Covid 19 – Reliefs under Company Law
What to do if a shareholders' meeting needs to be held but one or more shareholder(s) cannot attend in person due to travel or meeting restrictions?
Limited liability companies (GmbH) generally must pass shareholders' resolutions in shareholders' meetings. This requires personal presence of the shareholders. In many GmbHs the articles of association provide for simplifications, e.g. by allowing voting in writing or by telephone. However, if the articles of association do not include such provision, a personal meeting of the shareholders is dispensable only if all shareholders support the decision to be made or agree to cast their votes in writing – the so-called circulation procedure. In GmbHs with several shareholders, it may well be so that this isn't the case, e.g. if the shareholders are in dispute or individual shareholders cannot be reached.
The Act now creates temporary reliefs for GmbHs: In deviation from the principles outlined above, shareholders' resolutions may be passed by circulation even if not all shareholders agree or participate.
In such cases, the resolution may also be passed in text form, meaning without a personal signature being required, e.g. by a copy/scan of an original or by email or SMS.
If the articles of association contain a quorum requirement, the required number of shareholders must of course participate in the vote, as the Act does not change this.
Please note that this only applies to shareholders' meetings/resolutions taking place in 2020.
What to do if a proposed merger threatens to fail because necessary actions cannot be taken before the expiry of applicable time limits due to travel or meeting restrictions?
When registering a merger, a closing balance sheet of the company to be merged must be submitted, dating as of the effective date of the merger. For practical reasons, parties usually choose the end of the financial year as the merger date, as they can then use the balance sheet from the annual financial statements and do not need to prepare an interim balance sheet. However, the balance sheet must not be older than eight months at the time when the application to register the merger is filed with the commercial register.
The Act now extends this period to twelve months. Accordingly, it is sufficient for a valid registration of a merger if the balance sheet date is no more than twelve months prior to the date of application to the commercial register.
The Act thus creates a practical relief for companies whose financial year differs from the calendar year, e.g. ending on 30 September 2019, and which are now to be merged but struggle with practical problems, because e.g. the balance sheet cannot be completed on time or the necessary signatures of the managing directors cannot be obtained, due to the applicable corona restrictions. However, if the corona crisis continues over the summer, the Act will also provide more leeway for all companies that are to be merged with (tax) effect as of 31 December 2019 and for which the registration with all necessary documents would otherwise have to be submitted by 31 August 2020 by the latest.
Please note, however, that the extension provided by the Act only applies if the application for the merger is filed to the commercial register in 2020.
If you have any questions in this context, please reach out to your usual kallan contact persons or contact us at firstname.lastname@example.org.
The situation resulting from the effects of coronavirus is changing rapidly. The above information reflects the situation on 25 March 2020 which may have changed since then.