We have received several inquiries from clients asking for guidance regarding their shareholders’ meetings in light of the rapidly evolving novel coronavirus (“COVID-19”) pandemic.
This article, which we believe may be of interest to our clients and business partners, is for general information purposes only. It should not be relied upon as legal advice as facts and circumstances may vary. Sharing this information does not establish a client relationship with the recipient unless Borenius Attorneys Ltd is or has been formally engaged to provide legal services.
The Regional State Administrative Agencies have imposed restrictions that fall in line with the policies established by the Finnish government to combat the effects of COVID-19. These restrictions, in particular the ban on public gatherings of more than ten persons, are likely to have an impact on the format of and practical measures taken in relation to annual general meetings for listed companies in Finland.
With the annual general shareholder meeting (“AGM”) season upon us, this article seeks to provide information relating to (i) the options available for holding AGMs in light of COVID-19 concerns and (ii) the procedures that should be followed in the event that an issuer decides to change the date, time or location of its in-person AGM due to COVID-19.
- Finnish company law requires for the AGMs of private and public Finnish limited liability companies to generally take place within six months from the end of the company’s financial year, unless a shorter period is mandated in the relevant company’s articles of association.
- Furthermore, the AGMs must e.g. approve the annual report and resolve on the distribution of dividends.
- In light of growing global concerns surrounding the COVID-19 outbreak and the recommendations issued in response by the Finnish government and the Regional State Administrative Agencies, Finnish companies are considering the impact the outbreak may have on their ability to host their AGMs.
- This article explores the various factors that should be considered and the options available to Finnish listed companies in addressing these concerns.
- The deadline of an AGM cannot be extended by including a provision to that effect in the company’s articles of association. However, smaller companies often hold their AGMs after the deadline without adverse consequences. Regardless, the board could be held liable for neglecting to convene the AGM within the prescribed period if the delay causes losses to a party. Because the deadline is established in the Finnish Limited Liability Companies Act, the board would face a presumption of negligence due to its breach of these provisions.
- Companies affected by the restrictions were originally instructed to primarily find an alternative date for convening their AGMs within the prescribed six-month period.
- However, on 16 April 2020, the Finnish Ministry of Justice published a legislative proposal for a temporary new law that would amend e.g. the provisions of the Finnish Limited Liability Companies Act and allow limited liability companies to postpone their AGMs past the deadline, but until no later than 30 September 2020. We expect that Parliament will approve the proposed legislation on 24 April 2020.
- When its AGM is convened, the company should take all legal and practical measures to minimise the risk of infection for shareholders, employees and guests. As such, companies should seek to restrict the number of in-person participants to comply with the ten-person limit. Companies should also take additional precautions to minimise the risk of infection at the meeting e.g. by offering the possibility of attending the meeting by proxy or remotely by technical means.
On 16 March 2020, the Finnish government issued a restriction on arranging public events, limiting the number of attendees to ten people. The restriction applies to all meetings that are open to the public, regardless of whether they are held indoors or outdoors, and it applies to both public meetings and public events.
While the definition of a public meeting is open to interpretation, the Finnish Ministry of Justice (the “MoJ”) has issued guidelines where it has stated that AGMs are generally subject to the ten-person restriction.
Furthermore, the MoJ stated in its general Q&A that if a time limit for holding a meeting is about to expire, the company’s management will have to assess whether it should postpone the meeting or come up with alternative arrangements to hold the meeting as planned, such as by using proxies or via a remote connection. The principle of the equal treatment of shareholders must be observed, and the meeting should not be held in a way that prevents shareholders from participating in decision-making.
On 17 March 2020, the Finnish Regional State Administrative Agencies banned public meetings of more than ten persons in line with the guidelines announced by the Finnish government the day before. In response, several listed Finnish companies have announced publicly that they will cancel their general meetings and postpone them to a later, undetermined date.
However, the MoJ’s statements regarding the ban and the approach adopted by the Finnish Regional State Administrative Agencies do not completely rule out the possibility of holding an AGM, provided that appropriate arrangements are made. The Advisory Board of Finnish Listed Companies has encouraged companies to adopt a risk-based approach when assessing whether they should postpone their AGMs.
Alternative approaches to arranging an AGM during the COVID-19 pandemic and the ban on gatherings of more than ten participants include the following measures:
- Cancelling and postponing the AGM to a later date. As noted, several companies have cancelled their summoned AGMs in the market. The ban on large public gatherings expired on 13 April 2020. Representatives of the MoJ have flagged the possibility of a new decision extending the ban on public gatherings. A possible new end-date of 31 May 2020 has been discussed in the media.
- Implementing exceptional arrangements at the AGM. The Advisory Board of Finnish Listed Companies issued a position paper on 13 March 2020 (later updated) outlining the board’s position that AGMs should be convened, if possible, as originally planned to meet market expectations and support a functioning capital market. Mitigating arrangements to minimise the risk of transmitting the coronavirus proposed in the position paper by the Advisory Board include:
- offering shareholders the possibility to vote in advance or to issue a proxy to a named representative present at the meeting;
- allowing shareholders to follow the proceedings of the AGM remotely e.g. via a stream of the meeting (hybrid meeting);
- dividing the meeting attendants into smaller groups that are seated in separate rooms (with separate entrances) to keep the number of attendees in each room at ten or below;
- limiting the duration of the meeting and limiting or cancelling any food or beverage service;
- limiting the attendance of board members and management at the AGM.
Cancellation and postponement of the AGM
In light of the current COVID-19 pandemic and the ban on public gatherings, many companies – including big-name entities like Nokia, Fortum, Stora Enso and Nordea – have cancelled their AGMs and announced that a separate summons will be published to a separate AGM at a later, as-of-yet undetermined date.
Under Finnish company law, the board can decide to cancel an already published AGM notice up until the opening of the meeting. Of the companies listed above, e.g. Nokia announced the cancellation of its AGM on 18 March 2020 (originally to be held on 8 April 2020), whereas Nordea announced the cancellation of its AGM on 23 March, i.e. two days before it was scheduled to be held on 25 March. The cancellation of the AGM should be communicated in the same manner as convening the AGM and by releasing a stock exchange release. As of 26 March 2020, approximately 46 listed companies have cancelled their AGMs in Finland.
The Finnish Limited Liability Companies Act does not address making changes to an issued notice to convene a general meeting. Pursuant to legal literature, material changes to the notice require for the company to cancel the convened meeting and issue a new notice while observing requirements related to convocation periods as well as other requirements arising from law and from the company’s articles of association. However, minor changes, such as minor adjustments to the time of day and any necessary limited changes to the venue of the meeting, are considered permissible.
It should be noted that postponing an AGM will also necessarily postpone the resolution on distributing dividends and consequently delay the payment of any distribution of dividends or other funds, unless an earlier AGM has authorised the board to decide on such distributions. As such, companies should consider the opinions of investor groups on any decisions regarding the postponement of their AGMs.
If the ban on public gatherings is extended past 30 June 2020, companies will need to assess whether practical arrangements can be made to hold their AGMs within the prescribed period or whether their AGM can be delayed without causing losses to the shareholders or adverse consequences to the company.
On 16 April 2020, due to the COVID-19 pandemic, the MoJ proposed the adoption of a time-limited amendment to the regulation that would allow companies to postpone their AGMs past the six-month deadline until 30 September 2020.
Finnish company law allows general meetings to postpone matters for them to be addressed in a continuation meeting. While less often exercised by listed companies, the right to postpone a matter does, in principle, offer companies the possibility of formally holding their AGMs within the prescribed time-period while postponing matters (e.g. profit distribution) to be addressed at a later continuation meeting.
A new notice must be provided of the continuation meeting, if it is to be held more than four weeks after the general meeting. Only those shareholders that had registered for the original general meeting may attend the continuation meeting, and companies must carefully assess whether a postponement to a continuation meeting is possible in light of the requirement for the equal treatment of shareholders.
Temporary amendment relating to the regulation of general meetings
On 16 April 2020, the MoJ proposed 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 while still observing requirements related to protecting public health. The temporary rules are proposed to remain in force until the end of September.
Pursuant to the proposal, the general meetings of companies and cooperatives, the meetings of associations and other similar meetings specified in the law could be postponed and held by the end of September. However, the boards of these corporations should prepare their financial statements by the end of June at the latest.
The proposed legislative amendments would also make it easier to hold meetings by allowing remote participation and the use of proxies. Pursuant to the proposal, the general meeting of a listed company could be held as a remote meeting only if the board of directors so decides. Participating in a meeting held by a cooperative or a registered association by using a representative would be allowed, subject to certain restrictions.
The key points of the Amendment Act are the following:
- Public and private limited liability companies whose financial year ends between 30 September 2019 and 31 March 2020 may, in deviation from the Finnish Limited Liability 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 date of the meeting.
- Listed companies, both those trading on the main list and on the First North marketplace, are allowed to arrange their AGMs with exceptional measures undertaken to enable the AGMs to be held without any shareholders being physically present at the meeting.
- Pursuant to the Amendment Act, an AGM (or an extraneous general meeting) of a listed company or that of a company trading on the First North marketplace, which is held by 30 September 2020, can be held in a manner that limits shareholders to exercising their rights at the general meeting through an attorney only or by remote means only, i.e. through mail, telecommunication or other technical means.
- To simplify the use of an attorney representative, the Amendment Act obliges listed companies and companies trading on the First North marketplace to nominate an attorney who must be independent of the company. No other particular requirements are imposed on the attorney. The company’s board may decide that the attorneys are only allowed to participate in the physical meeting remotely. This option means that the meeting can be arranged as an online (virtual) meeting with the chair, the secretary and (depending on the voting method) the of votes being the sole persons physically present at the meeting venue.
- To safeguard the rights of shareholders, the Amendment Act introduces regulations obliging companies to offer shareholders the opportunity to present questions and counterproposals in advance. The proposal allocates all costs arising from the use of the company-nominated attorney to the company.
- The Amendment Act includes changes to the requirements concerning the content of the summons to the general meeting. Under the said Act, the summons must include the main points of the board’s proposals as well as the main points of any counterproposals submitted by shareholders holding at least 1% of all shares in the company prior to the publication of the summons to the meeting.
- If the board proposes the payment of dividend or distribution of funds at an amount lower than the minority dividend, an alternative proposal corresponding to the minority dividend must be put forward to the shareholders. The Finnish Limited Liability Companies Act states that at least one half of the profits of the financial period and up to 8% of the equity of the company must be distributed as minority dividend if shareholders who hold at least 10% of all shares so demand.
- The summons to a general meeting must include information on and directions regarding the shareholders’ right to raise questions and make proposals, the responses provided by company management, and the manner of keeping the information available prior to the general meeting and the closing of the votes.
- If a general meeting is convened while limiting the physical attendance of shareholders and attorneys, any counterproposals presented during the meeting and after the deadline stated in the summons will not be put to a vote.
- The notice, or the Company website, must also include the personal and contact details of the attorney appointed by the company. The starting and closing dates of the advance voting period must be disclosed in the summons to the meeting.
- The Finnish Accounting Act is also amended to require companies whose financial year ends between 30 November 2019 and 29 February 2020 to prepare their annual accounts by 30 June 2020.
The Amendment Act changes not only the deadline for holding the AGM of a listed (or private) limited company, but also many of the central principles that apply to shareholder rights under Finnish company law.
Contrary to the existing Finnish Limited Liability Companies Act, the rights of shareholders to physically attend a general meeting can be limited under the Amendment Act. Furthermore, shareholders have a general right to present counterproposals during the meeting under the current Finnish Limited Liability Companies Act, whereas the Amendment Act would require all counterproposals and advance votes to be delivered in advance within the timeframes stipulated in the summons.
The Amendment Act proposal notes that a precondition for enabling listed companies and companies trading on the First North marketplace to hold virtual, i.e. online only, general meetings is to oblige the company to ensure that shareholders are able to ask questions and submit counterproposals prior to the meeting. In addition, the management of these companies is obliged to provide answers to the shareholders’ questions and to submit any counterproposals that meet the minimum requirements (i.e. proposing shareholder holds at least 1% of all shares) to a vote. Furthermore, the questions, answers and possible counterproposals must be made available to all shareholders prior to closing the vote on a matter. The proposal notes that the proposed changes expand the rights of shareholders to obtain information and influence the decision-making of the general meeting when compared to a traditional meeting held in person.
The Advisory Board of Finnish Listed Companies has noted that it is in the process of updating its model summons to a general meeting to reflect the requirements of the Amendment Act.
Implementing exceptional arrangements at the AGM
The Advisory Board of Finnish Listed Companies issued a position paper on 13 March 2020 encouraging companies to make practical arrangements to minimise the risk of transmitting the coronavirus.
The advisory board noted that listed companies should emphasise in their communications that shareholders, especially those who belong to risk groups, should carefully consider whether they need to participate in the general meeting in person or whether the exceptional arrangements are sufficient for their needs.
Advance and proxy voting
The Finnish Limited Liability Companies Act permits advance voting, remote participation and gathering of proxies or powers of attorney to enable shareholders to take part in voting without participating in the meeting in person.
The summons to the AGM should disclose the possibility of voting in advance and participating remotely as well as any applicable preconditions, the limitations imposed on the shareholders’ rights to engage with and ask questions, and applicable procedures.
A precondition for remote attendance is that the option is noted in the relevant company’s articles of association. Alternatively, if the articles do not exclude the option, the board can decide to allow remote attendance at the AGM. Pursuant to the Finnish Limited Liability Companies Act, a general precondition for allowing remote attendance is that the right to participate and the veracity of the vote count can be verified in a manner corresponding to that used at an ordinary meeting.
In practice, in the absence of widely accepted technical platforms, listed companies have not made much use of the option to have shareholders attend their AGMs remotely and have rather opted for hybrid meetings combined with advance voting options.
The Finnish Securities Markets Act (the “SMA”) prescribes that proxy templates or powers of attorney prepared for or on behalf of the issuer company should be kept available for the shareholders. Furthermore, the summons to the general meeting should, pursuant to the SMA, make a note of this if such proxy templates or powers of attorney have been prepared.
Companies should take note that the collection of proxies should be carried out in a neutral manner so that shareholders have equal opportunity to vote against board and other proposals if they choose to and without promoting one voting alternative above another.
This AGM season has seen several well-known companies in the market – such as Componenta Plc, UPM-Kymmene Plc and Fortum Plc – offering shareholders the option of granting a proxy and providing voting instructions to an external attorney to represent the shareholders physically at the meeting (at the company’s expense), enabling shareholders to participate in voting without having to attend the AGM in person.
The Finnish Limited Liability Companies Act has recognised the possibility of participating in an AGM by technical means since 2001. Originally, the rule was intended to clarify the permissibility of the practice of having the general meeting be spread out in several meeting rooms that are connected by real-time video and audio links. Simultaneously, participation by other technical means, e.g. via an online link, was made possible.
However, while the technical means of participation are not limited or prescribed in detail, the Finnish Limited Liability Companies Act does require that the issuer company convene a physical meeting in all circumstances.
The general meetings of Finnish companies generally have limited quorum requirements. They are considered properly quorate if at least one shareholder is physically present (in person or by proxy) and the meeting has been summoned in accordance with regulatory requirements and those established in the company’s articles of association. Consequently, so-called hybrid meetings are permissible where the majority of other shareholders participate remotely from other locations e.g. via a video link.
Remote participation is an additional option for shareholders, but shareholders must generally be afforded the possibility to participate in a physical meeting. Consequently, so-called “virtual” general meetings, i.e. meetings solely arranged online, are not possible under the Finnish Limited Liability Companies Act, unless all shareholders consent to holding the general meeting without convening a meeting. Due to this requirement for unanimous consent, the virtual meeting option is not available, in practice, for listed companies, but it can be an option for companies with a smaller number of shareholders.
As described above, the Amendment Act would introduce a change to this rule by allowing listed companies and companies trading on the First North marketplace to hold online-only, virtual general meetings.
If the shareholders participating remotely are to be granted the right to participate in voting remotely, the issuer company should consider how the right to participate and the veracity of the vote count can be verified in a manner corresponding to that used at an ordinary meeting. The use of advance or remote voting and participation would generally need to be disclosed in the summons to the AGM along with the requirements and applicable limitations for such means of participation.
Shareholders have the right to vote and the right to ask questions at a general meeting. At the time of writing this article, there is no widely accepted or used service available on the Finnish market that would enable the remote attendance of shareholders while allowing for real time voting and the possibility to ask questions.
A widespread alternative seen in the market is the possibility for shareholders to follow the proceedings and presentations at a general meeting remotely via a streaming service. The streaming option does not allow shareholders to participate in the voting (unless they have made use of advance or proxy voting alternatives) or ask questions or present proposals to the meeting. Consequently, the alternative can be utilised with fewer preconditions, as e.g. the veracity of the vote count of those not physically attending does not need to be verified as it would have to be in the event of full remote participation.
Furthermore, the Finnish Limited Liability Companies Act does not prescribe any special requirements that apply to the summons to the general meeting in order to allow the possibility to follow the proceedings remotely (remote voting is possible only if the option is disclosed in the summons). As such, issuer companies – such as Fortum and Cargotec – have been observed to allow shareholders the possibility to e.g. follow the general meeting via a streaming service.
A widespread convention observed in the market is for issuer companies to require shareholders wishing to follow the general meeting proceedings via a streaming service to verify their identity by means of online banking codes or similar e-ID methods.
However, the Finnish Limited Liability Companies Act does not impose detailed strict identification requirements. As the general meeting can generally allow any third party to participate, the preparatory works of the Finnish Limited Liability Companies Act notes that a general meeting that convenes and is broadcast through technical means is deemed to have approved that third parties may take part in the meeting (by watching the stream).
It would be recommended, however, that the meeting expressly recognise that third parties may follow the proceedings through technical means and that this is approved at the beginning of the meeting.
For clarity, issuer companies should disclose to their shareholders, in the summons to the general meeting, that even if the shareholder has registered as an attendee for the general meeting and only follows the meeting through such access, the shareholder cannot exercise its rights related to voting and asking questions during the meeting.
Limiting the number of attendees through other means
This spring, several listed companies have announced that they will be adopting practical measures that are intended to limit the transmission risk at their AGMs.
Companies have disclosed their intent to limit the duration of their meetings, encouraging shareholders to make use of options to authorise representatives to attend the meetings by proxy forms or powers of attorney. Several companies have announced that they will not be serving food and beverages and that the number of board and management representatives present is limited to a minimum. Companies have also made practical arrangements to spread out the meeting into several rooms linked by video and audio feeds, noting that the aim is to keep the number of attendants in each room below the mandated maximum.
The AGM season is getting under way in Finland, much like in many other countries around the world for companies whose financial year ends on December 31.
The outbreak of COVID-19 is causing companies to rethink their arrangements for their 2020 AGMs in light of potential bans on large gatherings and the practical risks of COVID-19 spreading that arise with any gathering of people in closed spaces.
While summons to AGMs have, to a large extent, already been sent out, or are in the process of being published, companies are communicating a strong recommendation that shareholders avoid attending the meeting in person by submitting advance proxy votes on resolutions to be considered at the meeting as soon as possible and making use of other options made available to them.
Finnish listed companies are also making it clear that if physical AGMs are to be held, they will not necessarily take place in the usual format. For example, meetings are likely to be shorter in duration as presentations by the chair and other members of the board will be kept to a minimum, or the entire AGM will be streamed online. Companies have also provided means for shareholders to raise questions prior to the meeting, in writing or electronically, so that those not attending still have the opportunity to raise questions that can then be discussed at the AGM.
Virtual AGMs held exclusively online without a corresponding physical meeting are common in the US. However, Finnish company law has not, so far, allowed companies to hold a purely online meeting without the consent of all shareholders, although hybrid meetings (where shareholders may participate electronically in the AGM in conjunction with a physical meeting) are permissible.
The Amendment Act, introduced by the MoJ on 16 April 2020, offers companies some relief as the deadline for holding AGMs is extended to 30 September and listed companies and companies trading on the First North marketplace are offered the possibility of arranging online only, virtual general meetings.
As listed companies have experienced challenges in keeping the number of attendees physically present at their AGMs down to the maximum of ten attendees, it is likely that a large number of listed companies will make use of the options made available under the Amendment Act to postpone their AGMs and limit the right of their shareholders to participate in person.
Borenius’ lawyers are available to assist in addressing any questions you may have.