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Lessons from the COVID-19 Pandemic: Drafting Articles of Association for German Limited Liability Companies

The COVID-19 pandemic continues to have Germany firmly in its grip. The high infection figures require contact restrictions that affect many areas of our lives - including corporate law. Shareholders' meetings in the classic sense, i.e. in the form of a physical meeting, are hardly possible with a larger group of shareholders - or at least unreasonable. And without a shareholders' meeting, necessary resolutions cannot be passed.

The legislator quickly recognized the problem in spring, during the first "Corona wave": For stock corporations (Aktiengesellschaften), the option of a virtual shareholders' meeting was introduced, and for GmbHs, the German limited liability company, the written circulation procedure was facilitated. Accordingly, individual shareholders can no longer block the adoption of resolutions by circulation procedure. The regulation, which initially applied until the end of 2020, has now been extended until the end of 2021.

However, the (simplified) circulation procedure is not always the method of choice. Particularly in the case of difficult decisions, discussions among the shareholders are important as a basis for decision-making. In these cases, resolutions by video conference or the online participation of shareholders in a physical meeting are more suitable than a written circulation procedure; however, virtual resolutions or combinations of face-to-face and online meetings require explicit authorization in the articles of association. The COVID-19 Act does not provide any relief for this.

Against this background, shareholders of limited liability companies should take the current Corona crisis as an opportunity to put their articles of association to the test. As part of the "modernization", provision should be made for the possibility of adopting resolutions outside of face-to-face meetings, in particular by telephone or video conference or in any combination. In addition, it would make sense to have detailed regulations for concrete implementation, for example, a regulation on minimum participation quotas for passing resolutions in video and telephone conferences or by circulation procedures via e-mail, regulations on deadlines for casting votes, and the right of initiative, i.e., who can initiate such a procedure for passing resolutions. Or, to paraphrase Winston Churchill: Never let a crisis go to waste.

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