Revision of Stock Corporation Law | Part 2: Electronic Means in the General Meeting of Shareholders
This article is part of our series of articles summarizing the "Stock Corporation Law Revision (expected to be in force as of 1.1.2023)". We will highlight amended parts of the revision and outline the possible implications for practice.
The modernization of the General Meeting is one of the objectives of the 2023 revision of stock corporation law. At the latest, the Corona pandemic highlighted the need for an alternative to the physical General Meeting. However, the use of electronic means at general meetings is also desirable for purely organizational reasons. This has now been taken into account.
This article describes the new possibilities for organizing general meetings with the use of electronic means and sets out the actions to be taken in order to be able to make use of the new possibilities as of January 1, 2023.
The purely virtual General Meeting
Art. 701d revOR governs the possibility of holding a purely virtual General Meeting. However, this option must be provided for in the company's Articles of Association. In addition, the board of directors must designate an independent proxy in the notice convening the meeting. However, the latter may be dispensed with in the case of listed companies, provided that all shareholders agree. Furthermore, pursuant to Art. 701e revOR, the Board of Directors must ensure that the identity of the participants in the virtual General Meeting is established and that their votes are transmitted directly in the General Meeting. Each participant should be able to submit motions and take part in the discussion. In particular, the Board of Directors must guarantee that the voting results cannot be distorted. The purpose of these provisions is to comply with the principle of immediacy as far as possible at the virtual General Meeting as well, but also to ensure an undistorted vote. This will also strengthen shareholders' confidence in the new decision-making process. Furthermore, the provision of the statutory basis is intended to take account of the fact that not all persons have the same confidence in new technical developments, which is why the shareholders should decide on their application.
The virtual participation in a physical General Assembly and the physical General Assembly in several meeting locations
Art. 701c revOR provides for the possibility that individual shareholders who are not present on site may participate virtually in the General Meeting. This option is very advantageous, especially for multinational companies, as it may be associated with difficulties to find a suitable meeting place in the case of a multinational shareholder base.
Art. 701a para. 2 revOR stipulates the possibility of holding the General Meeting at several venues at the same time with electronic transmission. This is also very attractive for multinational companies, especially if several major shareholders exist in different countries.
For both options, an adjustment in the Articles of Incorporation and the designation of an independent proxy are not necessary. This is because the principle of immediacy is not restricted in the same way as with a purely virtual meeting, as the General Meeting continues to take place physically. The Board of Directors is thus enabled to use electronic means more flexibly according to the ongoing needs of the company and the current state of technology.
Technical problems and their consequences
If technology is used, there is also a risk of technical problems. The revision of the Stock Corporation Act has recognized this problem and set out in Art. 701f revOR how to proceed in such a case. If technical problems arise during the General Meeting of Shareholders so that it cannot be conducted properly, it must be repeated from that point on. However, resolutions passed prior to this remain valid.
No technical problems under this provision are individually occurring difficulties with the shareholders' telecommunications systems. However, if nationwide problems occur with a major telecommunications provider (for example, Swisscom) and a significant proportion of the shareholders are affected, the Board of Directors may not ignore this. It must take appropriate measures, such as briefly interrupting the meeting and continuing it at a later date. On the other hand, problems of individual participants with their hardware or software fall within their sphere of risk and do not affect the course of the General Meeting.
If the General Meeting has to be repeated due to technical problems, the deadline for convening the meeting pursuant to Art. 700 para. 1 CO need not be observed. However, the new date for the repetition of the General Meeting must be set so that the majority of the shareholders are not prevented from attending from the outset. If the agenda is adjusted, the legal and statutory provisions on convocation must be complied with in full.
The Board of Directors cannot exempt itself from the obligation to repeat the vote by proving that the technical problems had no influence on the result. This seems somewhat overcautious in view of the fact that such exculpation is very much possible in national referendums.
Further possibilities of the use of electronic means
Art. 701c et seq. revOR governs the general use of electronic means in the general meeting. In addition to the possibilities already mentioned, electronic voting at a physical general meeting is particularly worth mentioning. This method is already used de lege lata at general meetings with a large shareholder base. The new regulations are intended to embed the current practice in a legal framework and prevent cases of abuse. Particular attention should be paid to Art. 701e revOR, which stipulates the action requirements of the board of directors when using electronic means.
Another innovation is the introduction of the possibility to issue powers of attorney and instructions to the independent proxy electronically (Art. 689c para. 5 revOR).
Our recommendations for action
Both purely virtual and hybrid general meetings offer a company a high degree of flexibility and enable a higher participation rate among shareholders. Multinational companies in particular can benefit from this. It is therefore advisable to have the Articles of Association reviewed with effect from January 1, 2023 and, if necessary, to prepare an amendment to the Articles of Association in advance so that they permit the holding of a virtual General Meeting. If electronic means are already being used to conduct general meetings, the board of directors is advised to review whether the current handling complies with the new provisions of the stock corporation law revision. We will be happy to assist you in reviewing your articles of association.
Source: Dispatch on the amendment of the Code of Obligations (Stock Corporation Act), BBl 2017 399, November 23, 2016.
Do you have any questions about the 2023 revision of company law? Please contact Balthasar Wicki or Sebastian Wälti.