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Global Economy

Hardly any presence general meetings?

The new federal government plans to allow virtual general meetings in the future – even after the end of the corona pandemic. This is indicated by the draft bill for the "virtual general meeting" that the Federal Ministry of Justice presented today. In order to enable a virtual meeting instead of the face-to-face event that has been common for decades, the German Stock Corporation Act is to be amended. "A corona-related temporary solution becomes a permanent option," said Federal Minister of Justice Marco Buschmann (FDP).

More rights than before

Unlike the regulations due to Corona, which were limited until August 2022 and forced the shareholders into a largely passive role, they should not have to make any major cutbacks in their usual rights in the “new” virtual general meeting.

The draft bill provides for shareholders' right to speak at the meeting as well as a right to ask questions. "At the same time, we ensure that the virtual format remains workable for companies," the ministry said. However, the number and duration of the speeches could be limited. Contributions must be registered at least four days in advance, and questions must be submitted in advance. For this purpose, the speeches of the managers should also be published in advance.

"The procedure and the process of the general meeting will be straightened out, the information options for the shareholders will be strengthened," the ministry said. The government hopes this will result in shorter annual general meetings – up to now these have often lasted eight to ten hours – and more specific answers to shareholders' questions.

Good experiences in the pandemic

According to the draft bill, virtual general meetings have generally proven their worth. For example, increasing attendance rates in the meetings have been observed. This means that a higher proportion of the share capital was represented at the general meetings. In the past, it was easier for large shareholders in particular to achieve a relative majority of votes when there was little attendance and thus turn votes in their favour.

Shareholder protectors take a critical view of virtual general meetings

However, the plans are not well received by everyone involved. "Preventing a lively dialogue between shareholders and companies is a restriction of shareholders' rights," explained Thomas Richter, general manager at Fondsverband BVI. Managing Director Marc Tüngler from the DSW shareholders' association criticized the fact that shareholders were no longer able to speak spontaneously during the meeting. This deprives them of the right to react to current developments, for example.

Ingo Speich, an expert in good corporate governance at the Deka securities firm, pointed out that the law does not provide for a hybrid general meeting that would give shareholders the choice between attending on site or via the Internet. It is good that the shareholders can decide on the format five years in advance, commented the head of the Deutsches Aktieninstitut (DAI), Christine Bortenlänger, as a representative of the interests of listed companies. Speich thinks the period is too long, especially since the new format has not yet been tested.

Cost savings for companies

The planned new regulation is likely to result in significant cost savings for companies, since some large corporations in particular have had to rent expensive exhibition or concert halls every year in order to accommodate a five-digit number of shareholders in extreme cases. In addition, companies could avoid preparing a stage for their critics, such as every year in front of the Frankfurt Festhalle in the run-up to the legendary Deutsche Bank general meeting.

The amended law is expected to be passed by the next AGM season, which begins in about a year.

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