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General Meeting of Shareholders – COVID-19 and Post COVID-19 Era

General Meeting of Shareholders – COVID-19 and Post COVID-19 Era

Romania
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In light of the COVID-19 outbreak, virtually all companies have faced difficulties in relation to the organizing of general meeting of the shareholders (“GMS”) via traditional methods i.e. GMSs held by physical attendance of the shareholders.

Thus, holding the GMSs remotely has become a subject of interest for most companies. Moreover, we expect for this issue to gain momentum even after the end of the COVID-19 crisis as more and more companies will wish to have the option of organizing remote GMSs both in order to be prepared for any new extraordinary circumstances as well as to simplify the proceedings altogether even for “normal” times.

In theory, companies may: (i) hold a hybrid meeting by combining a main physical location with a form of remote participation and vote via correspondence, (ii) hold a virtual meeting by electronic means and vote via correspondence or (iii) take decisions of the shareholders meeting only via correspondence.

But what if your articles do not allow any of the above scenarios? It is to be noted that, (a) according to the Romanian Companies Law no. 31/1990 (the “Companies Law”), shareholders may hold an GMS via correspondence only if such possibility is expressly mentioned in the articles of association while (b) many articles of association do not provide such alternative.

Arguments supporting the view that GMSs can be organized remotely in case of extraordinary circumstances (such as the COVID-19 related restrictions) even if the articles of association do not expressly provide for such possibility may be put forward. However, such endeavors may be challenged by minority shareholders.

In order to offer much needed support for companies, the Romanian Government adopted the Emergency Government Ordinance no. 62/2020 on certain measures related to the meetings of the statutory bodies of companies which entered into force on 8 May 2020 (“EGO 62/2020”).  

EGO 62/2020 provides derogatory provisions from the Companies Law by implementing the possibility of holding GMSs by electronic means even if such possibility is not reflected in the company’s articles of association. Furthermore, its provisions shall apply for non-listed companies only and for a limited period of time i.e. GMSs summoned and held until 14 July   2020.

Considering the challenges faced by shareholders and the limited period of time during which EGO 62/2020 is applicable, where the case, it is advisable for articles of association to be amended by: (i) removing provisions directly or indirectly prohibiting remote GMSs and (ii) including provisions regarding specific methods of remote GMSs.

It is good practice to introduce specific and detailed provisions in the articles of association but the level of detail needs to be carefully considered as, sometimes, the desire to make everything clear can lead to a rather burdensome process to be followed by the directors while organizing an actual GMS. Thus, some matters should remain at the discretion of the directors which shall have the power to provide for the required details in the summoning notice of each GMS.

In order to assess the most suitable means for the proper summoning and holding of remote GMSs for non-listed companies, the following considerations are to be noted:

  • Summoning notice transmitted electronically

According to the Companies Law, a GMS can be summoned either via registered letter or, if the articles of association allow it, by a letter sent electronically with an incorporated extended electronic signature. The extended electronic signature has certain benefits such as streamlining the decision-making process, reduced costs and ease of electronic transmission of documents or information.

  • Ensure that the GMS technology solutions satisfy legal requirements

The companies may use a third-party platform provider to ensure that the technology is secure, effective and works without interruption. Thus, the chosen technology should allow for: (i) direct and concomitant identification of the participants at the meeting, (ii) real-time transmission of the meeting and (iii) recording of the meeting once the prior consent of the participants in this respect has been obtained.

The companies may also consider that some of the shareholders are less familiar and with less access to technology. Thus, the company should: (i) use appropriate technology that provides a user-friendly experience to the company and its shareholders and (ii) provide assistance for those shareholders who need help with using said technology before and during the meeting.

  • Introduce clear instructions for the shareholders

If a hybrid or virtual GMS was not held before, consideration should be given to what changes need to be made to the usual summoning notice of the meeting, in particular clear instructions on: (i) how to access the documentation and information related to the GMS, (ii) sending of proposals for the supplementing of the agenda, drafts of resolutions and questions, (iii) providing the power of attorney by representatives, if the case and (iv) exercising of the vote by correspondence.

Also, in order to assess the number of attendees and ensure the meeting of the minimum quorum requirements, the pre-registration of the GMS attendees must be arranged for.

  • Ensure ease of access of documents and information

Companies should ensure easy access to documents related to GMSs. The extended electronic signature may be considered by shareholders for accessing and sending of documents and information of major importance while other documents could be simply sent via electronic means.

  • Providing of the power of attorney

According to the Companies Law, the powers of attorney for representation in the GMS should be submitted to the company in original with at least 48 hours before the meeting. Articles of association may include specific provisions that allow the submission by electronic means of the powers of attorney having attached the extended electronic signature.

  • Ensure the vote by correspondence

In addition to the vote cast in a physical meeting, the only other allowed mechanism by the Companies Law for the exercising of the voting right is the vote by correspondence.

Thus, the summoning notice should clearly indicate that the vote by correspondence may be communicated by registered letter, courier services or by email having an incorporated extended electronic signature.

However, one must be aware that the mandatory secret vote is required in some cases such as appointing or revoking the directors of the company, censors or financial auditors. In this regard, the option for the shareholders’ vote to be expressed by means that allow disclosure only to those responsible for counting and validating the votes in the meeting must be ensured.

  • Establish an online shareholder Q&A for the GMS

Last but not least, shareholders should have the possibility to submit questions related to the GMS. The questions should be submitted in writing in advance of the meeting as well as subsequently, until the elapse of the voting deadline.

By Ioana Criste, Associate, and Diana Bejenaru, Associate, Ijdelea Mihailescu

Romanian Knowledge Partner

Țuca Zbârcea & Asociații is a full-service independent law firm, employing cross-disciplinary teams of lawyers, insolvency practitioners, tax consultants, IP counsellors, economists and staff members. It also operates a secondary law office in Cluj-Napoca (Romania), and has a ‘best-friend’ agreement with a leading law firm in the Republic of Moldova. In addition, thanks to the firm’s dedicated Foreign Desks, the team provides the full range of services to international investors seeking to gain a foothold or expand their existing operations in Romania. Since 2019, the firm and its tax arm are collaborating with Andersen Global in Romania.

Țuca Zbârcea & Asociaţii is providing legal services in every aspect of business, covering all major areas of practice: corporate and M&A; litigation and international arbitration; corporate tax; public procurement; TMT; employment; insurance; banking and finance; capital markets; competition; healthcare and pharmaceutical; energy and natural resources; environmental; intellectual property; real estate; regulatory legal services.

Țuca Zbârcea & Asociaţii is a First-Tier law firm in all international legal directories and a multiple award-winning law firm both locally and internationally. It received the CEE Deal of the Year Award (DOTY Awards 2021) and the Law Firm of the Year Award: Romania (IFLR Europe Awards 2021). 

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