Corona-Pandemic (COVID-19) and General Meetings
Questions and answers in relation to COVID-19 in Switzerland
My company plans its annual general meeting. Are general meetings affected by the Swiss measures to prevent the spread of coronavirus?
In order to contain the spread of SARS-CoV-2, the Swiss Federal Council ‒ by issuing the COVID-19-Ordinance 2 on 16 March 2020 ‒ prohibited, in principle, public and private events. This ban also concerns general meetings of Swiss companies (such as stock corporations or limited liability companies) with the physical presence of their shareholders. According to the publications of the Federal Offices of Public Health and Justice, this rule also applies to general meetings with only a small number of participants.
For the time being, the ban is in force until 19 April 2020. However, it may well be extended.
Violations of the ban are, on the one hand, subject to criminal sanctions. On the other hand, there is a risk that resolutions of a general meeting held in violation of the ban can be challenged.
Can my company nevertheless hold its general meeting?
Article 6a of the COVID-19-Ordinance 2 provides for a new procedure that allows holding general meetings without the physical presence of the shareholders. This procedure can be made use of with respect to general meetings held until 19 April 2020, and ‒ according to the Federal Office of Justice ‒ also with respect to general meetings to which the shareholders have been invited until this date. Thus, companies have two options:
- Postpone the general meeting and hold it after the repeal of the above mentioned assembly ban; or
- Use the procedure introduced by article 6a of the COVID-19-Ordinance 2.
What procedure must be followed according to article 6a of the COVID-19-Ordinance 2?
Article 6a of the ordinance provides that the shareholders must be able to make use of their rights at the general meeting either in writing or in electronic form or by way of an independent proxy designated by the company. The company has to inform its shareholders of the procedure to be followed at the latest four days prior to the general meeting.
It is generally also possible to hold a general meeting pursuant to this procedure if (parts of) the agenda items require notarization. The details should, however, be clarified with the notary in charge in advance.
Is there a risk that resolutions of a general meeting held according to the procedure pursuant to article 6a of the COVID-19-Ordinance 2 can be challenged?
There is a certain risk that such resolutions can be challenged. Shareholders could, for example, argue that their right of information or their right to put forward motions within certain agenda items has been violated. This risk can be reduced if shareholders have the possibility to participate in the general meeting, for example via a chat function (see next question).
More generally, the COVID-19-Ordinance 2 is emergency law adopted upon short notice. It is therefore obvious that not all legal issues potentially arising in relation to general meetings held without the physical presence of shareholders could be clarified ‒ irrespective of the published explanatory materials of the Federal Offices of Public Health and Justice.
What practical recommendations can you give me/my company?
In order not to limit the rights of shareholder, we recommended that companies provide for a mechanism, such as a chat function, to enable shareholders to ask questions, present their arguments and submit motions on the agenda items. In addition, ideally every statement made by a shareholder should also be made available to the other participating shareholders.
Moreover, if possible, the time limits and means of communication provided for in the Swiss Code of Obligations and the articles of association should be adhered to also when holding a general meeting according to article 6a of the COVID-19-Ordinance 2.
Eventually, general meetings with agenda items that are controversial between significant shareholders should ‒ due to the risks of being challenged ‒ rather be postponed (see the above-mentioned first option). The provision of the Swiss Code of Obligations according to which the annual general meeting must be held within six months after the end of a financial year does not entail immediate sanctions (Ordnungsvorschrift). In particular, the meeting does not become invalid and the resolutions adopted can neither be challenged.
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