General meetings of Swiss companies during and after COVID-19

Introduction

The COVID-19 pandemic has had a significant impact on how general meetings of Swiss companies are being held. In particular, recurring bans on events have affected general meetings requiring the physical presence of shareholders. With effect as of 17 February 2022, such bans have been lifted. However, the provisions rendering it possible to hold general meetings without the physical presence of shareholders remain in place for the time being. The now replaced COVID-19-Ordinance 2 of 13 March 2020 contained a special provision allowing general meetings to be held without the physical presence of shareholders, in deviation of the legal requirements under the Swiss Code of Obligations (CO). In accordance with this provision, most general meetings of Swiss companies did not physically take place in 2020 and 2021.

On 25 September 2020, the Swiss parliament passed the COVID-19 Act, creating the legal basis for the Swiss Federal Council to maintain those measures resolved by emergency decree that are still necessary due to the COVID-19 pandemic. Article 8 of the COVID-19 Act entitles the Federal Council to provide that general meetings can continue to be held without the physical presence of shareholders. On that basis, the Federal Council enacted article 27 of the COVID-19-Ordinance 3 of 19 June 2020 (COVID-Ordinance 3), which remains in place even if the ban on events has now been lifted.

Three options to hold general meetings without the physical presence of shareholders

Article 27 of the COVID-Ordinance 3 allows general meetings in writing, electronic form or by way of an independent proxy designated by the company (COVID General Meetings). This enables companies to hold meetings without shareholders being physically present. Companies issuing an order that a general meeting will take place in one of these ways must inform their shareholders in writing or online. According to article 27 paragraph 2 of the COVID-Ordinance 3, this order has to be communicated four days prior to the general meeting at the latest. Under normal circumstances, companies will (and should) announce how the meeting will be held when calling the meeting. In case of Swiss stock corporations, the meeting must be convened no later than 20 days before the date of the meeting in the form prescribed in the articles of association (i.e. normally in writing; cf. art. 700 para. 1 CO).

The Swiss Federal Office of Justice (FOJ) clarifies that the available options – physical meeting according to the CO (to the extent permissible during the time when the ban on events was still in force); meeting in writing, by way of an independent proxy or in electronic form according to the COVID-Ordinance 3 – are to be understood as alternatives. Hence, a combination (e.g. that some shareholders attend physically and some electronically) is not possible according to the FOJ.

Swiss-listed companies have predominantly chosen the option to order the shareholders to exercise their rights through an independent proxy. With respect to non-listed companies, the picture is more mixed. Some have held meetings in writing, some by way of electronic means such as via "Zoom" or "Teams", and some have used an independent proxy. If non-listed stock corporations choose the last option, the board must first appoint an independent proxy (whereas listed companies are supposed to have an independent proxy, elected by the shareholders, already in place).

Furthermore, not only the voting rights but also the other shareholder rights may be exercised at these general meetings – namely, the information right (art. 697 CO) and the right to bring forward agenda items or motions (cf. art. 700 paras. 2 and 4 CO). Hence, stock corporations can direct their shareholders to make use of their information rights through an independent proxy or in writing only. For transparency reasons, it is advisable that stock corporations clarify in the call for the meeting that also these further rights are to be exercised in writing, electronically or through the independent proxy, as the case may be.

It is also possible to hold COVID General Meetings where all or part of the agenda items require notarisation. From a practical perspective, the details should be discussed in advance with the notary.

Risks posed by COVID General Meetings

We are not aware of any particular issues connected with the COVID General Meetings held since the start of the pandemic, which indicates that holding general meetings without the physical presence of shareholders does work.

However, there are certain risks that resolutions passed at COVID General Meetings can be challenged by shareholders which do not exist, or not to the same extent, if the meetings are held physically. These risks should, in particular, be addressed if stock corporations expect agenda items to be controversial with a significant number of shareholders, or if the votes of the shareholders who may consider themselves deprived of their rights may make a difference in the outcome of the vote. These risks include:

• General meetings held by way of electronic means – such as via "Zoom" or "Teams" – are vulnerable to technical errors. In particular, shareholders may argue that they were cut off from voting or from putting forward a motion, etc. Hence, if meetings by electronic means are envisaged, it is advisable to make sure that the technology is proven and stable.
• In case of physical and "live" meetings by electronic means, shareholder questions can be answered before the shareholders cast their vote. In case they expect controversies, stock corporations should thus consider implementing a procedure whereby the right to ask questions and obtain answers is ensured even if the general meeting is held in writing or by way of an independent proxy in line with the COVID-Ordinance 3. For such purposes, a stock corporation could for example invite the shareholders in the call for the meeting to ask questions within a short period of time, which then could be answered before the shareholders ultimately cast their vote.
• Providing for such a procedure may be particularly relevant if additional transparency is required concerning a certain agenda item, such as if listed companies want to introduce an opting out or up. In this case, the shareholders must have been sufficiently and duly informed "before voting" (cf. the Perfect Holding decision of the Swiss takeover board of 26 April 2013, para. 26). This can be more difficult to achieve if the shareholders have no possibility to ask questions before they cast their vote.

Given the above risks and shortcomings, boards of directors may consider holding physical general meetings again in 2022 after the ban on events has now been lifted. In particular companies with a larger shareholder base may consider this, since the contact with their shareholders might have suffered during the pandemic. This presupposes, however, that an adequate location can be secured on rather short notice.

Meetings without physical presence of shareholders will outlast the pandemic and the temporary COVID measures

According to article 29 paragraph 5 of the COVID-Ordinance 3, Swiss companies are allowed to hold their general meetings in the form of COVID General Meetings until the provisions on the conduct of general meetings in the Amendment of 19 June 2020 to the Swiss Code of Obligations ("Revised Swiss Stock Corporation Law") enter into effect (the latest until 31 December 2023).

The Revised Swiss Stock Corporation Law will enter into effect on 1 January 2023. It will also provide for the possibility to hold general meetings without the physical presence of shareholders. According to the art. 701d of the revised CO ("rev-CO"), general meetings can be held entirely by electronic means ("virtual general meetings"). Unlike with the COVID General Meetings, these virtual general meetings must be provided for in the articles of association of the company and, as a rule, an independent proxy must be appointed.

Besides the virtual general meeting and the traditional physical meeting, the Revised Swiss Stock Corporation Law allows to hold general meetings also in writing. A pre-condition to general meetings in writing is, however, that no shareholder requires oral deliberations (cf. art. 701 para. 3 Rev-CO). Hence, general meetings in writing cannot be forced upon the shareholders and it remains to be seen whether they gain any significance outside of purely non-controversial, closely held companies.

Unlike with COVID General Meetings, according to art. 701a para. 3 and art. 701c Rev-CO, eventually also partially physical, partially virtual general meetings will be possible ("hybrid general meetings"), as long as the virtual attendees have the same chances to participate and exercise their rights. In contrast to purely virtual general meetings, hybrid general meetings are generally permitted even if not provided for in the articles of association.

General meetings of Swiss stock corporations without the physical presence of the shareholders are thus here to stay, whether in the form of COVID General Meetings or – after the Revised Swiss Stock Corporation Law entered into effect – in the form of virtual general meetings or general meetings held in writing.

For more information on general meetings under Swiss law, contact your regular CMS advisor or local CMS experts Alain Raemy and Matthias Kuert.