Impact of COVID-19 on forthcoming annual general meetings in Finland
Many listed companies are currently busy preparing for their annual general meetings (“AGM”), as the Finnish Companies Act currently provides that issuers with the financial year ending at the end of December must arrange their AGMs by 30 June.
In light of the growing global concern surrounding the COVID-19 outbreak as well as the recommendations and orders that the Finnish Government and the Finnish Regional State Administrative Agencies have issued in response to the pandemic, Finnish companies are considering the impact the outbreak may have on their ability to host their AGMs.
On 16 March, the Finnish Government issued a prohibition on arranging large public events: “Public gatherings are limited to no more than ten persons, and it is recommended avoiding spending unnecessary time in public places”. The prohibition applies to all meetings that are open to the public, regardless of whether they are held indoors or outdoors. The prohibition applies to both public meetings and public events.
While the definition of public meetings is open to interpretation, the Finnish Ministry of Justice has issued guidance to outline its view on the AGMs being subject to the ten-person restriction. The companies affected by the restrictions were originally instructed to primarily find an alternative date for convening their AGM within the prescribed six-month period.
Temporary amending regulation
To address the challenges that Finnish companies are facing with hosting their AGMs within the time limit, the Ministry of Justice proposed on 16 April 2020 temporary legislation (the “Amendment Act”) that would allow companies, cooperatives and associations to hold their statutory meetings despite the coronavirus epidemic and the related restrictions on gatherings. The temporary regulation is expected to be approved by the Finnish Parliament on 24 April 2020 and to remain in force until the end of September 2020.
In accordance with the proposal, companies, cooperatives and associations specified in the law may postpone their annual meetings until the end of September 2020. Companies should, however, prepare their financial statements by the end of June at the latest.
The proposed legislative amendments would also facilitate the organisation of annual general meetings by allowing mandated remote participation and the use of proxies. Listed companies and companies trading on the First North may arrange their AGMs (or extra general meetings) by 30 September 2020 upon the board of directors’ decision by providing the shareholders an opportunity to exercise their rights at the general meeting solely through an authorised attorney, i.e. without participating in person at the meeting.
Furthermore, the proposal provides that listed companies and companies trading on the First North may arrange their AGMs (or extra general meetings) by 30 September 2020 by providing that the shareholders exercise their rights at the meeting remotely by mail, telecommunications or by other technical means only, i.e. in deviation from the current rules, remote participation would be the sole alternative and shareholders would not be allowed to participate in person at the meeting.
In addition, the boards of directors may decide that the attorneys are only allowed to participate in the meetings remotely. This way the meeting can be arranged as an online meeting with only the chairperson, the secretary of the meeting and (depending on the voting method) the teller being physically present at the meeting venue.
To simplify the use of an attorney, the company is obliged to nominate one or more attorneys for the shareholders’ use. The nominated attorney may not be a related party of the company. No other particular requirements are imposed on the nominated attorney. The personal details and the contact details of the attorney nominated by the company must be provided in the summons to the general meeting or on the company website.
As companies must offer their shareholders a possibility to present questions and make counterproposals prior to the general meeting, it is not considered necessary that the attorney nominated by the company offers shareholders the opportunity to give the attorney instructions with respect to questions, discussions or alternative proposals to be presented at the general meeting.
The main changes to the current rules introduced by the Amendment Act are:
- Public and private limited liability companies that have a financial year ending between 30 September 2019 and 31 March 2020 may, in deviation from the Companies’ Act and any provisions in their Articles of Association to the contrary, hold their AGMs by 30 September 2020. The convocation period and deadline for publishing the minutes of the meeting and registering the annual accounts are adjusted to correspond to the postponed date of the meeting.
- Listed companies that are trading on the main list and on the First North marketplace are allowed to arrange their AGMs with exceptional arrangements that enable the AGMs to be held without any shareholders being physically present at the meeting.
- In accordance with the proposed act, listed companies can arrange their AGMs (or extra general meetings) by 30 September 2020 so that shareholders may to exercise their rights at the general meeting through an authorised attorney or by remote participation only.
- To simplify the use of an attorney representative, companies are obliged to nominate one or more attorneys for the shareholders’ use, and such attorneys may not be related parties of the company. No other particular requirements are imposed on the nominated attorney. The companies must provide the personal details and contact details of the nominated attorney in the notice to convene the general meeting or on the company website.
- To safeguard the rights of the shareholders, the Amendment Act introduces regulations that oblige the companies to offer their shareholders an opportunity to present questions and counterproposals in advance. In accordance with the proposal, companies will bear all the costs arising from the use of the attorneys nominated by the company.
- Furthermore, listed companies and companies trading on the First North marketplace can decide to limit the shareholders’ right to participate in the annual or extra general meeting so that participation represented by a nominated attorney or remote participation are the sole alternatives offered to the shareholders. Companies can also limit the nominated attorney’s right to participate in the general meeting to remote participation only. This option means that the meeting can be arranged as an online meeting with only the chairperson, the secretary of the meeting and (depending on the voting method) the teller being the sole persons physically present at the meeting venue.
- The Amendment Act includes changes to the requirements concerning the content of the notice to the general meeting. Under the act, the notice must include the main points of the board’s proposals as well as the main points of the counterproposals presented by the shareholders holding at least 1 % of all shares in the company, provided that they are sent to the company before the meeting notice is published or the deadline set out in the notice. The relevant share is calculated compared to the number of registered shares, disregarding own shares held by the company or entity controlled by the company.
- If the board proposes the payment of dividend or distribution of funds by an amount lower than the minority dividend, the board of directors must put forward an alternative proposal regarding the minority dividend to the shareholders. The Companies Act defines that the amount of the minority dividend must be at least 50% of the profits of the financial period and up to 8% of the equity of the company. Under the current Companies Act, a dividend corresponding to the minority dividend must be distributed, if so demanded by the shareholders with at least 10% of all shares.
- The Notices to convene general meetings must include the information and instructions regarding the shareholders’ right to raise questions and make proposals, the company management’s responses as well as the manner of keeping the information available prior to the general meeting and the closing of the vote.
- When the general meeting is convened by limiting the physical attendance of the shareholders and attorneys, any counterproposals presented during the meeting and after the deadline stated in the notice will not be put to a vote.
- The starting and closing dates of the advance voting must be mentioned in the notice to convene the meeting.
- The Amendment Act also amends the Accounting Act so that companies with a financial year ending between 30 November 2019 and 29 February 2020 must prepare their annual accounts by 30 June 2020.
Key points of the amendment act and main changes to current regulation
The Amendment Act changes not only the deadline for the listed (or private) limited companies to hold their AGMs by the end of September, but also many of the key principles regarding the rights of the shareholders of listed companies and companies trading on the First North marketplace under Finnish company law, e.g.:
- Shareholders’ right to attend general meetings in person, previously considered essential under the Companies Act, can now be restricted under the Amendment Act either by requiring shareholders to instruct the nominated attorney to represent them at the meeting or by requiring shareholders to exercise their rights in advance or remotely.
- The Amendment Act amends the obligation to arrange a physical meeting with at least one shareholder participating in person or through an attorney. Under the Amendment Act, a meeting can be arranged as an online meeting with only the chairperson, the secretary of the meeting and (depending on the voting method) the teller being physically present at the meeting venue.
- Additionally, companies may limit the attorneys’ right to participate in the general meeting only through mail, telecommunication or other technical means. Using this option means that listed companies and companies trading on the First North marketplace will be able to arrange general meetings without having any shareholders or shareholder attorneys present in person at the meeting venue.
- The current Companies Act affords shareholders a general right to be represented by an attorney appointed by the shareholder at general meetings. The right has been considered absolute and cannot be limited in the Articles of Association. The Amendment Act, however, introduces an obligation for the company to nominate one or more attorneys for the shareholders’ use. The company, not the shareholders, shall bear all costs associated with the use of the nominated attorney.
- When general meetings are arranged so that the rights of the shareholders to attend in person are restricted, the notice to the meeting must include, inter alia, the details of the proposals for the general meeting presented by the board and the qualifying shareholders as well as the instructions on the timing and methods for presenting questions and counterproposals. The notice shall specify the website where the answers to the questions and counterproposals are made public before the meeting and the end of the voting. If these requirements are met, the general meeting is not required to address or vote on counterproposals presented during the meeting and after the deadline set in the notice.
- Currently any shareholder, irrespective of their share of ownership, has the right to propose resolutions to the general meeting. The Amendment Act limits this right to make proposals or counterproposals to shareholders holding at least 1% of all shares in the company.
The Advisory Board of Finnish listed companies has stated that it is in the process of updating its model notice to convene a general meeting to reflect the new requirements introduced by the Amendment Act.
Borenius’ lawyers are available to assist in addressing any questions you may have regarding these new precedents.