The Limited Liability Companies Act reform means that general meeting practices remain flexible
General meeting practices changed during the last few years after remote participation became possible in the spring of 2020 due to the coronavirus pandemic. This transition period came to an end on 11 July 2022 when the Limited Liability Companies Act reform entered into force, with significant amendments to chapter 5, which regulates general meetings. Some of the amendments have been in use in listed companies since the temporary legislation of 2020 entered into force, but the current reform will also introduce entirely new possibilities. The reform focuses on various possibilities for remote participation, which enable general meetings to be permanently organised remotely in part or in full going forward, i.e. as hybrid or remote meetings, as long as the shareholders’ right to participate and the correctness of the vote counting can be established as reliably as in a traditional physical meeting. In the future, changing the general meeting practices without the consent of all shareholders will be possible for non-listed companies as well. Naturally, general meetings may still be organised in a fully traditional manner if the company so wishes.
In the future, hybrid meetings will be possible for all limited liability companies
Organising hybrid meetings, i.e. enabling real-time remote participation in full in a traditional meeting, will be possible for all limited liability companies based on a decision by the board of directors. This does not require amendments to the articles of association. Full participation in a general meeting means that a shareholder can exercise their power of decision freely. In practice, this means that a shareholder participating remotely is able to exercise their right to attend, to speak and to vote largely in the same manner as any shareholder participating at the meeting venue. In hybrid meetings, the meeting place is the company’s domicile, as customary, or another meeting place set forth in the articles of association.
The board of directors can decide that in addition to participation at the meeting venue and real-time remote participation, supplementary ways of remote participation will be offered in a hybrid meeting before the start of the meeting or during the meeting, unless the articles of association prohibit or limit offering such ways of participation. This can mean, for example, advance participation by mail or data link largely in the same manner as in meetings of listed companies under the temporary legislation. Supplementary ways can be used to increase shareholders’ opportunities to participate, but they will not fully replace actual participation in meetings as the board of directors may decide to impose limitations on the supplementary ways of remote participation, unless otherwise set forth in the articles of association. We believe that for example offering opportunities such as advance voting will be popular in the future, particularly now as shareholders have become accustomed to it during the temporary legislation.
If the company’s shareholders wish that there will be no possibility to organise hybrid meetings, a specific provision must be included in the articles of association to prohibit remote participation or to limit it to some extent. This shows that in the reformed Act, the flexibility of meeting practices is considered as the default that can be deviated from only by way of specific provisions in the articles of association.
The practicalities of organising meetings are made easier by the fact that in the notice convening the general meeting, shareholders can be required to make a binding commitment to whether they will participate in the meeting remotely. On the day of the meeting, shareholders cannot change their mind and participate in the meeting at the meeting venue.
Organising remote meetings requires amending the articles of association
Unlike a hybrid meeting, organising a general meeting entirely remotely, i.e. with no meeting venue and in such a way that the shareholders can fully exercise their rights in real-time by way of a data link, requires a specific provision to be added in the articles of association. It can be set forth in the articles of association that the general meeting shall be or can be organised in this manner. It is recommended that the provision in the articles of association enabling remote meetings is drafted so that it will enable the various meeting procedures to be as flexible as possible in the future.
In a remote meeting organised without a meeting venue, the board of directors may also decide to offer means of remote participation to supplement full participation (such as the opportunity to vote in advance) before the meeting or during the meeting, unless prohibited or limited in the articles of association. Organising the opportunity to vote in advance may be recommended in these cases as well, so that the shareholders can choose their manner of participation as freely as possible.
Until the end of 2022, amending the articles of association to make organising hybrid meetings obligatory may in listed companies be decided by advance voting in meetings under the temporary legislation. After the transitional period the issue will be decided in the same manner as any other amendment to the articles of association. However, the exception is that the decision to amend the articles of association so that organising hybrid meetings becomes obligatory can be reached by a simple majority instead of a two-thirds majority.
We estimate that the transition to remote meetings will be quite long and daunting for many listed companies. Next spring will likely prove to be a testing period for hybrid meetings. In contrast, non-listed companies will in many cases find transitioning to remote meeting easier after the coronavirus pandemic. Based on our information, there have already been some amendments to companies’ articles of association to enable remote meetings. Technical solutions for organising remote meetings are being developed in several quarters and the range of available services will likely increase during the next general meeting season.