The need for social distancing has come to the fore in 2020. Due to the global pandemic of the coronavirus disease, we had to suddenly find different solutions in our everyday life to make as little physical contact with each other as possible. Most areas of our daily lives were affected by some adjustments and the operation of corporate bodies of the company has been no exception to the changing reality.
To facilitate the participation of shareholders at the general meeting, the Slovenian legislature introduced the possibility of so-called electronic general meetings into Slovenian law already in 2009. The main characteristic of electronic general meetings is that shareholders can attend the general meeting by electronic means without their physical presence.
Only a few companies have implemented the possibility of holding electronic general meetings into their Articles of Association, thus electronic general meetings have not been frequently carried out in practice.
A real and genuine need to organise general meetings without the physical presence of shareholders came to the forefront in 2020 as a result of circumstances not directly related to the economic or political aim of promoting the involvement of shareholders in the corporate decision-making process as was the initial intention of the law in 2009.
In November 2020 the Slovenian legislature adopted the Act Determining the Intervention Measures to Mitigate the Consequences of the Second Wave of COVID-19 Epidemic (hereinafter “Intervention Act”) which introduced the option of “virtual” general meetings. The reason for complementing the existing regulation of (electronic) general meetings was to enable general meetings in the era of the epidemic when the rules of social distancing must be observed. The principal difference between the electronic and the virtual general meeting is that the virtual general meeting is fully carried out in the digital environment. Hence, the introduction of the virtual general meeting represents an important new development of Slovenian law that requires additional attention.
The Intervention Act now provides that the option of holding the virtual (and electronic) general meeting does not have to be stipulated in the company’s Articles of Association. With the consent of the supervisory board, the management can decide that the general meeting will be held virtually without the physical presence of shareholders or their proxies and other participants. To carry out a virtual general meeting, the management has to determine the rules relating to such general meeting which have to be made available to the shareholders.
The virtual general meeting can be carried out only under certain conditions. Firstly, the company has to ensure the transmission of the video and audio of the entire general meeting in real-time. The company also has to arrange the requisite conditions for determining the identity of shareholders or their proxies. Furthermore, the shareholder voting process has to be possible by the use of electronic means and the conditions for secure electronic communication have to be provided. Finally, the management has to ensure that shareholders can exercise their right to be informed about the company's affairs by the use of electronic means.
The Intervention Act also sets forth exemptions concerning the challenging of the resolutions which were adopted at the virtual general meeting. Namely, immediate notification of the intention to challenge a resolution is not required at the virtual general meeting. Also, resolutions which were adopted at the virtual general meeting cannot be challenged based on alleged infringement of rights resulting from malfunctions of technical means, unless such technical malfunction was the result of serious negligence or intent by the company convening the virtual general meeting. Challenging the resolutions based on an alleged infringement of the shareholder's right to be informed also cannot rest solely on the restrictions of such right that are a result of carrying out the general meeting in virtual form.
The introduction of the virtual general meeting should be considered as a welcome improvement of Slovenian legislation. On the other hand, it should be pointed out that the Intervention Act limits the possibility of convening virtual general meetings only to the time of the COVID-19 epidemic. Since virtual general meetings can attract and encourage a wider circle of shareholders to participate in a company’s decision-making process and determine its goals, thereby contributing to the overall corporate governance of Slovenian companies, virtual general meetings should be considered as an option also in the future post-epidemic times, which will hopefully come very soon.
By Katja Sumah, Partner, and Luka Rzek, Associate, Miro Senica and Attorneys