No cause for concern: Government proposal to allow postponing Annual General Meetings until 30 September 2020 and holding listed companies’ Annual General Meetings without shareholders physically present

Pursuant to the Limited Liability Companies Act and Limited Liability Housing Companies Act, ordinary general meetings must be held within six months of the end of the financial period, unless provisions on a stricter time limit are laid down in the Articles of Association. For most companies, this means the end of June. For this reason, many companies are currently wondering whether their Annual General Meetings must be summoned under the exceptional circumstances caused by the coronavirus pandemic, even though all physical meetings should be avoided.

The Finnish Government is aware of the problem and intends to resolve it by issuing temporary legislation.

Annual General Meeting to be held by 30 September 2020

According to Government proposal 45/2020 vp, all limited liability companies, including private companies and public companies, commercial banks and other credit institutions in limited liability company form, as well as limited liability housing companies, may hold their Annual General Meeting, to be held after the end of the financial period which ended in the period 30 September 2019 to 31 March 2020, by the end of September 2020, even if provisions on a stricter time limit are laid down by law or a company’s Articles of Association.

Similar exceptions are proposed to the time limits for holding extraordinary general meetings and general meetings to decide on the approval of a merger or demerger plan.

Possibility for listed companies to hold the Annual General Meeting without shareholders present

For listed companies and First North listed companies, the proposal also includes new methods that make it possible to hold the Annual General Meeting, which must be held by 30 September 2020, entirely without shareholders being physically present. Companies may use such methods at their discretion, which means that the company may act in line with the legislation in force, even if it were to hold the Annual General Meeting by 30 September 2020.

The first option is to hold the meeting, by decision of the company’s Board of Directors, so that shareholders may exercise shareholders’ rights at the Annual General Meeting only by way of proxy representation. To facilitate the use of proxy representatives, the company must appoint, for shareholders’ use, one or several proxy representatives who are not related parties to the company. The company’s Board of Directors may also decide that the proxy representatives can only participate in the physical meeting by remote means.

This means that the meeting can be arranged either so that only a few proxy representatives are physically present at the meeting, and the other participants present are the chairman and other required personnel, or so that the meeting is held completely by remote participation, which means that all proxy representatives participate remotely and only the chairman of the meeting, the secretary, if applicable, and, depending on the voting procedure, vote counters, attend the meeting in person.

Shareholders must be able to issue voting instructions to the proxy representative, including several options, if several competing alternative decisions are put to a vote in the matter to be decided on. According to the proposal, the company is liable for the costs incurred by the shareholder in using the proxy representative appointed by the company, which means that no costs should be incurred for shareholders.

The other new method for holding the Annual General Meeting is that shareholders may exercise their rights in the meeting only by post, telecommunications or other technical means. This means that remote participation would be the only available means of participation. This alternative allows proxy representatives to participate in the Annual General Meeting by remote means only.

Both methods, and their combinations, also require the notice of the Annual General Meeting to include exceptional contents.

Financial statements to be drawn up by 30 June 2020

As for the Accounting Act, it is proposed, notwithstanding the law or provisions in the company’s Articles of Association, that the financial statements for the financial period ending in the period 30 November 2019 to 29 February 2020 must be drawn up no later than 30 June 2020.

Exceptional regulations in force until 30 September 2020

It is expected that the Government’s proposal will be heard by Parliament in the week beginning 20 April 2020. According to the proposal, the legislation should enter into force as soon as possible. The intention is for the exceptional regulations to remain in force until 30 September 2020.

Remote participation, proxy arrangements and holding the Annual General Meeting “on paper”

It should be noted that the legislation in force already includes several viable methods for holding a General Meeting in exceptional circumstances.

The basic rule in both the Limited Liability Companies Act and Limited Liability Housing Companies Act is that the meeting must have a physical meeting venue. However, both acts allow the meeting to be held so that participation is possible from outside the meeting venue. For example, the meeting can be held so that participation in it is possible by post, telephone or telecommunications.

The legislation in force already facilitates also other arrangements to enable the meeting to be held safely, regardless of the exceptional circumstances. For example, in recent weeks, several listed companies have held their AGMs successfully by proxy arrangements, so that the shareholders have centralised their voting rights with certain persons. This means the number of participants at the meeting has remained controllable and safe. Companies have also been prepared to guide shareholders who arrive at the meeting venue to several separate spaces as necessary to minimise physical contacts. According to the current legislation, advance voting is also possible and it has made it easier for shareholders to exercise their rights in the current exceptional circumstances.

In addition, it is permitted to hold General Meetings “on paper”, i.e. practically without convening. However, as this procedure requires consent by all shareholders, it is only suitable for companies with a small number of shareholders. If the shareholders are unanimous, they can also handle all matters requiring a General Meeting decision in a written decision instead of a General Meeting.

The proposed changes are certainly welcomed by all parties currently planning AGMs. In particular, the extension to the time limit for holding AGMs makes the situation easier. However, companies and their shareholders certainly do not wish to postpone the Annual General Meeting unless it is absolutely necessary. For example, the payment of dividends and the election of Board Members require a decision by the General Meeting, and there is certainly no desire to delay these.

Merilampi’s experienced specialists participate annually in the preparation of several private and public companies’ Annual General Meetings and managing the duties of chairman in these meetings.

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