Stock Corporation: Articles of Association May Allow a General Shareholders' Meeting Abroad

A stock corporation’s general shareholders' meeting should take place at the company’s seat, unless otherwise specified in its articles of association (section 121 para. 5 of the German Stock Corporation Act (Aktiengesetz - "AktG"). Frequently, meeting locations which deviate from the company’s seat are permitted by a regulation within the articles. However, it was thus far disputed whether it is also permitted to hold a general shareholders' meeting abroad. In the past, several higher courts in Germany rejected general shareholders' meetings abroad (e.g. Higher Regional Court Hamburg (Oberlandesgericht - "OLG"), decision of 07/05/1993, file no. 2 Wx 55/91). One reason given for such decisions was that no German notary would be available if decisions that required certification were reached in foreign countries.

The Federal Court of Justice (Bundesgerichtshof – “BGH”) has now decided that the articles of a German stock corporation (Aktiengesellschaft – “AG”) or European stock corporation (Societas Europea – “SE”) may also permit general shareholders' meetings abroad, the fact that a German notary cannot work in a foreign country, and is therefore not available for the minutes, being negligible (BGH, judgment of 21/10/2014, file no. II ZR 330/13). Decisions can also be certified by foreign notaries if such certification is comparable to the German certification; that is, if the notary's position in the respective country is similar to that of a notary in Germany. Furthermore, not every general shareholders' meeting involves decisions which require certification. However, the articles must appropriately limit the selection of meeting locations with due regard to the shareholders' interests. For instance, the choice should not include a large number of locations which are geographically far apart.

In the present case, the Federal Court of Justice held that a regulation in the articles of a SE which permitted the general shareholders' meeting to take place outside Germany in an EU city with more than 500,000 residents or a stock exchange went too far, since it allowed a choice from more than 60 cities. The articles should therefore provide a more concrete regulation for the place where the general shareholders' meeting is held.

The judgment of the Federal Court of Justice creates legal certainty, particularly for corporations with foreign majority shareholders; it being obvious for such companies to hold the general shareholders' meetings at the domicile of the majority shareholder. The judgment is also of special significance for SEs. The permissibility of foreign meeting locations allows an SE to particularly do justice to its nature as a European company. In addition, the interests of the (minority) shareholders are sufficiently protected given that the articles must provide a limited choice of locations based on appropriate criteria; good accessibility of the meeting location being one important criterion.

However, if decisions which require notarial certification are imminent, it continues to be important to exercise caution as such cases require a local notary whose position is comparable to that of a German notary. This is more likely to be the case in Basel and Zürich than in London or Bucharest. In decisions which must be registered, such as capital increases or changes to the articles, it is recommended to clarify the matter with the responsible commercial register in advance.