There are over 100,000 public limited companies in Switzerland, about ten times as many as in Germany or Austria. This type of company is extremely popular and the majority of them are SMEs.
The Swiss Code of Obligations has long laid down the procedure for the annual shareholders general meeting. It must take place physically among shareholders – or their representatives. Those who cannot attend may be represented by proxy. No other options so far exist.
Large group meetings are prohibited in the wake of the Coronavirus crisis. Smaller gatherings are not recommended, even in a professional environment.
In order to reduce risk the Confederation has now, for the very first time, created the possibility to hold general meetings virtually or digitally. On the basis of COVID 19 Ordinance 2 Art. 6a, shareholders are no longer obliged to meet in person, but can hold their general meeting digitally.
As a representative of the digital economy, Drooms welcomes this step and offers assistance to SMEs in this regard.
The following should be noted:
- The rules for timely and formal invitations remain in place.
- Voting rights may be cast in writing (by letter/email) or otherwise electronically. For example, shareholders can vote orally when participating via video conference. This tends to be recommended for companies with a manageable number of shareholders.
- The technical prerequisites must function perfectly and be easily accessible so that there is no risk of subsequent contestation.
- The documents for the general meeting can be made available in various ways. A virtual data room meets all documentation, auditing and data protection requirements.
In summary, the following steps should be taken when SMEs hold their general meetings digitally:
1) The issue of timely and formal invitations
2) Access to documents via a Swiss virtual data room
Although Art. 6a of the regulation speaks of an “optional provision”, it is recommended to follow Art. 6a and to ask shareholders to exercise their voting rights according to one of the above variants – especially if the shareholder group consists of more than five people.
Although Art. 7c para. 2 of the regulation prohibits gatherings of more than five people in public places, it is advisable to follow this instruction also for gatherings of more than five individuals in closed rooms.
The purpose of this order is to prevent people from spreading the virus. However, as this can also happen when more than five people meet in a confined space, it is our opinion that this too should be avoided if possible. If up to five people gather, a distance of two meters must be maintained.
If a Shareholders General Meeting has already been convened, shareholders must be notified of the procedure for exercising voting rights at least four days before the Shareholders General Meeting. The statutory or statutory periods of notice (generally 20 days) need not be observed. Again, the respective provisions and formal requirements of the Articles of Association must be observed.
If shareholders have not yet been formally invited to the General Meeting, it must be convened in accordance with the legal and statutory deadlines (generally 20 days). The corresponding instructions for exercising voting rights must also be explained.
In both cases, it is advisable to refer to the special provisions set out in the ordinance.
If the date of the Annual General Meeting is after 19 April 2020 but before 30 May 2020, it is nevertheless advisable to comply with the ordinance and exclude personal attendance. Shareholders should be informed that a) the company assumes the regulations will be extended and b) should the situation change before the General Meeting, the required parties will be notified.
Holding of the Ordinary General Meeting after six months
The legal requirement to hold an ordinary general meeting within six months of the end of the financial year is a regulatory provision. If the Ordinary General Meeting is held in the second half of the year, the General Meeting is still valid, and its decisions cannot be challenged on the grounds of non-compliance with the regulation.
To which companies do the regulations apply?
The special provisions of the regulation concern all companies: public limited liability companies, private limited liability companies, general partnerships, limited partnerships, associations and cooperatives.
Limited liability companies however, based on Art. 805 of the Swiss Code of Obligations, may already by law, pass their shareholders’ resolutions in writing, provided that no shareholder requests oral consultation.
Since this article was published and in order to combat the effects of the COVID-19 pandemic, the German government have now created the legal basis for a “virtual general meeting”.
Disclaimer: The information contained in this article is for general information purposes and does not constitute legal or tax advice. In concrete individual cases, the present content cannot replace individual advice from competent persons.