial teams in tackling the challenges presented by the Covid-19 epidemic.

UPDATE – New crisis measures on general shareholder meetings were announced. Click here for additional insights.  

 

 

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Elise De Baerdemaecker

Advocaat Vennoot / Avocat Associé, PwC Legal BV/SRL

Tel: +32 473 91 06 11

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