I. Current situation

The COVID-19 Act only requires for the holding of a virtual general meeting that the video and audio transmission of the entire general meeting is provided, the exercise of voting rights via electronic communication as well as the granting of proxies is possible, the shareholders are provided with an opportunity to ask questions via electronic communication and the shareholders who have exercised their voting rights are provided with an opportunity to object to the passing of resolutions. According to the German Stock Corporation Act (Aktiengesetz – AktG), countermotions by shareholders must be made at the meeting and are therefore generally not provided for under the COVID-19 Act. However, practice has moved towards considering such motions as having been made at the meeting if they have been submitted electronically in accordance with the requirements of the AktG and in due time. Shareholders do not have the right to speak at the virtual shareholders’ meeting.
The Executive Board is not obliged to answer shareholders’ questions, but decides at its own due discretion which questions to answer and how, and may in particular order that questions be submitted electronically no later than two days before the meeting. In practice, the order to submit questions in advance has been used almost without exception, which on the one hand has led to more efficient annual general meetings and on the other hand to an increased number and better quality of answers to questions at the annual general meeting. It was also noted that the easier participation option was accompanied by greater shareholder participation in the virtual general meetings. All in all, however, there is no denying that the rights of shareholders under the Stock Corporation Act have been temporarily restricted by the COVID-19 Act.

II. The government draft

The aim of the government draft is to use the positive experience gained with the virtual general meetings in 2020 and 2021 for a permanent statutory regulation, while ensuring that shareholders can exercise their rights in the event of a virtual general meeting in a largely comparable manner to the attendance meeting.
The core of the new regulation, which applies not only to stock corporations but also to companies in the legal form of a KGaA (commercial partnership limited by shares) and an SE, is the new § 118a AktG. The prerequisite for holding a virtual general meeting is first of all a corresponding basis in the company’s articles of association that provides for or authorizes the management board to hold the general meeting virtually. Such a regulation must be limited to a maximum of five years, i.e. the annual general meeting must decide again after five years at the latest whether virtual general meetings should be possible. For a transitional period until the end of August 2023, the holding of virtual meetings shall also be permitted without a legal basis in the articles of association. The companies therefore have sufficient time to adopt the necessary provisions in the articles of association at the 2023 annual general meeting.
The right to speak and ask questions is significantly extended by the government draft compared with the COVID-19 Act. Accordingly, shareholders are entitled to submit comments on items on the agenda up to five days before the annual general meeting, which must be made available by the company no later than four days before the meeting. It is true that the management can reasonably limit the scope of such comments. However, the government draft leaves open as to what is meant by “reasonably”. Further, the draft does not even limit the right to submit comments to shareholders who have duly registered for the annual general meeting.
In deviation from the COVID-19 Act, shareholders are granted a direct right to speak at the annual general meeting under the government draft. The government draft does neither provide for the possibility of limiting speaking contributions from the outset to a reasonable total time or to a reasonable number of speaking contributions to be admitted, nor is it necessary to register the speaking contribution in advance of the annual general meeting. The government draft assumes that a “virtual registration table” will be set up at the meeting where requests to speak can be registered. The chair of the meeting decides on shortening the speaking time or closing the list of speakers, as is the case at the plenary meeting.
Shareholders’ rights to information and questions are also to be significantly extended under the government draft. It is possible to stipulate in the notice convening the meeting that questions must be submitted electronically no later than three days before the meeting. However, unlike the COVID-19 Act, the government draft obliges the management to also answer these questions no later than one day before the meeting and to make the questions and answers available to the shareholders. Questions that have already been made available and answered on the company’s website in advance of the meeting do not have to be answered again by the management board at the annual general meeting. However, this apparent relief is greatly relativized by the newly introduced right to ask follow-up questions. This right to ask follow-up questions relates to all questions submitted in advance, to all answers given in advance or at the meeting, and to questions that are only asked during the shareholders’ speeches. Not only the shareholder who asked the question is entitled to ask follow-up questions, but every shareholder with regard to all questions asked and all related answers.
In contrast to the COVID-19 Act, the government bill further grants shareholders a comprehensive right to submit motions and election proposals at the virtual meeting. The government draft also adopts the fiction that has already been established in practice to date, according to which countermotions that have been duly submitted in due time and are thus to be made available to shareholders in advance are deemed to have been submitted at the time they are made available.

III. Consequence

The aim of the government draft to bring the virtual general meeting into line with the requirements of the German Stock Corporation Act, particularly with regard to shareholders’ rights, seems understandable. In its implementation, however, the government draft misses the target in some places. In particular, the virtual general meeting under the COVID-19 Act, which relieves the annual general meeting of questions and shareholder motions that were postponed to the run-up to the annual general meeting, is cancelled out by the unlimited right to ask questions and submit motions at the meeting. According to the government draft, companies must answer shareholders’ questions before the annual general meeting and make the answers available on the website. However, they must also expect numerous and extensive follow-up questions to be asked and answered at the meeting. Furthermore, comments received in advance of the annual general meeting must be examined and made available.
This will significantly increase the expense for the companies, and the demands on the back office are likely to be higher than for the conventional annual general meeting. The further effect of the current legal situation, namely that virtual general meetings can be held within a manageable timeframe, is also called into question by the government draft. The government draft has therefore faced considerable criticism from the business community. It remains to be seen whether the law will enter into force as planned on 1 August 2022. Following the first reading in the Bundestag on 12 May 2022, the bill was referred to the Committee on Legal Affairs (Rechtsausschuss) for further discussion.