Between March and June companies usually hold their annual general meetings. The measures adopted by the Swiss Federal Council to combat the Coronavirus have a direct impact on these meetings. In the following, we show how such company meetings are still possible under the current legal situation.
1. Starting Point
1.1 General Prohibition of Physical Company Meetings
Under the currently applicable Ordinance on Measures to Combat the Coronavirus of 13 March 2020 (COVID-19 Ordinance 2), public or private events are prohibited. According to the FAQ of the Federal Office of Justice of 17 April 2020, physical company meetings are considered to be events within the meaning of COVID-19 Ordinance 2, irrespective of the number of participants, and are therefore generally prohibited.
The prohibition of physical company meetings applies to all forms of companies, i.e., not only to corporations such as companies limited by shares and limited liability companies, but also to general and limited partnerships, associations and cooperatives as well as to meetings of condominium owners. The prohibition of meetings and the special provisions of COVID-19 Ordinance 2 described below are only applicable to meetings of shareholders, but not to other corporate bodies of the company, as the applicable law already allows these bodies to hold their meetings in a non-physical way.
The prohibition initially applied until 19 April 2020 and was extended first until 26 April 2020 and then until 10 May 2020. The special provisions of the COVID-19 Ordinance 2 shall also apply to meetings held after 10 Mai 2020, provided that these are convened before 10 Mai 2020 and the relevant orders have been made in the convening notice in accordance with the COVID-19 Ordinance 2.
The competent cantonal authorities may grant exceptions to the general prohibition of physical company meetings in individual cases if:
- overriding public interests so require, for example for education and training institutions and in the case of supply or service provision problems; and
- the education and training institution, the organiser or the establishment manager submits a protection plan that includes preventive measures as set forth in art. 7 of COVID-19 Ordinance 2.
1.3 Special Provisions for Company Meetings without Authorisation
Whereas the current law already allows various forms of companies or corporate bodies (see, e.g., art. 713 para. 2 for the board of directors of a company limited by shares) to pass their resolutions in writing (see, e.g., art. 805 para. 4 OR for limited liability companies), this is not possible at shareholders’ meetings of companies limited by shares. Furthermore, certain companies whose corporate bodies are not subject to a legal obligation to physically attend meetings provide for such an obligation in their articles of association and regulations.
The COVID-19 Ordinance 2 provides for an exception to the obligation to hold company meetings in physical form, in order to allow the necessary resolutions, elections and deliberations to take place. The organiser of such a meeting, i.e. the body that prepares the meeting (e.g. the board of directors as “organiser” of the shareholders’ meeting of a company limited by shares), may, regardless of the expected number of participants, order the participants to exercise their participation rights exclusively:
- in writing or online; or
- through an independent proxy appointed by the organiser.
At such a meeting, all resolutions, elections and deliberations may take place to the extent permitted by the general rules applicable to the respective company. Notarizations may also be carried out.
An authorisation from the competent cantonal authorities within the meaning of art. 7 of the COVID-19 Ordinance 2 is not required for such meetings.
2. Implementation in Practice
2.1 Orders According to the COVID-19 Ordinance 2
The COVID-19 Ordinance 2 does not oblige companies to hold their meetings in the manner described above. However, since physical meetings are currently prohibited and may only be held with a special authorisation granted by the competent authorities, hardly any company will hold a physical meeting during the time the COVID-19 Ordinance 2 is in force.
Rather, the organiser will order that the participants of the company meeting exercise their participation rights in writing or online. Thus, the participants may cast their votes by letter or via an Internet platform set up for this purpose. If the organiser orders this option of participation, he has to provide the persons entitled to participate with the appropriate means to exercise their voting rights, such as physical voting cards or an electronic access to a voting platform. A qualified electronic signature is equivalent to the written form, but not an e-mail. Voting by e-mail is not possible according to the FAQ mentioned above.
Alternatively, the organiser may order that the participants exercise their participation rights in the meeting through an independent proxy appointed by the organiser. In this case, the organiser has to ensure that the participants can give the independent proxy a power of attorney and voting instructions by letter, e-mail or via a corresponding Internet platform.
The company may also offer all alternatives, i.e. offer the participants the opportunity to cast their votes either in writing or online or via the independent proxy.
The Covid-19 Ordinance 2 does not specify how the written or online voting or the authorisation of the independent proxy must be carried out. In the case of listed companies, the Ordinance against Excessive Remuneration in Listed Companies (VegüV) already provides for the possibility of authorising the independent proxy in writing and online. Therefore, the Covid-19 Ordinance 2 should not result in additional difficulty for these companies.
However, this is uncharted territory for private companies. We recommend that such companies provide their shareholders with proxy forms. These forms should also allow shareholders to express their opinion on how they wish to vote if other participants submit (written) motions on existing agenda items. To make it easier for the organiser to chair the meeting and to prepare for (written) questions or motions, we also recommend setting a deadline in the invitation by which shareholders must send any written proposals or questions to the company.
Finally, the organiser must ensure that it can identify the senders in all forms of online voting or instruction. It is in the interest of the organiser to take adequate precautions to ensure that only authorised persons attend the meeting. Otherwise, there is a risk that the resolutions adopted will be challenged (see e.g. art. 691 para. 3 of the Code of Obligations for resolutions of the shareholders’ meeting of companies limited by shares).
2.2 Notification of Orders
If the organiser has not yet formally convened the meeting, the general rules applicable to the respective company continue to apply with regard to form and deadline; in the case of the company limited by shares, this means that the shareholders’ meeting must be convened in due form at least 20 days before the meeting. It is advisable to include the above orders according to the COVID-19 Ordinance 2 in the invitation.
If the meeting has already been convened, no new invitation is required. However, the organiser must communicate the orders according to COVID-19 Ordinance 2 to the participants in writing or publish them online no later than four days before the meeting.
2.3 Conduct of the Meeting
Under the COVID-19 Ordinance 2, as provided for by the Code of Obligations, the company meeting must take place on a certain date, at a certain time and in a certain place. According to the explanations of the Federal Office of Justice in the FAQ mentioned above, the COVID-19 Ordinance 2 temporarily introduces a regulation comparable to the virtual shareholders’ meeting, as foreseen in the current revision of the law of companies limited by shares. This provides the organiser with the legal framework to enable participants to take part in the meeting by telephone or video conference (direct voting). However, a purely virtual meeting (as foreseen in the current revision of the law of companies limited by shares) is, in our opinion – with the exception of meetings of management or administrative bodies – not permitted even under the COVID-19 Ordinance 2.
Therefore, in our opinion, the holding of the meeting requires the physical presence of the following persons:
- chairman of the meeting: usually a representative of the highest management or administrative body;
- minute-taker and vote counter;
- independent proxy, if one has been appointed;
- representative of the auditors, if the company is subject to audit and the auditors’ participation is not waived; and
- notary, concerning resolutions to be notarised.
Since these functions are essential for the conduct of the meeting, it is still permissible for these persons to meet physically for this purpose. They must keep a distance of at least two metres from each other (see art. 7c para. 2 COVID-19 Ordinance 2).
2.4 Postponement of the Meeting
If it is not possible to conduct a meeting despite the possibilities discussed above, the organiser may postpone the meeting. Thereby, a possible violation of a time limit set forth in the law (e.g. the 6-month limit for the ordinary shareholders’ meeting of companies limited by shares) or the company’s articles of association usually appears to be excusable under the given circumstances.