General Meetings in the Context of Quarantine
Date: 01/04/2020In the wake of the COVID-19 epidemic, several safety measures have been implemented to fight the spreading of the virus. Considering the prognostic models of further development, it is unlikely that the measures will be lifted anytime soon.
One of the measures implemented is the ban on mass gatherings mandated by the Public Health Authority of the Slovak Republic. Not only does it affect personal lives of individuals; as a result of the ban, organisers of mass gatherings will most likely incur financial losses, and there is one aspect of this measure we wish to bring to your attention as it also affects corporations.
It is almost that time of the year when companies usually call together and organise their annual general meetings. General meetings have not been expressly banned, nor does the ban expressly determine the number of persons whose attendance qualifies for a “mass gathering”. Still, having the purpose of the mass gatherings ban in mind, you should consider whether the general meeting brings together a larger number of people in one place, thus likely increasing the risk of COVID-19 spreading.
The Commercial Code and related legal regulations offer alternatives when it comes to standard organisation and dealings of the general meeting, enabling the observance of the mass gatherings ban. One of the traditional alternatives is shareholder voting without attendance at a general meeting (per rollam), or shareholders sending their votes by mail or electronically; they may also be represented by granting a special power of attorney in which multiple shareholders authorise an agent to attend and vote at the general meeting. The less traditional options, which Slovak law does not provide for, include holding a general meeting by way of video conferencing or live streaming.
As far as preventive measures which each company should adopt in relation to the organisation of a general meeting are concerned, we recommend the following:
- Check your bylaws or articles of association for the latest possible date on which the annual general meeting can be held and consider its feasibility; please note that if the general meeting date is tied to the filing of your company’s tax return in any way, the Economy Ministry has postponed the deadline for filing tax returns from 31.03.2020 to 30.06.2020 if the company notifies its intent to file at a later date;
- Consider the risks attached to the mass gatherings ban and potential absence of foreign residents at the general meeting,
- Check whether your corporate documents, such as bylaws or articles of association, provide any alternative option for organising the general meeting. If needed, execute any amendments to the documents well in advance, if possible;
- When convening a general meeting, consider alternative options for shareholders to attend and vote and adjust the general meeting organisation accordingly.
We recommend taking these measures to avoid any potential sanctions for not complying with the mass gatherings ban, to provide for proper functioning of the company in the face of the expected economic crisis caused by the spreading of the epidemic, and, last but not least, to protect the health of all those affected by the situation.
At the same time, please be advised that as per Section 193 Commercial Code (applying accordingly to limited liability companies), the board of directors is obliged to inform the supervisory board without undue delay of any circumstance that may have a material adverse effect on the economic growth and the assets of the company, especially its liquidity.
UPDATE
On 25 March 2020, the National Council of the Slovak Republic adopted Act No. 62/2020 Coll. on certain extraordinary measures in connection with the spread of dangerous contagious human disease Covid-19 and in the administration of justice which amends and supplements certain acts. The Act deals, in part, with the discussed matter of the organisation of corporate general meetings during the current exceptional situation. Section 5 of the Act provides for the option to use postal voting or attendance at the general meeting via electronic means, even if the internal corporate regulations or Statutes are silent on the matter.
To ensure compliance, respective applicable conditions set out by Sections 190a – 190d of the Commercial code, which deal with said distance voting procedures, need to be followed. We would like to draw your attention to the fact that the nature of these conditions is relatively formalistic, and so we recommend taking care with respect to meeting the conditions relating to the form and content of the ballot, procedures related to the service and counting of postal ballots or the technical parameters of the electronic voting system.
The legal team at RUŽIČKA AND PARTNERS is here to help you plan and implement any preventive measures and analyse and solve any risks relating to the current situation.
Do not hesitate to contact us!
