Shareholders' meeting: No withdrawal of votes after receipt

A vote given at a shareholders' meeting of a company cannot be withdrawn once it has been received by the chairman of the shareholder´s meeting. Even a subsequent important reason for changing the voting behavior does not change this.

Facts

The ruling of the Munich Higher Regional Court is based on the following facts: The meeting of a limited partnership (Kommanditgesellschaft, KG) decided on the sale of real estate with the majority required by the articles of association. The plaintiff objected to this decision. In its opinion, the decision was invalid due to lack of the required majority. This was because several shareholders had changed their votes before the end of the voting period. In the plaintiff´s opinion, a change was still possible at any time until the final counting of all votes.

The decision of the Munich Higher Regional Court of April 5, 2023 (7 U 6538/20)

The Munich Higher Regional Court (Oberlandesgericht, "OLG") rejected the complaint. In the court´s opinion, the vote was in favor and has to be counted. The court stated that it was not possible to subsequently change the vote after the vote was received by the company. Even the existence of a (supposedly) important reason for a change of its decision from the shareholder's point of view does not permit a subsequent change. This also applies to shareholders' meetings which are not passed in face-to-face meetings. In the case of a decision passed by way of circulation decision, the relevant time for a withdrawal of the vote is determined by the receipt of the vote by the chairman of the meeting.

Practical advice

A company is represented towards third parties by the management (managing director/board of directors/partner with unlimited liability). In contrast, the shareholders' meeting is the body responsible for forming the company's internal will. The main and fundamental decisions of the company assigned to the association of shareholders by law and the articles of association are made at the shareholders' meeting.

In the past, shareholders' meetings were regularly held as face-to-face meetings. As one of the many reactions in connection with the Corona crisis, the legislator has made further simplifications for shareholders' meetings. This is intended to make it easier to make decisions.

Of particular relevance in practice are (i) the adoption of resolutions by written circulation procedure, in which resolutions are adopted in writing without a meeting of the shareholders, and (ii) the possibility of remote shareholder meetings by using telecommunication and / or video communication. These options must be provided for in the articles of association of the respective company. The practical advantages are that the shareholders can make important decisions for the company more quickly and with less effort.

If the articles of association allow for online shareholders' meetings, this leads to a significant increase in the company's ability to act, especially when decisions need to be made quickly. In practice, this can also be combined with a waiver of compliance with the other formal requirements (e.g., form and deadline). If the actual articles of association only allow company meetings to be held in the presence of the shareholders, the shareholders should reconsider amendments to the articles of association.

Insofar as difficulties are expected due to the time difference between the casting of votes and the date of the shareholders´ meeting, the decision of the OLG Munich provides clarification. A vote cast and received binds the respective shareholder who gave the vote. This ensures clarity for the company. But for the shareholders this means that they must also be clear about the significance and scope of their vote.

If the shareholder changes his opinion after casting his vote, he can only stop the counting of his vote by taking action as quickly as possible:

• Circulation procedure and voting by mail: In this case, only a phone call or e-mail will regularly suffice to effect the withdrawal in good time before the vote arrives.
• Circulation procedure and use of electronic means of remote communication (e.g., e-mail, but also chat and messenger services): As receipt of the vote in the mailbox is to be expected directly after sending, a withdrawal can only be made by immediate declaration at the same moment. This will probably only be a possibility if the person clicked the send button by mistake.
• "Online shareholders' meeting": No withdrawal is possible if the shareholders' meeting is held online or hybrid (i.e., partly in person and partly online). This is because the vote cast is then received directly when the vote is given by the shareholder and heard by the others (chairman of the meeting, co-shareholders).

Circulation procedures and online meetings provide important possibilities for the company and its shareholders. However, shareholders should avoid casting their votes without due consideration.