COVID-19 Update Germany: Law to amend the current laws on stock corporations, limited liability companies and transformations to protect companies from the effects of the current corona crisis has come into force

By Dr. Peter Veranneman, Christoph Meves

03-2020

To mitigate the consequences of the COVID-19 pandemic, the German Bundestag passed a comprehensive package of legislative measures titled "Law to Mitigate the Consequences of the COVID-19 Pandemic in Civil, Insolvency and Criminal Procedure Law" (hereinafter "COVID-19-PG"). After approval by the German Federal Council (Bundersat), the law has come into force on 28 March 2020.

While in COVID-19-PG:

  • the "Law on the temporary suspension of the obligation to file for insolvency and to limit the liability of corporate bodies in the event of insolvency caused by the COVID-19 pandemic" is found in Article 1,

  • Article 2 contains the "Act on Measures in Corporate, Cooperative, Association, Foundation and Home Ownership Law to Combat the Effects of the COVID-19 Pandemic" (hereinafter referred to as "COV-GesR-MG"). 

Among other things, the COVGesR-MG reduces the requirements for holding general meetings, passing share-holder resolutions and carrying out transformations and divisions.

Changes to the German Stock Corporation Act

Section 1 COVGesR-MG contains a number of simplifications for the convening and holding of general meetings:

  • In deviation from Section 118 of the German Stock Corporation Act (AktG), the management board may take decisions regarding electronic participation, the written or electronic casting of votes, the participation of members of the supervisory board by means of video and audio transmission, and the approval of video and audio transmission without such having to be provided for in the articles of association (Section 1(1) COVGesR-MG).

  • Furthermore, the management board may now decide, subject to certain conditions, that the general meeting is held virtually, i.e. without the physical presence of shareholders (Section 1(2) sentence 1 COVGesR-MG).

  • In the cases of a virtual general meeting, shareholders no longer have a right to information pursuant to Section 131(1) AktG[1], but are now only granted the opportunity to ask questions by way of electronic communication. According to the official justification given for the law, the shareholders' right to ask questions does not include the right to receive an answer. The management board only has to decide on answering any question at its own discretion and is entitled to summarize the questions asked and to select meaningful questions in the interest of the other shareholders. The reason given for this significant encroachment on shareholders' rights is that it is not foreseeable to what extent and in what way the right to ask questions will be exercised. The legislator is convinced that "a flood of questions and also - as is not unusual in social media - objections that are unacceptable in terms of content are possible".

  • Furthermore, the management board may also decide that questions must be submitted electronically at least two days before the meeting and that new questions can therefore not be asked during the meeting (Section 1(2) sentence 2 COVGesR-MG).

  • The shareholders' right of appeal is restricted pursuant to Section 1(7) COVGesR-MG. Pursuant to the provision, a resolution of the general meeting may only be challenged in the event of violations of the regulations on participation and electronic voting if the company can be proven to have acted intentionally. By reference to Section 1(2) COVGesR-MG, the same also applies to the holding of a virtual general meeting and the answering of questions during such an event.

  • The management board may convene the general meeting with 21 days' notice (according to the previously applicable law: 30 days) (Section 1(3) COVGesR-MG). The proof of shareholding to be provided to listed companies pursuant to Section 123(4) sentence 2 AktG must refer to the twelfth day prior to the general meeting and, in the case of bearer shares, must be received by the company no later than the fourth day prior to the general meeting. In the convening notice, the management board may provide for a shorter deadline for the receipt of the proof; deviating provisions of the articles of association shall not apply.

  • The general meeting must now take place within the fiscal year (according to the previously applicable law: within the first eight months of the fiscal year) (Section 1 (5) COVGesR-MG).

Pursuant to Section 1(6) of the COVGesR-MG, the approval of the supervisory board is required for all corresponding decisions of the management board, whereby, irrespective of the articles of association, the resolution can be passed without the physical presence of the members of the supervisory board.

The regulations on stock corporations to a large extent apply accordingly to the partnership limited by shares (KGaA) and to the European Company (Section 1 (8) COVGesR-MG).

Changes to the German Law on Limited Liability Companies (GmbHG)

In the case of limited liability companies, shareholder resolutions can now be passed in text form (e.g. by email) or by written vote according to Section 2 COVGesR-MG, even if, in contrast to the previous wording of the law, not all shareholders give their consent to such procedure.

Changes to transformation law

Pursuant to Section 4 COVGesR-MG, the closing date of a closing balance sheet to be submitted upon filing for registration of a conversion with the commercial register may, in deviation from Section 17(2) sentence 4 of the German Transformation Act (UmwG), be up to twelve months in the past (according to the previously applicable law: eight months). Pursuant to Section 125 (1) UmwG, this also applies to the split-up/demerger of a company.

The new regulations only apply to matters which take place in 2020 or which, in the case of transformations and divisions, are filed for registration with the commercial register in 2020 (Section 7 COVGesR-MG). However, the German Federal Ministry of Justice and Consumer Protection is authorised to extend the above-mentioned regulations by statutory order without the consent of the Bundesrat until 31 December 2021 (Section 8 COVGesR-MG).

COVID-19-PG can be found online (in German language) at the following address: https://www.bmjv.de/SharedDocs/Gesetzgebungsv
erfahren/Dokumente/Bgbl_Corona-Pandemie.pdf?__blob=publicationFile&v=1
.

We will closely monitor the further situation and will report on new developments. Our corporate team in Germany stands ready to advise on corporate law measures based on the new regulations of COVGesR-MG.

Last reviewed: 30 March 2020

[1] Upon request, each shareholder is to be provided with information by the management board at the general meeting on the company's affairs to the extent that such information is necessary to permit a proper evaluation of an item on the agenda. The obligation to provide information also extends to the legal and business relations of the company with an affiliated company.