Guidance on changes to company, transformation and condominium law

In the areas of corporate law, conversion law, and condominium law, the current severe restrictions on the ability to hold meetings are the main source of problems.

In particular, resolutions can no longer be passed at an in-person meeting, as the number of invitees exceeds the permitted gathering limits, or it is unclear whether enough shareholders will attend to meet the necessary quorums. As a result, it is currently not possible to hold either the annual general meeting or an extraordinary general meeting. However, given the current challenges, the need for extraordinary meetings has actually increased. This is because companies will want to—or may be required to—adopt resolutions regarding capital measures, financing, the sale of essential business assets, or restructuring in response to the economic consequences of the COVID-19 crisis. Furthermore, there is a risk that, for certain types of companies, the terms of office for governing bodies will expire and efforts to appoint new members will fail because no valid resolution can be passed on this matter. The consequence would be a leadership vacuum in companies of certain legal forms or the appointment of emergency management.

To address the issues identified, the following relief measures have been adopted. These are initially limited to the year 2020. However, there is a possibility that the validity of the regulations may be extended by one year until the end of 2021 by means of a statutory order issued by the Federal Ministry of Justice and Consumer Protection (BMJV), should this be necessary due to further developments in the COVID-19 pandemic.

Corporate Law

The following simplifications apply to the conduct of annual general meetings ofstock corporations (AG):

• Decisions regarding shareholders’ participation and voting at the Annual General Meeting via electronic means(Section 118(1), sentence 2, and (2) of the German Stock Corporation Act (AktG)), the participation of members of the Supervisory Board via video and audio transmission (Section 118 (3) sentence 2 of the German Stock Corporation Act (AktG)), and the authorization of video and audio transmission (Section 118 (4) of the German Stock Corporation Act (AktG)) may be made by the company’s Management Board evenwithout authorization by the Articles of Associationor rules of procedure. A general meeting may also be held for the first time as a purely online general meeting. The management board of a stock corporation may thus enable online participation in the general meeting, so that all shareholders may then participate virtually without being physically present in person or through a representative. This is accompanied by a restriction on the possibility of challenging resolutions. Consequently, a resolution cannot, in principle, be based on violations of the aforementioned regulations regarding virtual participation and the holding of a purely online general meeting.
• Thenotice periodfor the annual general meeting, which is currently 30 days pursuant to Section 123(1), sentence 1 of the German Stock Corporation Act (AktG),isreduced to 21 days.Accordingly, the requirements for providing evidence and giving notice have been adjusted.For example, requests for additions to the agenda must be received by the company at least 14 days before the meeting (Section 122(2) AktG). The deadlines for intermediaries under Section 125 of the German Stock Corporation Act (AktG), as amended by the ARUG II legislation, have also been adjusted and shortened from 21 to 12 days prior to the meeting.
• Notwithstanding Section 59(1) of the German Stock Corporation Act (AktG), the Executive Board may distributean interim dividend from retained earningsevenin the absence of a provision in the Articles of Association.
• It follows from sections 120(1), sentence 1, and 175(1), sentence 2, of the German Stock Corporation Act (AktG) that the annual general meeting must be held within the first eight months of the fiscal year. However, in some cases this deadline cannot be met, so that the Annual General Meeting may be held even after the eight-month period has expiredwithin the fiscal year; in other words, theprevious eight-month deadlineis extended.
• Each of the aforementioned options available to the Executive Board requires theapproval of the Supervisory Board.Notwithstanding Section 108(4) of the German Stock Corporation Act (AktG), the Supervisory Board may adopt resolutions by written procedure, regardless of any statutory or bylaw provisions.
• The law explicitly stipulates that challenges to resolutions of the general meeting cannot be based on violations of the suspended provisions.

The following simplification applies to the conduct of shareholder meetingsof a limited liability company (GmbH): Previously, under Section 48(2) of the GmbH Act, it was possible to dispense with holding a meeting to pass a resolution if all shareholders agreed in writing to the resolution to be adopted or submitted their votes in writing. Now, a so-calledcircular resolutionmay be adopted evenwithout the consent of the shareholders.

Right of conversion

The aim is to ensure that conversion procedures do not fail due to restrictions on the ability to hold meetings, because the statutory eight-month deadline for filing the conversion with the commercial register cannot be met. For this reason, thedeadline in § 17(2), sentence 4 of the German Conversion Act (UmwG)isextended to twelve months.It begins on the effective date of the relevant closing balance sheet.

Condominium Law

In particular, homeowners’ associations (WEGs) face the risk that their financing will no longer be secured if a resolution cannot be passed to extend the budget—due to the inability to hold a homeowners’ meeting. For the same reason, no resolution can be passed to appoint a new WEG administrator.

To prevent the condominium association from becoming unmanaged, themost recently appointed manager will remain in office.To ensure the financial stability of the condominium association, it is further ordered that themost recently adopted budget plan remain in effect until a new budget plan is adopted.