The temporary COVID-19 act includes the following new rules for legal entities in the Netherlands:
- Management boards and supervisory boards may decide to hold virtual board meetings.
- Management boards may decide to hold hybrid or all-virtual general meetings of shareholders or members.
- Virtual meetings are also possible if the law or an entity's articles of association only allow physical meetings.
- Management boards may decide to extend the deadline for drawing up annual accounts. The deadline for publishing the accounts remains unchanged.
- The new rules apply from 16 March 2020. Most of them end on 1 December 2020, unless they are extended.
When considering holding a virtual general meeting, the management board needs to take into account a number of practical issues, such as:
- how and when members or shareholders can submit questions
- how these questions will be answered
- what the voting process will look like, e.g., whether voting will be allowed during the meeting or only electronically prior to the meeting
- how the identity of members or shareholders who are submitting questions and casting votes can be verified
For more information on applying the new temporary rules on virtual board meetings or general meetings, please feel free to reach out to us.
Decision-making by management boards and supervisory boards
Dutch law does not provide rules on decision-making by management boards and supervisory boards. This means that in principle, board decisions can be made in any way that the board members agree upon: in meetings, by telephone, through other electronic means of communication or in writing.
However, sometimes an entity's articles of association provide rules for board meetings. These may include a requirement for physical meetings. The temporary COVID-19 act provides that this requirement does not apply. This means that all management boards and supervisory boards may now decide to hold virtual board meetings. The members of the board have to agree on which way to hold the meeting.
Decision-making by the general meeting
With respect to decision-making by the general meeting, Dutch law envisages a physical meeting of members or shareholders. In their articles of association, entities may allow a general meeting to be held in hybrid form, meaning that shareholders or members can participate in, address and vote at the meeting by electronic means of communication.
COVID-19 act allows virtual general meetings
Based on the temporary act, the management board may decide to hold a hybrid meeting or an all-virtual general meeting and deny physical access to a general meeting if the following conditions are met:
- Members or shareholders can attend the meeting through electronic means (e.g., through an audio/video live stream).
- Members or shareholders have received the opportunity to ask questions about the proposed agenda items in writing or by electronic means, no later than 72 hours before the meeting.
Furthermore, other persons entitled to attend the meeting, such as the members of the management board and supervisory board or an auditor must be able to fulfill their advisory role by electronic means.
All-virtual meetings are therefore possible, also if the law or an entity's articles of association only allow physical meetings or hybrid meetings.
Questions from members or shareholders
Questions asked by members of shareholders must be answered before or during the meeting. The answers must be made available on the relevant entity's website or through electronic means of communication. This allows members or shareholders to take into account the answers when casting their vote. When the board only allows votes to be cast prior to the meeting, it is appropriate that the answers to the question are made available beforehand.
The management board must make an effort to enable the members or shareholders to ask questions during the meeting (e.g., through email or chatbox). This does not apply if it is unreasonable to demand this under the specific circumstances. The chair of the meeting may set further rules in the interest of the order of the meeting.
Validity of resolutions
To avoid legal disputes, the temporary act states that failure to comply with these requirements concerning questions and the answers thereto will not affect the validity of the decision-making during the meeting. This way, connectivity issues of a member or shareholder will not stand in the way of validly adopted resolutions.
Convening virtual meetings
If the management board decides to hold a hybrid or an all-virtual general meeting, they must state this in the convening notice to the meeting. The convening notice must also include information on:
- how and when members or shareholders can submit their questions
- how these questions will be answered
- how members or shareholders can attend or participate in the meeting
If a convening notice for a physical general meeting was already sent, the management board may still decide to change the meeting into a virtual meeting. They must notify the members or shareholders of this at least 48 hours before the meeting.
In addition to the measures to facilitate virtual meetings, the temporary act holds a number of other provisions for legal entities. These include the following.
Extension of the term to draw up the annual accounts
If an entity's management board fails to meet the statutory deadline for preparing the annual accounts due to special circumstances, the general meeting may extend this deadline by a few months. The temporary act makes it possible for the management board to extend this deadline instead of the general meeting.
However, the deadline for publishing the annual accounts is not affected by the temporary law. This includes the terms within which listed companies must publish their financial reports.
Powers attributed to the management board
If an entity's articles of association limit the powers attributed to the management board by the temporary act or require the approval of another corporate body, such provisions are rendered inapplicable by the temporary act.
The act came into force on 24 April 2020. It has retroactive effect, starting from the day on which the COVID-19 measures became effective in the Netherlands, 16 March 2020. The retroactive effect lifts any doubts as to the validity of resolutions adopted through electronic means before the temporary act came into force. Most provisions of the temporary act expire on 1 December 2020. This term can be extended by two months by royal decree.
We would be happy to provide you with further information or discuss any development that could be relevant to your business. Please contact your regular Baker McKenzie counsel or visit our website.