Legal Alerts/24 May 2021
The Relief to Hold General Meetings by Remote Participation Extended to June 2022
The Finnish Parliament has adopted a new act on the temporary deviation from the Companies Act, the Act on Cooperatives and Associations, and certain other organisations, the “2021 Amendment Act”, that will become effective as of 8 May 2021. This act replaces and cancels the amendment act currently in force.
Temporary legislation originally proposed by the Finnish Ministry of Justice in April 2020, allowed listed companies and companies trading on the First North marketplace to require shareholders to participate in general meetings by proxy representative, or through remote participation (i.e. by post, telecommunications or other technical means, the “Amendment Act”). The Amendment Act was originally intended to lapse at the end of September 2020.
However, the coronavirus pandemic continued to cause significant health concerns towards the end of 2020, as a result of which a de facto extension of the Amendment Act until 30 June 2021 was introduced (the “October 2020 Amendment Act”, described in our earlier Legal Alert).
The new 2021 Amendment Act extends the reprieves afforded by the October 2020 Amendment Act, currently in force until 30 June 2022, and it will replace and cancel the October 2020 Amendment Act.
Extending temporary legislation to June 2022
The preparatory works of the 2021 Amendment Act note that predicting the development of the COVID-19 pandemic and its impact on general meetings to be held in the fall of 2021 is difficult, mainly due possible future mutations of the virus and uncertainty relating to the vaccine coverage.
Furthermore, preparations and planning for general meetings in organisations with a large number of shareholders or members is time consuming and consequently, the 2021 Amendment Act remains in force until 31 June 2022, covering the annual general meeting seasons 2021 and 2022.
Listed companies and companies trading on the First North marketplace can, under the 2021 Amendment Act, opt to limit their 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 proxy representative’s right to participate in the general meeting to participate remotely. 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.
Reintroducing the right to postpone general meetings
Although the 2021 Amendment Act otherwise mirrors the October 2020 Amendment Act, the 2021 Amendment Act allows all companies to postpone their annual general meetings until the end of September 2021. Under the October 2020 Amendment Act, covering annual general meetings held in the spring of 2021, companies were not allowed to postpone their annual meetings.
Hence, the 2021 Amendment Act does not bring relief only to listed companies and companies trading on the First North marketplace, but all limited companies (and cooperatives and associations as specified in the law) may also opt to postpone their annual general meeting until 30 September 2021.
It should be noted, however, that no such postponement option is proposed for the general meetings to be held in 2022.
Unlike the original Amendment Act, the 2021 Amendment Act does not introduce any relief in the timing to prepare the annual accounts. The Finnish Accounting Board has, however, issued a voluntary resolution in March 2021 allowing limited liability companies to postpone their annual accounts until 30 June, under certain conditions.
Implications for your company (listed or trading on the First North marketplace)
If you are responsible for, or involved in arranging an annual general meeting (“AGM”) for a listed company or a company trading on the First North marketplace, the 2021 Amendment Act does not introduce changes to the temporary regulation applicable to AGMs.
The 2021 Amendment Act allows listed companies and companies trading on the First North marketplace to require shareholders to participate by proxy representative, or through remote participation (i.e. by post, telecommunications or other technical means). Companies can also limit the proxy representative’s right to participate in the general meeting to remote participation.
The 2021 Amendment Act includes requirements corresponding to those applicable under the Amendment Act and the October 2020 Amendment Act concerning the content of the notice to the general meeting (see our original Legal Alert on the subject ).
The legislator has strived to avoid regulation that would force companies to deviate from the meeting practises found workable under the original Amendment Act and the October 2020 Amendment Act.
The experience obtained from the Amendment Act and the 2020 October Amendment Act shows that many listed companies and companies trading on the First North marketplace have broadly utilized the options to arrange their general meetings by mandatory remote participation and mandatory proxy representatives.
Research shows that the options introduced by the acts were well received and caused no, or few issues for the companies or shareholders. Hence, the new legislation introduces welcome flexibility and predictability for the AGM seasons 2021 and 2022.
Implications for your company (all limited companies)
Those limited companies that are not listed or trading on the First North marketplace cannot use the relief introduced by the Amendment Act or subsequent 2021 Amendment Act to arrange their general meetings by mandatory remote participation or through a mandatory proxy representative(s).
However, the 2021 Amendment Act reintroduces the option for all limited companies, including listed companies and companies trading on the First North marketplace as well as privately held companies, to postpone their 2021 AGM until 30 September 2021. Hence, companies that have not yet held their AGM, or that still are able to reschedule their AGM, now have the option to postpone their AGM past the 30 June deadline applicable to companies with a financial year corresponding to a calendar year.
In spring 2020, the possibility to postpone an AGM was the most utilised reprieve introduced by the original Amendment Act. The possibility to postpone the AGM is no longer an available option in 2022 under the 2021 Amendment Act.
Several parties opining on the draft 2021 Amendment Act referred to the need to introduce permanent legislation, offering, for example, the possibility to arrange general meetings by remote participation since the Companies Act requires that shareholders must always have a right to physically participate in a general meeting.
With the 2021 Amendment Act, the legislator has paved the way to introduce permanent legislation before the validity of the 2021 Amendment Act ends and we believe that a permanent amendment will be introduced no later than 2022.
Borenius’ lawyers are available to assist in addressing any questions you may have regarding this new legislation