Amendment to § 48 I GmbHG enables virtual shareholders’ meetings
With Art. 48 I GmbHG (German Limited Liability Companies Act), the legislator creates the legal basis for virtual shareholders’ meetings. Baker Tilly partner Oliver Köster and Eden Tahmasian, research associate in the M&A/General Commercial and Corporate Law practice group, explain what needs to be taken into account during implementation and whether virtual meetings are a viable alternative to physical meetings.
The shareholders’ meeting of a GmbH is a mandatory decision-making body whose organization is standardized in Art. 48 GmbHG. Since August 1, 2022, the meeting can now be held by telephone or video communication. With this addition, the legislator has created a basis for maintaining the company’s functionality in phases of a pandemic. In addition, the amendment takes account of the ongoing digital transformation. This makes the question of implementation in practice all the more important.
What problem has the legislature solved?
The default provisions of Art. 48 GmbHG contain regulations on the internal organization of a shareholders’ meeting. The procedure, the participation of the shareholders, as well as the place and time are standardized.
Until the amendment to the law, it was unclear whether the requirements for a shareholders’ meeting were met if the meeting was held only by electronic means. To create certainty, shareholders had the option of resolving on virtual means of communication as an alternative to a physical meeting. However, the resolution could only be passed with a majority that amended the Articles of Association as defined in Art. 53 II 1 GmbHG. If a company did not obtain the required majority, this sometimes resulted in cumbersome circular resolution procedures: The shareholders’ meeting was held via video conference, while the resolutions from the meeting were only subsequently sent to all shareholders in text form for approval.
With the addition of a sentence 2 to Section 48 I GmbHG, this cumbersome procedure is a thing of the past. Non-physical meetings are legally permissible in addition to physical meetings if all of the GmbH’s shareholders’ express consent is provided in text form. This enables the passing of resolutions by video conference or even by telephone.
How does the innovation affect practice?
In practice, existing articles of association now clash with the amended law. It remains unclear whether articles of association which merely reproduce the wording of Art. 48 I GmbHG, previous version, are to be applied with priority. Such articles of association will probably have to be interpreted to the effect that the company wishes to follow the legal situation and has therefore not created any regulations of its own. Accordingly, the articles of association are deemed to now also include the supplementing provision on virtual meetings.
If the articles of association already include detailed provisions on remote meetings, the GmbH has already dealt with or at least considered the issue and concluded a contractual agreement in this respect. Accordingly, the shareholders’ autonomous will would have to supersede the default provisions even after the amendment.
It also remains questionable what requirement is placed on the shareholders’ consent if the articles of association provide for a stricter or lesser form than text form, or if no consent is required at all. These agreements could constitute “special provisions” within the meaning of Art. 45 II GmbHG, which take precedence over the provision pursuant to Art. 48 I 2 GmbHG.
How to reconcile the new regulation with shareholders’ interests
Once the initial challenges have been overcome, the next step is to reconcile the new legal situation with the shareholders’ interests. In any case, the shareholders’ rights should not be restricted by the change. Since the shareholders’ meeting thrives on an interactive exchange of opinions, it is advisable to provide for virtual meeting procedures comparable to those of a physical meeting. It can help to structure the course of the meeting and deliberately create breaks for questions and discussion. This can help avoid long monologues by the management.
As it might prove difficult in practice to obtain the consent of all shareholders, it is advisable to modernize the articles of association in line with the new regulations and to avoid any mistrust of innovations by reaching a consensus. For example, one could agree upon a right of the shareholders to a physical meeting.
It should also be noted that, although it is not mandatory to keep minutes of the meeting, this is advisable for reasons of legal certainty.
Virtual meetings ensure a company’s functionality in uncertain times
More flexible handling of the shareholders' meeting was foreseeable in the wake of the Corona pandemic and in the age of digitalization. Now, the task is to gain experience in dealing with the new form of meeting. The advantages of a virtual meeting make it worthwhile to address the issue. It offers an uncomplicated and cost-effective alternative to physical attendance. It helps large companies in particular to speed up business transactions and ensures they can continue to work and function even in uncertain times.