Possible effects of the coronavirus on the General Meetings of listed companies

Read the article in Finnish here.

Several of our listed company clients have asked us guidance in case the spread of the Coronavirus Disease (COVID-19) threatens to affect, one way or the other, the organising of the Annual General Meeting during spring 2020. We have compiled in this article alternatives that take into account any exceptional arrangements that may be required, while also meeting the legal requirements set forth for holding a General Meeting, and listed benefits and drawbacks of each option.

The General Meetings of listed companies are mass events which, depending on the company, may involve more than a thousand people in the role of shareholder, management representatives and other participants (for example shareholder assistants or technical assistants of the meetings). In Switzerland, for example, the authorities have banned public events of over thousand attendees in order to prevent the spread of the coronavirus, and the authorities may impose similar bans, restrictions or recommendations also in Finland on a short notice, which is why it is advisable to be prepared for the matter also in connection with organising a General Meeting.

We have identified the following alternatives arranging the General Meeting, some of which are complementary.

1. The General Meeting shall be held as planned, but with special precautions

  • Informing about the precautions before the meeting; keeping hand disinfectants available; arranging seating order so the overcrowding is avoided; offering of pre-served and pre-portioned food and drinks instead of self-service buffet, etc.
  • If the authorities recommend that mass events be avoided or cancelled – even if they are not explicitly prohibited – it is likely that the number of participants in such situations will in any case be lower than normal.

2. The General Meeting shall be held as mentioned above, but the meeting is also “streamed” as a live broadcast, and there is a possibility to view a recording later on the company’s website

  • In this option, shareholders can remotely attend the General Meeting. On the other hand, it excludes the such shareholders’ right to speak or vote.

3. The General Meeting shall be held as mentioned above, but the participants are divided into several spaces

  • The meeting is divided into several meeting rooms, which, however, are located in the same building, so that the audience in each meeting room does not exceed the limit set by the authorities (e.g. max. 300/500/1000 persons). In this case, each meeting room has the necessary number of meeting assistants for who assist attendees while they carry out the right to speak and vote.
  • On behalf of the premises, this may be possible in Helsinki, for example, at Messukeskus, and possibly at the Finlandia Hall and the Marina Congress Center (if relevant meeting rooms are vacant).

4. Holding the General Meeting in such a manner that advance voting and/or electronic voting is possible

  • Attendance at the General Meeting may also be carried out by post, telecommunication connection or other technical means, if the company’s Board of Directors so decides and the Articles of Association do not prohibit such participation.
  • In practice, the abovementioned methods mean advance voting and real-time electronic voting.
  • A prerequisite is that the right to participate and the correctness of the counting of votes can be ascertained in a manner comparable to that of a General Meeting held with traditional participation manners.
  • The notice of the meeting must specify the abovementioned opportunity to participate, the conditions for exercising it, any restrictions on the exercise of the shareholder’s voting rights related to it, and the procedure to be followed. If the notice of the meeting has already been published without the above information, it shall be supplemented in this respect at least three (3) weeks prior to the General Meeting.
  • In practice, very little use has been made of the abovementioned methods of participation in Finland, because fulfilling the conditions set forth for participation as required by law, and without compromising the smooth running of the meeting, has so far been regarded challenging.
  • Currently there is no overall solution in place for electronic voting that would meet the abovementioned criteria, but if the disruption caused by the coronavirus in holding General Meetings expands, new solutions that meet the requirements of companies, shareholders and other stakeholders may be developed even with short timeframe.

5. Cancellation and convening of a new meeting (or adjournment of an already convened meeting)

  • This option is particularly appropriate when authorities prohibit or recommend the cancellation of mass events where the number of participants exceeds a certain specified number.
  • There is no specific time limit for cancellation of the General Meeting, but in practice it is recommended that the cancellation is not left to the last days before the scheduled date of the General Meeting in order to reach as many participants as possible.
  • The deadline for convening a new General Meeting is three (3) weeks prior to the new meeting date, but not less than nine (9) business days prior to the record date of the General Meeting (which in turn is eight (8) business days before the general meeting).
  • In practice, the three-week rule applies in most cases; a longer notice period will only apply to General Meetings that take place on days after Easter, May Day, or Ascension Day (meetings held from April 14 to April 23, May 4 to May 7, or May 25 to May 28, 2020).
  • Pursuant to the Finnish Companies Act, the Annual General Meeting must be held within six (6) months of the end of the preceding financial period, i.e. if the company’s financial period is a calendar year, the General Meeting shall be held by the end of June, unless the company’s Articles of Association imposes stricter time limits.
  • If, however, the authorities prohibit the holding of mass events in such a way that the prohibitions de facto prevent the holding of a General Meeting, then in practice the holding of the Annual General Meeting may be postponed beyond the above deadlines without causing, for example, invalidity of the meeting or liability for damages for the Board of Directors. If any party were to challenge in court the decisions of the General Meeting in such a state of emergency, the claim would have no chance of success in practice.
  • Although the cancellation of a General Meeting may attract broader (neutral) media attention, at least among major listed companies or companies that first notify of the cancellation, one should also consider the risk that, if a General Meeting would be held without any precautionary or special measures, and subsequently it proves to be a source of the spread of infections, this is likely to generate considerable negative publicity.

6. Postponing the General Meeting to a continuation meeting

  • In this option, the general Meeting is formally held at a pre-planned date, but without addressing material agenda items: The meeting is opened, organised and the chairman of the meeting is elected, but before advancing to material agenda items – before the presentation and approval of the financial statements – the General Meeting decides that from the agenda item ‘Presentation of the financial statements’ onwards all other matters on the agenda of the General Meeting shall be transferred to a continuation meeting in the manner permitted by the Finnish Companies Act.
  • A separate meeting notice shall be sent to the continuation meeting if it will be held more than four (4) weeks after the first general meeting (as it seems likely, if it is decided that holding a continuation meeting is necessary due to prevailing circumstances).
  • The advantage of this approach is, at least in theory, that the shareholders’ registrations for the first meeting are maintained, thus avoiding the administrative burden of organising a new registration procedure. However, in such a case, only shareholders who have registered for the first meeting within the applicable registration deadlines are allowed to participate in the continuation meeting (i.e., a shareholder who has not registered for the initial meeting, may not subsequently register or participate in the continuation meeting).
  • This option is especially viable, if an authority decision or recommendation to cancel mass events is made just before the General Meeting.

In any case, any changes in the organisation of the general meeting due to the coronavirus require in listed companies – depending on the chosen policy – consideration and decisions by the Board of Directors, stock exchange releases and other possible informing through channels previously used by the company, so that information, for example about the possible cancellation of the meeting, can be transmitted to a sufficient extent.

Experts from Merilampi Attorneys participate annually in the preparation of, or in their role of a chairman in general meetings of numerous listed companies.

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