On April 7, 2020, we informed you of the upcoming emergency act to solve the practical issues caused by the current national and global coronavirus measures. After the approval of the legislative proposal by the Senate on April 21, 2020, the new Temporary Act COVID-19 Justice and Security (Tijdelijke wet COVID-19 Justitie en Veiligheid), hereinafter referred to as the Temporary Act, will have retroactive effect as from March 23, 2020. We hereby inform you of the changes and effects of this new legislation.
The Temporary Act contains regulations to solve the practical issues on multiple legal areas, such as criminal, constitutional and corporate law. This alert will focus on the rules that apply to corporate law.
The Temporary Act provides rules for the BV, the NV, associations, cooperatives and foundations. For these legal entities, the Temporary Act aims to provide a certainty regarding necessary decision-making in both the general meeting and the meetings of the management board and supervisory board.
Under the Temporary Act, the management board of a legal entity can decide that a general meeting can be accessed by electronic means of communication only. This includes the possibility of the prohibition of physical attendance of the shareholders and other persons entitled to attend the general meeting. The management board can furthermore decide that voting and speaking at the general meeting can only be done electronically. In addition, the management board may resolve that votes may be cast before the general meeting, by electronic means or in writing.
If the management board decides to take such measures, these must be stated in the convocation of the general meeting. If the general meeting has already been convened, the management board can still decide upon the before stated measures, but no later than 48 hours before the start of the general meeting. This announcement will be made in the same manner as the general meeting itself was notified (e.g. newspaper publication).
Subject to following conditions general meetings can be held exclusively electronically :
- the shareholders can follow the general meeting by electronic means; and
- the shareholders have been given the opportunity to ask written or electronic questions about the items on the agenda no later than 72 hours before the general meeting (or a shorter period to be set by the management board).
In addition, the management board must make every effort to make sure that the following applies :
- the questions asked in advance of the general meeting shall be (thematically) answered no later than during the general meeting. These answers shall be posted on the website of the company or made accessible to the shareholders in other (electronic) communication; and
- the participants must be able to ask questions during the general meeting electronically, unless this cannot reasonably be required in the light of the circumstances.
However, if the company does not meet these last two criteria, the resolutions in the general meeting are still validly taken. It is also explained in the Explanatory Memorandum that if a shareholder cannot participate optimally due to a faltering connection or any other reason, this does not affect the legal validity of the resolutions passed in the general meeting.
Furthermore, the management board has the option to decide that voting can only take place by electronic means of communication, this includes both video/audio communication or for example e-mail correspondence. The company may also decide that shareholders can only vote by granting a proxy or voting instruction prior to the general meeting. The legislator supported this last option with the argument that only some listed companies in the Netherlands recently started the use of electronical voting during the general meeting.
Finally, for the NV, there is a statutory period for holding the annual general meeting. This period can be extended by the management board with a maximum of four months. If the articles of association of another form of legal entity set a period for holding the general meeting, the management board can decide to extend this period with a maximum of four months.
Management board and Supervisory board
In respect of the meetings of the management board and the supervisory board, the Temporary Act creates the possibility to deviate from any statutory provisions about holding physical meetings.
The management board of the legal entity involved, can decide to extend the period for drawing up the annual accounts up to a total period of no more than ten months after the end of the financial year. With this decision of the management board, the general meeting’s authority to extend will expire. Please note that listed companies that are subject to the Financial Supervision Act (Wet op het financieel toezicht) are excluded from this possibility to extend. The legislator does not consider it necessary to give listed companies the possibility to postpone, because that would have an impact on their position on the capital market.
Publication of the annual accounts must be completed within twelve months of the balance sheet date. If, in case of a bankruptcy, this deadline is not met, this late publishing will be presumed to be a major cause of the bankruptcy, as stated in Article 2:138/248 of the Dutch Civil Code. Under the Temporary Act, the presumptions of proof do not apply if the management board can demonstrate that the failure to publish is due to the consequences of COVID-19.
Entry into force and retroactive effect
The Temporary Act has a retroactive effect from March 23, 2020. In principle, the law will lapse on September 1, 2020, but this term can be extended by royal decree. The rules regarding the presumption of proof lapse on September 1, 2023. This is related to the period for which proceedings based on Article 2:138/248 of the Dutch Civil Code can be instituted.