Member Article

The long-awaited government enactment on the holding of the general meeting of shareholders in the context of COVID-19 outbreak was finally passed in the form of the Government Emergency Ordinance No. 62/2020 that entered into force on May 8 (Ordinance 62).

However, Ordinance 62 lost the momentum for the annual general meetings of shareholders (GMS) of listed companies, the most vulnerable category of companies in terms of holding GMS in the particular context triggered by the coronavirus. It therefore states that it does not apply to listed companies.

Since listed companies were required by law to hold the GMS until the end of April, they needed to manage observing the strictly regulated legal provisions regarding convening and holding of GMS, while also protecting their stakeholders, in line with the measures, recommendations and best practices developed in the coronavirus environment.

Whereas legislative measures tempering the rigorous legal requirements regarding GMS would have certainly helped, listed companies have still generally succeeded to overcome the hurdles and organize the GMS with due observance and care to the interests of the shareholders. Investors’ understanding of the context and observance of the strong recommendations to vote by correspondence and, where possible, participate to GMS via remote means, were certainly of important support for the companies.

Ordinance 62 comes fairly late for non-listed companies as well, in particular for joint stock companies, since they are required to organize the GMS not later than the end of May, on the basis of a prior call notice published at least 30 (thirty) days in advance. Practically, many companies might have already published the convening notices; however, the new temporary legal provisions still bring some relief and support.

In brief, the measures approved by Ordinance 62 (applicable to non-listed companies only):

• Generally apply to GMS (i) held during the state of emergency (currently expected to last until 15 May 2020), (ii) called during the state of emergency but held thereafter or (iii) called and held during a period of 2 (two) months since termination of the state of emergency
  
  

Note: The provisions regarding the calling and holding of GMS also apply to the meetings of bondholders

• Extend the deadline for holding the annual ordinary GMS of joint stock companies approving the financial statements from end of May until end of July 2020, thus ensuring consistency with the extended term for the submission of the financial statements to the fiscal authorities; however, the applicable call notice term is not reduced
  
  

Note: The initial proposal was to allow that the call notice be reduced in exceptional situations; the provision was not kept in Ordinance 62, consequently the GMS should be called with the observance of the call notice period provided by law or by the articles of association

• Allow the GMS to be convened by other means than publication with the Official Gazette, as decided by the directors (letter with confirmation of receipt, courier, fax, e-mail with electronic signature, other distance communication means that allow transmission of the text); the call notice should also be published on the company’s website (if available)
  
  

Note: During this period, companies that have not already called a GMS, could benefit from this legal provision and avoid the formalities and costs associated with the publication of the call notice with the Official Gazette; however, such alternative methods would only be effective to the extent updated contact information of the shareholders is available to the company which, in certain cases (for example, in companies with a significant number of shareholders) might be difficult to achieve

• Require that the GMS documents (financial statements, annual report, dividend proposal etc.) be published on the website and, if the company does not have a website, be transmitted via e-mail, mail or courier
• Permit that the GMS be held exclusively by correspondence or by electronic means and correspondence, even if the articles of association do not provide for such alternatives; the voting ballots for voting by correspondence could be sent by letter with confirmation of receipt, mail, courier or e-mail with extended electronic signature until the date of the GMS
  
  

Note: Ordinance 62 does not prohibit the holding of the GMS in physical format; however, companies deciding to use this format will need to observe the COVID-19 related measures and recommendations

• Allow GMS voting by direct electronic means such as phone conference and video conference, however, only if voting by correspondence is also permitted and if the electronic means fulfill the technical requirements to allow: compatibility with mostly used fixed or mobile telecommunication technologies, identification and participation of shareholders, continuous transmission, in real-time, of the GMS and its recording and archiving, bi-directional communication in real-time, casting of votes (including, when the case, of secret votes) and registration thereof and subsequent verification of the voting manner
  
  

Note: Romanian companies rarely used in the past electronic means for holding GMS and the burden associated thereto (costs, technical complexities) are expected to continue to limit the use of remote means in the near future. Nevertheless, during the last 2 (two) months, companies became more familiar with remote technologies, paving the way for the use thereof on a larger scale, including for GMS

• For GMS called prior to Ordinance 62 but which take place after the instatement of the state of emergency, require the directors to inform the shareholders about the manner of holding the GMS in accordance of the provisions of the Ordinance, at least 5 (five) days prior to the date of the GMS and, in certain exceptional situations justified by measures taken by the authorities with respect to the COVID-19 outbreak, postpone or even revoke the holding of the GMS
  
  

Note: Specific consideration should be given to any intention to postpone or revoke the GMS, as this right should only be exercised in exceptional circumstances triggered by measures imposed by the authorities

• Provide that the resolutions of the GMS held after the instatement of the state of emergency but prior to Ordinance 62 could not be annulled for breach to observe the legal provisions regarding the holding of the GMS and the exercise of the voting rights if all shareholders participated and agreed for the GMS to be held in that relevant manner which is consistent with the provisions of Ordinance 62
  
  

Note: Initially, the intention was to provide that no GMS resolution could be annulled due to failure to observe the requirements regarding holding and voting in the GMS; however, because, arguably, of the legality and constitutional concerns, the provision was amended to only apply when all shareholders agreed and, implicitly, waived the requirements that were not observed

• Allow the participation to the management bodies by electronic means, irrespective of the agenda, during the state of emergency and 30 days thereafter
• Clarify certain formalities regarding the execution of the GMS resolutions and minutes