Corona crisis and corporate decision making (EY Law)
Publication date: 20/03/2020
COVID-19 is impacting the global economy: governments are imposing far-going travel restrictions and “lock-downs” on their citizens, meaning that all non-essential matters are cancelled and gatherings are forbidden. Public life is at a standstill, companies are disrupted, businesses are put on hold, etc.. The current circumstances might also frustrate the ongoing governance and decision-making processes of companies. Due to safety concerns and restriction measures, board meetings and shareholders’ meetings can be hindered to take place. However, there are several tools a company can make use of to overcome such difficulties with regard to the continuity of corporate decision making.
Board meetings in limited liability companies (“NV” and “BV”)
A board of directors functions as a collegial body and requires that its members-directors deliberate and decide collegially. This means that it should meet at regular intervals and make decisions through interaction. The Companies and Associations’ Code does not prescribe a frequency at which a board shall hold meetings. Board meetings deciding on non-urgent items could thus be postponed or cancelled in case they cannot take place due to the COVID-19 restriction measures.
However, some decisions cannot be postponed (e.g. the drafting of the annual report and approval of the annual accounts). Additionally, it is important that the board remains ‘active’, and is able to demonstrate that it has taken all measures and decisions that are deemed necessary in the interest of the company.
In such cases however, there are several means by which a company could still hold a board meeting, whilst limiting the number of persons present in a physical meeting, or with no physical gathering at all:
Representation by proxy
A director who is hindered to participate in a board meeting (for example a foreigner suffering from imposed travel restrictions) can grant a proxy to a colleague-director to participate and vote in his name, in order to limit the number of persons present at the meeting. Please always verify upfront if the articles of association include specific requirements or restrictions on the granting of proxies to another director.
Remote (electronic) deliberating
Furthermore, it is not required that the board members gather in a physical meeting. Board meetings could be held remotely through various electronic communication tools (e.g. a video or conference call). It should be ensured that all board members can interact and deliberate with each other in real time. For listed companies, electronic participation is even encouraged by the Corporate Governance Charter.
It is also important to note that even in case a board meeting is held electronically, the deliberations and decisions must always be recorded in minutes and signed by the chairman of the board meeting.
Furthermore, it is now possible under the new Code of Companies and Associations – for a NV as well as for a BV – to let the board take all decisions unanimously in writing, except where the articles of association of a company exclude or restrict this possibility. Before the entry into force of the new Code, written decision making was only allowed for cases (i) of urgent necessity and (ii) in which the interest of the company required it. The possibility of written decision-making can nonetheless be limited or excluded in the articles of association.
In any case, it is recommended to check the current articles of association and any applicable internal rules (“reglement van interne orde / règlement d’ordre intérieur”) upfront and verify whether they include any restrictions that may limit or excluded the use of any of the above means.
For general meetings, the situation is slightly different.
At least one shareholders’ meeting must be held annually, for the approval of the annual accounts and granting of discharge to the directors. This general meeting of shareholders has to be held within six months after the end of the previous financial year, so for most companies the deadline will be 30 June in case the financial year ends on 31 December. The articles of association mention the date and place where and when this general meeting is to be convocated. The annual general meeting could be postponed, however it may not be postponed indefinitely. The shareholders could for example decide via written resolutions to postpone the annual general meeting. However, as the directors have to submit the annual accounts within six months after the closing of the financial year a general meeting should at least be held prior to this date to present the annual accounts. If these would not be ready yet, the shareholders can again postpone the meeting but they should then take into account that the annual accounts must be filed with the Belgian National Bank within seven months after the closing of the financial year.
Do the shareholders need to be physically present at the meeting? This will depend on the rules contained for in the articles of association:
Representation by proxy
Unless the articles of association provide otherwise, a shareholder can grant a proxy to another shareholder in order to represent him or her at the general meeting, so that the number of persons present at the physical meeting remains limited to a strict minimum.
Remote (electronic) participation and voting
The articles of association can provide that the shareholders’ meeting can be held via digital communication means (i.e. video or conference call), provided that it allows (i) all shareholders to be individually identified by the company, and (ii) for direct, simultaneous and uninterrupted access to the discussions during the meeting, to vote and to ask questions. The convocation to the general meeting shall in such case also mention this possibility to participate remotely, together with a detailed description of the procedure for such electronic participation. Electronic participation means that the shareholders who are attending remotely can issue their vote in real time via the electronic means put in place by the company while the meeting is taking place.
Furthermore, the articles of association can also facilitate voting by permitting the shareholders to vote electronically or by post prior to the general meeting, so that their presence (whether physically or remotely) is not required during the actual meeting.
Please note that although the shareholders do not need to be present in person, the members of the bureau of the general meeting, the directors and the statutory auditor (if applicable) must in principle be physically present at the meeting.
The items discussed during the general meeting shall also have to be recorded in minutes. It is possible to draw up the minutes later on. However it is recommend to do this simultaneously as the meeting takes place, given the disagreements that may rise in case the minutes are drawn up afterwards. The minutes of the meeting shall also mention any technical incidents that have occurred during the meeting, in case all or some of the shareholder have participated remotely via an electronic communication tool.
The shareholders can also unanimously and in writing take all decisions within their competence, except for decisions that shall have to be recorded in an authentic deed.
The COVID-19 measures provide no excuse to completely put the decision making processes and operation of the companies’ governing bodies on hold, as a company disposes of several tools in order to hold a board or shareholders’ meeting without physical gathering of its members.
In case your articles of association do not foresee the necessary flexibility to make use of the different options mentioned in this alert, we are happy to assist you in upgrading them. Please do not hesitate to reach out to our corporate experts. We can immediately help your company as well to become fully compliant with the new Code of Companies and Associations.