COVID-19 temporary law enables meetings and decisions via live stream

On April 21, the Senate approved the Temporary COVID-19 Act ("Emergency Act"). This Emergency Act provides a myriad of provisions to adjust or relax procedures, deadlines and legal regulations in the field of Justice and Security because of COVID-19.

The Emergency Law provides, among other things, that instead of calling physical meetings, a virtual meeting of associations, cooperatives, public limited companies and the limited liability companies, among others, will suffice. In addition, voting is also possible via electronic means. The law entered into force on April 24, 2020, and applies in principle until September 1, 2020. In this blog, I highlight some of the key points of the Emergency Law.

Temporary derogation rules Civil Code regarding meetings and decision-making

All associations, cooperatives, public limited companies and limited liability companies are required to hold an annual general meeting. The annual general meeting is usually held in the spring, within six months of the end of the financial year. At this meeting, for example, the financial statements are adopted, discharge of directors and supervisory directors is granted, and directors or supervisory directors can be appointed.

The obligations for holding a general meeting are set out in Book 2 of the Civil Code (the "Civil Code"). To limit the spread of COVID-19, physically convening for a general meeting of members or shareholders, as well as directors, supervisory directors and other persons entitled to attend meetings such as the auditor, may be undesirable. Although the BW provides facilities for participating in the general meeting and exercising voting rights through an electronic means of communication, this cannot be done without a statutory regulation. Not all associations, cooperatives, NVs and BVs have made use of this possibility in their articles of association, which makes meeting and decision-making difficult in this situation.

Meetings by management and supervisory board (Article 5)

The Emergency Law provides for the possibility of deviating from statutory regulations regarding meetings of the management board or supervisory board (hereinafter "rvc"), or setting deadlines. To prevent the board from being unable to meet without violating the Articles of Association, such statutory provisions may be deviated from. The management board and the supervisory board, with the consent of all management board members and supervisory board members respectively, will have to arrange decision-making by other means, such as by electronic means.

General meeting via live stream (Article 6)

The board may further provide that, in lieu of a physical meeting, a general meeting will be held that can only be followed via an electronic means of communication. It is also possible for the board to determine that persons entitled to attend meetings do not have physical access to the general meeting. This is possible under the following conditions:

1. The general meeting can be followed electronically by members; and
2. Members were given the opportunity to ask questions in writing or electronically on the topics listed in the notice of the meeting until no later than 72 hours prior to the meeting.

More practically, it is therefore important that the meeting can be followed via a live stream (think audio or, for example, video). Questions can be asked in advance by members/shareholders by e-mail. A chat function can also be used to ask questions during the meeting. If the board wishes to make use of the power to hold meetings electronically, this should be stated in the notice of the general meeting. Even if the articles of association do not provide for exercising the right to vote via electronic means of communication, the board may temporarily make this possible.

Deferral of deadlines (Articles 7 to 9).

The board may also extend the deadline for holding a general meeting by up to four months. This means that the annual meeting can be postponed beyond June 30. The Emergency Law thus gives the legal entity and/or those involved the opportunity to meet later if it is more convenient than holding an electronic meeting.

In addition, the board may also extend the preparation of financial statements by up to four months (associations and cooperatives) or five months (in the case of NVs and BVs). In this case, the general meeting has no possibility of extension. After the extension, the general meeting still has one month to adopt the annual accounts. These can then still be published within twelve months after the balance sheet date. The Explanatory Memorandum to the Emergency Law shows that for the time being there is no reason to extend the obligation of Article 2:394(2) of the Dutch Civil Code to publish the annual accounts no later than twelve months after the end of the financial year.

Emergency law even needed?

It could be argued that an Emergency Act such as this one is not necessary to form an exception to statutory and statutory rules on meetings and decision-making. Indeed, Article 2:8(2) of the Civil Code provides for a ground for exception to statutory and statutory rules on the grounds of reasonableness and fairness. However, in such a case uncertainty remains about the validity of decisions taken in violation of statutory rules or rules in the articles of association. Resulting in possible nullity or voidability of decision-making.

In order to avoid doubt and ambiguity about the validity of resolutions passed if a general meeting is not conducted in accordance with the law and bylaws, and to prevent that postponement of a general meeting may lead to non-compliance with statutory deadlines, the Emergency Law ensures that it is permitted to temporarily deviate from statutory and bylaw provisions on holding physical meetings and related deadlines and sanctions (see Memorandum of Understanding 7).

The Emergency Act entered into force on April 24, 2020, and is basically valid until September 1, 2020. Finally, many of the provisions in the Emergency Act have been given retroactive effect until March 16, 2020. This also fixes possible flawed decision-making prior to the Emergency Act coming into force.

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