Remote participation and voting of shareholders in AGMs
Dear Clients,
In view of the forthcoming annual shareholders’ meetings’ season, we have prepared, in the form of Q&A, an overview of certain provisions of the applicable legislation in the Republic of Slovenia and in eight other countries, namely the provisions regulating the possibility of participation of shareholders and other bodies in an online shareholders’ meetings, ie. without physical presence.
Given the lastest measures associated with SARS-CoV-2 (COVID-19), the subject matter is currently particularly relevant. At least with respect to the applicable laws in the Republic of Slovenia, resolutions of shareholders’ meetings that will be carried out (with the required physical presence) during the duration of the emergency measures related to COVID-19, could potentially be invalid.
Does the applicable law in Slovenia provide for the possibility of holding (i) an online shareholders’ meetings (i.e. where shareholders may attend and vote at the shareholders’ meeting only online/remotely) or (i) a “physical” shareholder with the possibility of online participation of the shareholders (i.e. shareholders’ meetings where shareholders may attend either in person or may attend online and vote by using electronic means (i.e. remotely))?
Stock corporation (delniška družba)
Article 297/4 of the Companies Act stipulates that shareholders may participate in the general meeting or vote (either prior to the general meeting or at the general meeting) via electronic means without being physically present, provided that such a possibility is provided for in the articles of association. In such an event, either (i) the articles of association themselves may regulate the procedure of participation and voting via electronic means, or (ii) the articles of association may authorise the management of the company to regulate such a procedure in detail. However, the Companies Act is silent on the question of whether the articles of association may provide for the online general meeting as being the only possible form of the general meeting (i.e. not allowing shareholders to participate in person). According to our best knowledge, there is also no relevant case law of Slovenian courts on this topic yet.
Furthermore, pursuant to Article 292/2, the articles of association or the rules of procedure of the general meeting may even define the cases in which the members of the management or supervisory body may participate in the general meeting through “image and voice transfer” (i.e. electronic means) and the cases in which the general meeting may be transmitted through audio and video channels.
With respect to the location of the general meeting, article 295/6 stipulates that the general meeting shall be held at the registered office of the company, unless otherwise provided by the articles of association. The Companies Act and the legal literature are silent on the specific question of whether the location of the general meeting may be defined as being “online” and not at a specific (physical) location.
However, pursuant to Article 304/1 of the Companies Act, each resolution passed by the general meeting shall be confirmed by a notary in a notary record. The Companies Act does not contain any clauses which would provide for the possibility for the articles of association to regulate the notary’s participation in the general meeting by electronic means (as is the case for the participation of the management board, supervisory board and the shareholders).
Therefore, in our opinion and understanding, a shareholders meeting could be held almost completely online in the sense that both the management board and the supervisory board, as well as the shareholders would participate in the general meeting by electronic means (i.e. without being physically present), provided that this option is regulated in the articles of association. However, in our understanding, the Companies act currently does not contain specific provisions which would allow for a notary to participate in the general meeting via electronic means and without being physically present.
Limited Liability Company (družba z omejeno odgovornostjo)
Pursuant to Article 507/2 of the Companies Act, the Company members may decide by means of a written statement not to hold a general meeting. A resolution to this effect shall be adopted by all the members. In this case, the members shall send their votes to the manager in writing, by telephone, by cable or by other similar technical means.
Thus, in a limited liability company, the Companies Act specifically regulates only the possibility for the members (shareholders) to vote by way of electronic means outside of a general meeting, if all members (shareholders) consent thereto.
Nevertheless, given that governance of a limited liability company may in general be regulated fairly flexibly by the members (shareholders), and given that even in stock corporations participation and voting by electronic means is permissible if regulated in the articles of association, in our opinion also the articles of association of a limited liability company could provide for the possibility, procedure and conditions for member participation and votes in a general meeting by way of electronic means.
What are the conditions for such electronic attendance and voting of the shareholders’ meeting to be permitted (e.g. does such a possibility have to be specifically provided for in the Articles of Association; what are the procedural conditions thereof; etc.)?
Stock corporation (delniška družba)
The possibility for the shareholders to participate in the shareholders meeting and vote by electronic means must be specifically provided for in the Articles of Association. The procedure for the foregoing also has to be clearly defined, which may be governed either (i) in the articles of association themselves, or (ii) the articles of association may authorise the management of the company to regulate such a procedure in detail.
Article 297/4 of the Companies Act further stipulates that the participation and the voting can be subject solely to such requirements and limitations required for the identification of shareholders and to ensure secure electronic communication, and such requirements and limitations may only be imposed to the extent proportional to achieving this objective.
Limited liability company (družba z omejeno odgovornostjo)
As stated above, with respect to a limited liability company, the Companies Act does not contain specific provisions on the possibility of members of a limited liability company participating and voting in a general meeting by way of electronic means. Consequently, the Companies Act also does not govern any specific conditions for such electronic attendance and voting.
Does the applicable law in Slovenia govern the types and characteristics of electronic means which may be used for the purpose described above (i.e. are there provisions on which types of electronic means may be used, what are the encryption requirements, confidentiality requirements, etc.).
The Companies Act does not provide any mandatory rules as to the specific types and characteristics which may be used for ensuring shareholders’ participation and voting by electronic means in the general meeting. Article 297/4 of the Companies Act does, however (as already stated above), contain a general rule, stating that the participation and the voting by electronic means can be subject solely to such requirements and limitations required for the identification of shareholders and to ensure secure electronic communication, and such requirements and limitations may only be imposed to the extent proportional to achieving this objective. Thus, the articles of association may not disproportionately limit the type and characteristics of electronic means in a way which would unjustifiably limit the possibility of shareholders to participate and/or vote in the general meeting.
May proxy authorisations be given by shareholders to a proxy (to attend and vote at the shareholders’ meeting on behalf of the shareholder) in electronic form? How is that done in practice?
Stock corporation (delniška družba)
The general rule imposed by Article 308/6 of the Companies Act is that proxy authorisations have to be given in writing. However, shareholders of a company whose shares are traded on a regulated market may appoint a proxy in accordance with Article 308/6 by electronic means. The articles of association shall specify at least one method for using electronic means to transfer such proof of proxy appointment. Shareholders may revoke their proxy appointment in the same manner at any time.
The Companies Act does not contain any provisions which would differentiate between the situation where the proxy attends a “physical” general meeting and for the situation where the proxy attends the general meeting online and votes by using electronic means (i.e. remotely).
As for the stock corporations whose shares are not traded on a regulated market, the Companies Act does not specifically provide for a possibility for the proxy authorisations to be granted in electronic form. Nevertheless, according to legal literature, the articles of association of such stock corporations could provide for the possibility of granting the proxy authorisations in electronic form as well.
Limited liability company (družba z omejeno odgovornostjo)
The Companies Act does not contain specific provisions on the possibility of granting of proxy authorisations in electronic form. Nevertheless, in our opinion, the articles of association could govern and provide for such a possibility.
Have any new laws or provisions been introduced in this respect in Slovenia or are planned (in the pipeline) in light of the current SARS-CoV-2 (COVID-19) situation (quarantine, etc)?
The Government of the Republic of Slovenia has, since declaring the epidemic of SARS-CoV-2 on 13 March 2020, proposed several new laws and issued several governmental decrees addressing several different topics. So far, none of them introduced any changes with respect to easing the requirements for electronic participation and voting of shareholders in general meetings. Nevertheless, given the current SARS-CoV-2 (COVID-19) situation and the upcoming annual general meetings season, legislative action aimed at facilitating the exercise of shareholders’ rights while at the same time respecting the principle of social distancing (and preserving public health), would be welcome.
In our experience, articles of association of the majority of stock corporations in Slovenia generally do not provide for the participation and/or casting vote at the general meeting by electronic means.
Furthermore, certain recent government-imposed measures may affect the validity of the resolutions, adopted in (physical) general meeting’s held while the said measures are in force. Namely, on 20 March 2020, the Decree on the temporary prohibition of the gathering of people at public meetings at public events and other events in public places in the Republic of Slovenia came into force. The said Decree was later on, on 29 March 2020, replaced with the Decree on the temporary prohibition of the gathering of people at public meetings at public events and other events in public places in the Republic of Slovenia and prohibition of movement outside the municipalities, which further restricted the movement in public places. Individuals are thus not allowed to move in, access and stay in a public area, unless for certain specific purposes/in certain circumstances. The Decree thus contains an exhaustive list of 20 purposes/circumstances as an exemption to the rule. Attending a general meeting is not listed as one of the exemptions to the general prohibition. Even though general meetings are usually held on private grounds, attending a general meeting may thus be illegal for a shareholder (or at least certain shareholders), since the abovementioned Decree does not specifically provide that attendance at a general meetings is a legitimate purpose/circumstance (exemption to the prohibition) which would allow the shareholder to move across public areas to arrive to the location of the general meeting.
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In addition to an overview of certain provisions of the applicable legislation in the Republic of Slovenia, please find attached also a summary (Adriala Covid-19 Comparative Legal Guide Online shareholders’ meetings_online participation and voting in shareholders’ meetings) prepared by Adriala alliance, a network of independent premium law firms based in 9 jurisdictions in the SEE region (Albania, Bosnia and Herzegovina, Bulgaria, Croatia, Kosovo, Macedonia, Montenegro, Serbia, Slovenia) and of which our law firm is a member.
Our law firm is actively following the latest COVID-19 developments. As always, you can contact us via e-mail or telephone +386 (0)1 2445500, or you can directly contact the lawyer you are generally in contact with.
Law Firm Kavčič, Bračun & Partners, o.p., d.o.o.
Ljubljana, 3 April 2020
All information contained herein is based on applicable law or obtained from publicly available data or other sources believed to be reliable. This document is for general information purposes only, may be subject to change and may not be used instead of a legal opinion/advice. KBP does not guarantee the accuracy of the information and shall not be liable for any damages or costs in connection with the use of, or reliance on, the information contained herein.