6 April 2020 – need2know
The current situation raises many questions in connection with the holding of planned general or shareholders’ meetings, supervisory board meetings, the filing of annual accounts or the establishment of notarial deeds. The COVID Act on Corporate Law (Federal Law Gazette I No. 16/2020) has already made some necessary adjustments to the current situation. With the 4th COVID 19 Act (Federal Law Gazette I No. 23/2020), further simplifications with regard to meetings, annual accounts and notarial acts come into force, the majority of which are aimed at reducing personal contacts to the necessary minimum.
Shareholders’ meetings and general meetings
The original Corporate COVID-19 Act provided that for the duration of the measures taken to prevent the dissemination of COVID-19 under the COVID-19 Measures Act (Federal Law Gazette I 2020/12), meetings of shareholders and members of the executive bodies of a corporation or partnership may be held even without the physical presence of the participants. The 4th COVID-19 Act clarifies that this amendment is not only intended to relate to the duration of measures to prevent the dissemination of COVID-19, but generally until the end of 2020. This gives Austrian companies a certain degree of planning security for the holding of general meetings or general assemblies. In addition, it was added that these provisions apply not only to corporations, partnerships, cooperatives, private foundations, associations, mutual insurance companies, small insurance companies, but also to savings banks.
The Corporate COVID-19 Act already provided the Federal Minister of Justice with the authorisation to adopt more detailed rules concerning the holding of the above-mentioned meetings which ensure a comparable quality of decision-making. It has now been clarified that this authorisation should also extend to permit other voting mechanisms.
The provisions of Art 32 § 1 (1) of the 2nd COVID-19 Act on the organisation of meetings without physical presence take precedence – as special legal provisions – over any deviating provisions in the Articles of Association of Austrian companies. The regulation to be issued by the Federal Minister of Justice will likely provide further clarity.
In addition to the adoption of resolutions in writing, the use of technical means of communication should make it possible to reach a decision of comparable quality even without holding a meeting in person. In particular, the “qualified video conference”, already known from corporate law practice, should be considered here. Therefore, Article 32 § 1 2nd COVID-19 Act is intended to create a temporary legal basis for such virtual meetings and other forms of decision-making (e.g. written votes), whereby more detailed rules for such forms are reserved for the Federal Minister of Justice (Explanation IA 397/A 27th GP on Art 32 2nd COVID-19 Act). The 4th COVID-19 Act has now further created possibilities for notarial certification to be carried out via videoconferences or similar technical means (for details see below), thereby now also allowing meetings to take place via videoconference for which the “presence” of a notary public is mandatory.
However, qualified video conferences – as mentioned in the official notes to the 4th COVID-19 Act – can present companies with technical challenges. In a qualified videoconference, all participants must be able to see and hear each other, the audio-visual quality must allow authentic recording of details of human facial expressions, gestures and intonation, and the communication must be protected against access by unauthorised persons.
We assume that for smaller meetings, up to a maximum of 10-15 people, common video conferencing solutions with a corresponding security standard meet these requirements well. For meetings with a larger group of people, however, more specific solutions will have to be found to meet the requirements of taking minutes and determining voting results.
It is expected that the regulation to be issued by the Federal Minister of Justice will bring further simplifications and clarifications in this respect.
Ordinary general meetings of stock corporations/limited liability companies/cooperatives
The 2nd COVID-19 Act already provided for a twelve-month extension of the period within which the annual general meeting of a stock corporation must take place by the end of 2020. This now also applies to limited liability companies and cooperatives, but not to SEs.
This provision – as a special legal regulation – takes precedence over any deviating provisions in the Articles of Association or partnership agreement. This means that stock corporations, limited liability companies or cooperatives with a year-end closing date of 31st December can postpone the ordinary general meeting or ordinary shareholders’ meeting for the business year 2020 until 31 December 2020 without fear of penalty or other sanctions.
It is not possible for the Austrian legislator to adopt a corresponding adjustment for the Societas Europaea (“SE”), because the period within which an ordinary general meeting of shareholders must be held is regulated by EU law. However, the explanatory report on the 4th COVID-19 Act states that no management or administrative body of an SE can be reproached for not convening a general meeting even without an explicit extension of the period if COVID-19 requires that a general meeting is not convened.
Extension of deadlines for the preparation of annual accounts
The 2nd COVID-19 Act already extended the deadline for the submission of annual accounts from 22 March 2020 to 30 April 2020. The 4th COVID-19 Act now stipulates that the deadline of 5 months for the preparation of annual financial statements may be exceeded by 4 months if the legal representatives of companies are not able to prepare the annual financial statements in time due to the COVID-19 pandemic. This includes the documents listed in Section 222 para 1 Austrian Company Code (Unternehmensgesetzbuch), i.e. the annual financial statements, the management report, the corporate governance report, if applicable, the report on payments to public authorities, as well as other accounting documents, such as the consolidated financial statements, the group management report, and, if applicable, the consolidated corporate governance report. In the same way, the disclosure obligations also extend to these documents.
From the point of view of good corporate governance, it is recommended that these documents are published on the company’s website, which is registered in the commercial register, and made available for collection. In order to avoid personal contacts, the shareholders/partners should be offered the option of having the annual financial statements made available to them by e-mail upon request and should also be asked to refrain from collecting them in person. In the case of stock corporations, limited liability companies or cooperatives with a closed circle of shareholders or partners, if no website is registered in the commercial register, appropriate information could be sent by mail and the sending of such information by e-mail could be offered.
Supervisory Board meetings in the 1st quarter 2020
The 4th COVID-19 Act expressly clarifies that should no supervisory board meeting have been held in the first quarter of 2020 due to the COVID-19 crisis, this does not constitute a violation of the Austrian Act on Limited Liability Companies, the Stock Companies Act or the Cooperatives Act.
Extension of the possibilities for a “remote notarial deed” or notarial certification by video conference
A change that is very relevant for corporate law practice has been implemented in Section 90a of the Notarial Regulations (Notaritatsordnung) newly introduced by the 4th COVID-19 Act: This extends the possibilities for the execution of “electronic” notarial deeds, other public documents or certifications. These possibilities have so far only existed to a very limited extent for company formations. Now, for example, also transfers of shares in limited liability companies or general meetings can be notarised by video conference. The frequently required certifications of signatures are now also possible via video conference.
With regard to the notarisation requirements, the new stature refers to the requirements already created by the Electronic Notarial Form Foundation Act (Elektronische Notariatsform-Gründungsgesetz) in §§ 69b and 79 (9) of the Notarial Regulations. It is therefore necessary to identify the participants in a “video-supported electronic procedure” or by means of electronic identification in accordance with the further requirements of the Chamber of Notaries (Notariatskammer).
According to the wording of Section 90a of the Notarial Regulations, the new rules may only be applied “to prevent the dissemination of COVID-19” and unfortunately, in addition, the new statute will only be in force until 31 December 2020. It is hoped that positive experiences with the new forms of certification might lead to making them permanently available, since, irrespective of the present situation, a great deal of unnecessary travel activity and administrative work could be avoided by them.
Current developments make it clearer than ever that electronic means of communication make an indispensable contribution to maintaining the ability of companies to act and make decisions at all times. It remains to be seen whether in this area, in which legal developments have lagged far behind technological developments so far, the present findings will be used to make the legal framework fit for the future after the COVID crisis by taking new technological possibilities into account.
The regulation to be issued by the Federal Minister of Justice will also be of interest in this context.
Please note that the information provided here does not replace legal advice. The regulations presented here can be changed by the legislator at short notice. We therefore invite you to visit our information area on a regular basis.
Authors: Elke Napokoj, Stefan Gaug
Corporate / M&A
If you want to receive future issues of need2know, follow us on LinkedIn or send an e-mail to email@example.com.