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Stock corporation law: COVID-19 Pandemic Law - Temporary Relief for the Annual General Meeting (among others)

The spread of the Coronavirus (SARS-CoV-2) has led to considerable restrictions in all areas of private and business life. The German government has taken countermeasures with an "Act to Mitigate the Consequences of the Covid 19 Pandemic under Civil, Insolvency and Criminal Procedure Law" of 27 March 2020. In addition to a comprehensive moratorium on contracts, i.e. rights to refuse performance for a large part of the obligations, as well as a suspension of the obligation to file for insolvency (we reported on both separately), the law provides for substantial simplifications for the holding of general meetings of stock corporations ("AG"), partnerships limited by shares ("KGaA") and limited by shares ("SE").


The risk of infection and nationwide restrictions on meetings have already led to the cancellation of numerous annual general meetings. Section 118 (1) sentence 2 of the German Stock Corporation Act (AktG) allows shareholders to exercise their rights by "electronic communication" - but only if a corresponding provision has been included in the articles of association. The general meeting in person, i.e. the physical meeting of shareholders at a single location, has been the statutory, indispensable rule up to now. Shareholders always have the right to attend the general meeting even if electronic participation is possible. This means that the company cannot force its shareholders to participate in the general meeting only "online".

However, a lot depends on the resolutions of the annual general meeting: without a resolution on the appropriation of profits by the shareholders, no dividend can be paid out. In addition, capital measures and restructurings - even existential ones in the current exceptional circumstances - require a resolution by the annual general meeting.  For the stock corporation, section 175 (1) sentence 2 AktG also specifies an end date for the general meeting. This must take place at the latest eight months after the end of the previous financial year. Finally, the annual general meeting plays an important role for the expiry of the term of office of members of the supervisory board in office. If the annual general meeting does not take place within the eight-month period, the automatic resignation of supervisory board members may result in the supervisory board becoming unable to pass resolutions (sections 102 (1) sentence 1, 120 (1) sentence 1 AktG).

"Act Concerning Measures Under the Law of Companies, Cooperative Societies, Associations, Foundations and Commonhold Property to Combat the Effects of the COVID-19 Pandemic” (hereinafter: "Covid-19-Corprate Law Act")

In order to enable the affected company forms (to pass resolutions even if restrictions on the possibilities of holding general meetings continue to exist, the law provides - temporarily - for considerable simplifications in the holding of general meetings. These are in detail:

•    "Online participation" without authorization in the articles of association

Notwithstanding section 118 (1) sentence 2 AktG, the managing board can now, pursuant to section 1 (1) of the Covid-19-Corporate Law Act, make decisions on the participation of shareholders in the annual general meeting by means of electronic communication, i.e. so-called "online participation", the casting of votes by means of electronic communication pursuant to section 118 (2) AktG and the approval of video and audio transmission pursuant to section 118 (4) AktG - even if no corresponding authorization is provided for in the articles of incorporation.

•    (solely) virtual annual general meeting possible

Pursuant to section 1 (2) of the Covid 19 Corporate Law  Act, the managing board is given the opportunity to hold a general meeting entirely without the physical presence of shareholders (so-called "virtual general meeting"). The prerequisite for this is that

- the video and audio transmission of the entire meeting takes place,

- the exercise of shareholders' voting rights is possible via electronic communication (postal voting or electronic participation) and the granting of proxies,

- the shareholders are given the opportunity to ask questions by way of electronic communication and the questions are answered according to their best judgment, and

- the shareholders are given the opportunity to object to a resolution of the annual general meeting.

The shareholders' right to ask questions is not eliminated, but significantly restricted. Since a "flood of questions" is to be expected in the context of a virtual annual general meeting, depending on the size of the company or the respective group of shareholders, these questions are to be answered by the management (only) at its dutiful discretion. The administration does not have to answer all questions. Rather, questions may be summarized; the administration has the opportunity to select meaningful questions that are in the interest of the other shareholders.

•    Reduced notification period

In addition, section 1 (3) of the Covid-19- Corporate Law Act provides that the notification period is temporarily reduced to only 21 days (minimum period required under European law), in contrast to section 123 (1) sentence 1 AktG (30 days). The notification periods pursuant to section 125 (1 and 2) Stock Corporation Act are also adjusted accordingly and are now 12 instead of 21 days.

•    Advance payments on the balance sheet profit

In addition, the managing board can now, pursuant to section 1 (4) of the Covid-19- Corporate Law Act, decide to pay a discount on the net income for the year to the shareholders without an authorization in the articles of incorporation which is generally required pursuant to section 59 (1) AktG - while complying with the other requirements pursuant to section 59 (2) AktG.

•    Exceeding the end date

Finally, according to section 1 (5) of the Covid-19-Corporate Law Act, the managing board can decide that the ordinary general meeting is to take place within the (entire) fiscal year. The eight-month period pursuant to section 175 (1) sentence 2 AktG is thus suspended for the financial year 2020. This is intended to rule out any penalty payment proceedings pursuant to section 407 (1) AktG. As in the context of section 175 (1) sentence 1 AktG (immediate convening of the meeting after receipt of the supervisory board report), it was, however, already largely recognized for sentence 2 that both a penalty payment and obligations to pay damages on the part of the managing board cannot be considered if the managing board is not responsible for missing the deadline.

It should also be noted that the extension of the time limit pursuant to section 1 (7) does not apply to the SE. Due to the priority of European law, the mandatory six-month period pursuant to art. 54 (1) sentence 1 SE Regulation remains applicable in this case.

•    Approval by the supervisory board required

In order to prevent abuse and to ensure the supervisory competence of the supervisory board, section 1 (6) of the Covid-19-Corporate Law Act provides that the managing board may only decide on the aforementioned facilitations with the approval of the supervisory board in each case. However, this does not apply to the one-tier SE as it does not have a body corresponding to the supervisory board and a consent requirement would be in vain.

•    limited liability company (“GmbH”)

With corresponding provisions in the articles of association, solely virtual shareholder meetings by means of video or telephone conferences are indisputably permissible. Moreover, according to § 48 Paragraph 2 GmbHG there is no need to hold a meeting if all shareholders declare their agreement in text form with the provision to be made or with the written casting of votes.
Such consensus is now no longer necessary: Resolutions of the shareholders of a limited liability company (“GmbH”) can also be passed in text form (e-mail, fax etc.) or by written submission of the votes without the consent of all shareholders. Majority resolutions are therefore possible in a circulation procedure - even against the will of individual shareholders. This simplification applies for a limited period of time to all shareholders' meetings and resolutions in 2020. Resolutions in telephone or video conferences, on the other hand, are still only possible if the articles of association expressly permit this.


The simplifications implemented by the new law are very welcome - both to prevent infection with the Coronavirus and from a corporate law perspective. They will provide companies with the necessary tools in these economically difficult times to enable timely decisions by shareholders and to be able to decide on necessary measures.

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