In July 2022, the possibility of the virtual Annual General Meeting in shareholders’ law was opened in § 118a AktG. We explain how such a virtual general meeting must take place, what procedural facilitation there is and whether it offers advantages.

1st Virtual General Meeting: History

Only in the wake of the Corona Pandemic did the legislature see the need to move away from the rigid presence format of the Annual General Meeting. Practically little use was made of the possibility of online participation already introduced in 2019 in § 118 (1) sentence 2 AktG. On this basis, the public limited liability company can open the possibility of electronic participation to shareholders. However, shareholders are not physically prevented from participating.

From spring 2020, for the first time, the framework conditions for holding a general meeting without the physical presence of shareholders or their representatives were temporarily regulated. The virtual general meeting according to § 118a AktG is characterized by the physical absence of the shareholders or their representatives from the place of the general meeting. Given the many contact restrictions in place at the time, this was the only way for the company to hold its general meeting.

Based on the findings collected during the pandemic, the Bundestag adopted the law on the permanent introduction of the Virtual General Assembly on 7 July 2022. § 118a AktG provides for a general meeting, which is adapted in preparation and procedure to the attendance format, but purely virtual.

2nd General Meeting in Practice

A general meeting can be defined as the general meeting at which all shareholders appear or are represented. Therefore, the basic prerequisite is first of all that a meeting is held. All shareholders, including shareholders with non-voting preference shares, must appear or be represented. For the effective holding of a purely physical general meeting, it is not sufficient that a shareholder or his authorized representative is virtually connected and declares his waiver of compliance with formal requirements. According to § 241 no. 1 AktG, such an action would lead to the nullity of the decisions taken. However, a conceivable arrangement would be for the virtually connected shareholder to give (remotely) oral power of attorney to a physically present shareholder to attend the general meeting.

The presence of the members of the Executive Board and Supervisory Board for a General Meeting is not required. In principle, their presence is legally required. However, the absence is without consequences, since § 118 (3) sentence 1 AktG is designed as a mere target rule.

3rd Virtual General Meeting: Design

3.1. Virtual General Meeting to be arranged

Prerequisite for a virtual general meeting is that its implementation is ordered. In the statutes, the virtual general meeting can initially be provided as a standard regulation for five years. In the statutes, however, the Executive Board may also be empowered to arrange the virtual general meeting in individual cases. In order to maintain maximum flexibility, this enabling solution seems practically preferable. For the transitional period – without authorization of the articles of association – a Management Board resolution is sufficient, but this can only be issued with the approval of the Supervisory Board.

The legislature made no explicit provision about the legal consequences of a virtual general meeting held without such an order. It follows from general principles, however, that without an order the general meeting is to be held as a public meeting. Only at a virtual general meeting are the electronically connected shareholders deemed to have appeared. Unless there is an effective order for a virtual general meeting, electronically connected shareholders are also not deemed to have appeared.

According to § 121 paragraph 4b AktG, the convocation must specify how shareholders and their representatives can participate electronically in the meeting and that the physical presence at the meeting place is excluded.

3.2. Virtual General Meeting: Rights of Shareholders

The aim is that the purely virtually held Annual General Meeting is equivalent to the general meeting held in presence. § 118a AktG created various prerequisites that take into account the specificity of the virtual space and at the same time protect the rights of shareholders. In particular, the right to speak at the virtual general meeting includes the right to submit motions or electoral proposals as well as to request information and make enquiries (§ 130 (5) AktG). The legislator proposes that a virtual reporting table be set up for speeches with the possibility of registering speeches. In addition, applications and election proposals should also be transmitted to the company by e-mail.

In addition, shareholders have the additional right to submit comments on the items on the agenda before the meeting.

The right to speak in the Assembly shall be granted by video communication. Therefore, a suitable form must be chosen that allows a reliable direct connection in real time. The concrete form of video communication can be determined by society.

3.3 Ensuring the right to speak

The right of shareholders or their representatives to speak at a general meeting can be structured differently.

A general debate has been established at the beginning of the Assembly, at which each speaker is given the floor only once and can then comment on all items on the agenda. Individual debates, that is to say debates on each item on the agenda, are less practical. This applies to both the physical and the virtual general meeting.

However, it must be ensured that intended contributions are not ignored due to technical disturbances. It is therefore appropriate to request active comments from each shareholder, for example to ask the shareholders present or their representatives individually or in groups whether contributions are intended. It would also be conceivable that the assembly leader also maintains a list of speakers that is accessible to all participants, on which further contributions to the assembly leader can also be announced in text. B

3.4. Persons present on site

The circle of those who must necessarily be present on site according to § 118 (2) AktG is limited. The location of the general meeting therefore only fulfils the function of being a meeting place for these people. For the virtual general meeting, three people will usually meet physically. This includes a notary, a voting representative and the meeting leader.

Minutes on general meetings are to be notarized in principle on the basis of the provisions of § 130 (1) sentence 1, sentence 3 AktG. Therefore, the presence of a notary at a virtual general meeting is regularly required. In addition, the presence of a meeting leader is necessary, since the notary is prevented from exercising this position. Finally, a voting representative appointed by the company – unlike representatives of shareholders – may be physically present. In this respect, the company usually appoints a voting representative, such as an employee of the legal department.

Regarding the presence of the Management Board and Supervisory Board members, no stricter requirements apply than at the Annual General Meeting held in presence. Their absence therefore does not in principle constitute grounds for contest. The Articles of Association may also allow the members of the Supervisory Board to participate virtually.

The meeting place is freely selectable according to § 121 paragraph 5 sentence 3 AktG. Therefore, the question arises as to how the place where the officials meet is determined. In the absence of an explicit statutory allocation of competence, the persons involved can determine the location. It makes sense to agree on the seat of the company or the offices of the notary.

In addition, it may be useful for the company to maintain an e-mail account only for backup communication purposes during the Annual General Meeting. This allows shareholders to exercise their rights in text form. The notary can also authorize the company to accept contradictions for writing via such an account.

3.5.

Just as at the attendance meeting, the shareholders are to be included in the list of participants. However, the inclusion in the list requires that they are connected in such a way that they exercise subscriber rights (for example via the shareholder portal) and can therefore also be identified.

In order to be deemed to have appeared pursuant to § 245 sentence 2 AktG, the shareholders must be electronically connected. What exactly means electronic connection cannot be inferred from the explanatory statement. In any case, only those who exercise subscriber rights and can therefore be identified by the companies are considered to be electronically connected. In practice, at virtual general meetings of larger public limited liability companies, for the preparation and implementation of which special service providers are called in, shareholders are usually considered to be connected as soon as they have logged in with their access data in the shareholder portal.

In addition to professional service providers who specialize in holding general meetings, the established software tools for video communication can also be used. The latter seems practically often preferable. The commissioning of specialized service providers, on the other hand, means a considerable time and cost effort. Switched on is then who uses the software tool with its access data during the meeting.

3.6. Identification and assurance of uninterrupted presence

It remains to be clarified how the virtual participants identify themselves and how to ensure that the shareholders are permanently present. Especially in companies with a closed circle of shareholders, it is not uncommon that all persons present are also known to the notary or the meeting leader. For the identifiability, therefore, first of all, the personal familiarity with the meeting leader or the notary is trusted.

If the participants are not all personally known to the notary or the meeting head, the identification must be supported, for example, by individualized access data for participating shareholders.

As part of the determination of attendance, it must be checked whether the shareholders can exercise their rights effectively, i.e. whether they see a stable connection and whether the audio and video communications function stable in both directions. This shows that it should normally only be of interest for public limited companies with a manageable, closed circle of shareholders to hold a virtual general meeting in this way.

During the course of the general meeting, the meeting leader must then ensure and record via the list of participants that the full presence is maintained continuously and that the general meeting is paused accordingly in the event of any connection interruptions. Connection interruptions are noticeable, for example, by reducing the number of subscribers in the virtual space. Regardless of the number of participants, it makes sense that the meeting leader uses a helper who points out corresponding problems.

3.7th Virtual General Meeting: Resolution

As a rule, there are hardly any rules of procedure for general meetings. Therefore, the head of the Assembly is free to determine voting and counting procedures at his own discretion.

As a form of voting, acclamation or (digital) hand lifting come into consideration. With regard to the enumeration procedure, the use of the practically common subtraction procedure is discouraged. Only abstentions and no votes are counted. These are then deducted from the total number of votes represented. Those who do not expressly abstain or vote 'no' therefore vote 'yes', so if, for example, a vote is involuntarily abstained due to technical failures, the vote will be adopted. In order to exclude this risk, the addition process is suitable. This is a separate count of votes in favour and against. As a precautionary measure, abstentions should also be counted in order to avoid distortion of the result of the vote due to technical disturbances.

4th Conclusion of the Virtual General Meeting

Apart from the unneeded travel, which can often be avoided by granting powers even at the physical assembly, there is no significant advantage.

Conducting a virtual general meeting, however, is basically practical. Therefore, it can be an option for those cases where the personal participation of a shareholder is expressly desired but whose arrival is not possible at short notice.

However, it should be noted that the corresponding order by the Executive Board is required for a hybrid or virtual general meeting if the shareholders do not opt for the (inflexible) permanent order in the articles of association. In this respect – unlike at the general meeting held in attendance – the company’s board of directors is practically always involved.

A virtual assembly carried out on the occasion of such cases then corresponds largely to a physically held assembly. From the point of view of joint stock companies with a closed circle of shareholders, there is in any case nothing against allowing hybrid as well as virtual general meetings in the statutes in order to then be able to decide on a case-by-case basis which format best covers the specific needs.