In the current circumstances, due to the coronavirus outbreak and restrictions imposed on meetings of any kind, including meetings of shareholders and supervisory boards, ensuring uninterrupted and legally compliant company operations will be a challenge. The situation may be mitigated by legal tools allowing governing bodies to work remotely.
Summary
- The primary measures facilitating the operation of corporate governing bodies in the era of social distancing may include holding meetings using remote communications and voting by circulation procedure.
- The use of remote communications is possible as long as the relevant provisions have been included in the company’s organizational documents (its articles of association or statute).
- Works are now pending on amendment regulations to the Code of Commercial Companies and Partnerships (KSH) which will enable remote corporate governance operations even if such an option has not been provided for in the company’s articles of association or statute.
Remote board meetings
Pursuant to the provisions of the Code of Commercial Companies and Partnerships, the following can be held using electronic means of communication:
- shareholder meetings in limited liability companies,
- general meetings in joint-stock companies,
- supervisory board meetings in limited liability companies and joint-stock companies.
Therefore, members of governing bodies may adopt valid resolutions as required by law or the articles without having to convene physical meetings.
Please note that in the case of general meetings of shareholders of joint-stock companies, the meeting must be convened in the conventional, “physical” way at the location named in the statute, and attended by the chairperson of the meeting and the notary, while shareholders may attend using electronic means of communication, including but not limited to:
- real-time transmission of the general meeting;
- real-time two-way communication enabling shareholders to address the general meeting from a remote location;
- casting votes in person or by a proxy holder, whether before or during the general meeting.
Currently applicable provisions do not foresee the possibility of holding remote board meetings or adopting resolutions by circulation procedure, and therefore the viability of such solutions is doubtful according to legal theory.
The obligation to include relevant provisions in the articles of association or statute
To adopt the solution described above, i.e. hold virtual meetings of governing bodies, the company must enact relevant provisions in its articles or statute. This legal status quo is to be changed by the forthcoming amendment to the Code of Commercial Companies and Partnerships – pursuant to which the option for corporate governing bodies to avail of remote communications will become a principle (applicable irrespective of the provisions in the articles of association or statute). The effective date of the regulations in this regard is not yet known.
Adopting resolutions by circulation procedure
Provisions of the Code of Commercial Companies and Partnerships stipulate that in a limited liability company resolutions can be adopted without convening a shareholders’ meeting if all the shareholders give their written consent to the given resolution or to voting in writing. These rules also apply to supervisory board meetings in limited liability companies and joint-stock companies.
Other solutions
Other solutions which may prove helpful in ensuring business continuity may include granting powers of attorney (including for specific circumstances) or appointing authorised officers to expand the range of individuals authorised to act on behalf of the legal entity.
The exceptional circumstances we are currently facing require special measures to maintain reasonably efficient business operations. To this end, businesses may take advantage of the instruments described above, such as video conferencing, powers of attorney or voting by circulation procedure.