The AGM season in the spring of 2020 brought with it novel challenges as listed companies preparing for their annual general meetings (AGMs) were forced to consider the impact of the coronavirus pandemic on gatherings of shareholders.
Having to navigate Government-issued prohibitions on large public events and guidance from the Finnish Ministry of Justice, companies listed on the main list maintained by Nasdaq Helsinki Oy or the First North marketplace were faced with the alternatives of cancelling or postponing their annual general meetings or implementing exceptional arrangements for their AGMs.
As the AGM season of 2021 approaches, companies listed on the main list maintained by Nasdaq Helsinki or the First North marketplace are once again faced with similar challenges as in the spring of 2020. Companies must plan for arrangements that will be implemented at their AGMs in the spring of 2021.
As the coronavirus pandemic continues and companies must prepare to face the same challenges in late 2020 and early 2021 as they did in the spring of 2020, the Ministry of Justice has proposed to extend the act allowing listed companies and companies trading on the First North marketplace to organise their general meetings solely by remote participation or through an authorised proxy.
The Amendment Act and extension of the temporary legislation
As reported in our Legal Alert on 21 April 2020, the Ministry of Justice proposed temporary legislation that would allow companies, cooperatives and associations to hold their safely despite the coronavirus pandemic and the related restrictions imposed on gatherings (the “Amendment Act”). The temporary regulation was stated to remain in force until the end of September 2020.
The intent of the new extension proposal (Government bill 117/2020) is to secure the smooth decision-making of companies listed on the main list maintained by Nasdaq Finland and the First North marketplace while observing health and safety requirements in the autumn of 2020 (i.e. after the end of September 2020) and in the spring of 2021.
The proposed temporary legislation would extend certain rules of the Amendment Act and allow companies listed on the main list maintained by Nasdaq Finland and the First North marketplace to hold their general meetings solely or mainly by remote participation and limit the physical participation to the authorised attorneys representing the shareholders.
The legislation extending the deadline of certain rules established in the Amendment Act entered into force 3 October 2020 and will continue to apply until 30 June 2021.
No extension to the possibility to postpone annual general meetings
In deviation of the Amendment Act, the extension legislation would not, however, allow companies to extend the deadline for arranging their annual general meetings, meaning that companies listed on the main list maintained by Nasdaq Finland and the First North marketplace will need to ensure that their AGMs are convened and held within six months of the end of the preceding financial year. In many cases, this will require companies to convene their AGMs by the end of June 2021.
Changes to the Finnish Limited Liability Companies Act enacted under the Amendment Act
The Amendment Act, in its extended form, enacts certain changes that apply to companies listed on the main list maintained by Nasdaq Finland or the First North marketplace.
If such a company wishes to restrict the shareholders’ right to participate at the general meeting in person, it will need to observe the additional requirements concerning e.g. the contents of the summons to the general meeting as well as those that apply to questions and counterproposals from shareholders.
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.
Furthermore, to simplify the use of an attorney representative, companies are obliged to nominate one or more attorneys to represent the shareholders where they so wish. These attorneys must be independent of the company, but no other particular requirements are imposed on the appointed attorneys. Companies must provide the personal details and contact details of the appointed attorneys in the notice to convene the general meeting or on the company website. Companies will also bear all costs arising from the use of the attorneys they have appointed.
To safeguard the rights of the shareholders, the Amendment Act introduces regulations that oblige the companies to offer their shareholders the opportunity to present questions and counterproposals in advance.
Furthermore, listed companies and companies trading on the First North marketplace can decide to limit shareholders’ right to participate in the annual or extraordinary general meetings so that participation via proxy, i.e. an appointed attorney, or remote participation are the sole alternatives offered to the shareholders.
Companies can also limit the appointed 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.
Content of notices
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 based on the number of registered shares while disregarding treasury shares held by the company or an entity controlled by the company.
The notices to convene general meetings must disclose information and instructions regarding the shareholders’ right to raise questions and make proposals, the management’s responses as well as the manner in which the information is kept available prior to the general meeting. The starting and closing dates of the advance voting must also be disclosed in the notice to convene the meeting.
Decision-making and voting
If the board proposes the payment of dividend or a 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 Finnish Limited Liability Companies Act states that the minority dividend must amount to at least 50% of the profits of the relevant financial period and up to 8% of the equity of the company. Under the current Finnish Limited Liability Companies Act, dividend corresponding to the minority dividend must be distributed if so demanded by shareholders who hold at least 10% of all shares.
If a general meeting is convened with limitations in place for 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.
It should be noted that the changes enacted under the Amendment Act do not apply to private limited companies. Consequently, all Finnish private limited companies must organise their AGMs in 2021 (as well as other general meetings) within the applicable time limits and ensure that they observe the rules that applied before 1 May 2020 (i.e. the enactment date of the Amendment Act).
Borenius’ lawyers are available to assist in addressing any questions you may have regarding the extension of the Amendment Act and its impact on business in Finland.