General meetings of shareholders or members under Dutch law have to be held in a physical form. However, due to the outbreak of COVID-19 the necessity of having all-in digital meetings has become more relevant than ever. Due to this, the Dutch government has presented a bill of law to enable such digital meetings.
Certain Dutch legal entities, such as associations, cooperatives, public limited companies (NVs) and private limited companies (BVs) are obliged to hold a general meeting at least every financial year for their shareholders or members. In addition to the mandatory annual meeting where the key agenda item concerns the financial statements for the part financial year, the general meeting is convened when obligated by law or as often as deemed desirable (this is also called an 'extraordinary general meeting'). The general meeting is authorised to decide on matters affecting not only the financial statements, but also the (capital) structure and internal organisation of the company, such as, amongst others, the amendment of the articles of association, mergers, demergers, dissolution of the company, appointments and dismissals of directors, issues of shares and capital reductions.
Currently, Dutch law does not allow the general meeting to take place entirely digitally. The (mandatory) provisions in Book 2 of the Dutch Civil Code (DCC) on the general meeting assume that there will always be a physical meeting. The maximum that is currently possible, is a so-called “hybrid” meeting, whereby shareholders or members can also attend electronically – but a physical meeting room remains available. This hybrid meeting is only possible in case the articles of association of the entity involved allow for such.
Digital General Meetings – the future
Over (almost) the past three years, in connection with the corona pandemic outbreak, the government temporarily introduced the legal possibility of an all-digital general meeting and without the need to have such laid down in the relevant articles of association. In principle, this temporary bill of law expires on 1 February 2023, but the need for digital meetings has not disappeared. There are strong calls from industry leaders and representatives from (institutional) investors for a statutory regulation of a fully digital general meeting. Therefore, the Dutch government wants to permanently enshrine in law the possibility of opting for a fully digital general meeting.
Through this bill, the Dutch government intends to facilitate the use of electronic means at shareholder meetings. To this end, the bill contains three measures at its core.
- Firstly, the proposal provides for a number of amendments to Book 2 and Book 5 of the DCC to make it possible for NVs, BVs, associations, cooperatives and mutual associations to hold a fully digital general meeting, in addition to the already existing possibility of a hybrid general meeting. The possibility for a fully digital meeting has to be laid down in the relevant articles of association.
- Secondly, the proposal sets further conditions on the use of electronic means of communication at the general meeting, to ensure that there is support at the general meeting for holding a fully digital or hybrid meeting, that a digital meeting mirrors a physical meeting as much as possible and that participants can fully participate in it by digital means. To ensure full and well-informed participation in digital meetings, additional standards are set for the provision of information for digital meetings.
- Finally, the rules on convening the general meeting will be amended to simplify electronic convening.
The bill intends to be formulated in an optional and technology-neutral manner. Legal entities can choose for themselves whether they want to hold digital meetings and which electronic means of communication to use for that purpose. A precondition is that there must be support among members or shareholders, it must be possible for participants to fully participate in the meeting and - in line with the current rules for the hybrid meeting - participants can be identified and be able to exercise voting rights.
The Dutch government argues that the introduction of this bill will keep Dutch corporate law flexible and up-to-date and the Dutch business climate attractive and competitive. The use of electronic means of communication ensures that members and shareholders from all over the world can participate (location-independent) in the general meeting. This can have a positive effect on the number of shareholders and members participating in the general meeting.
In addition, digital meetings are supposed to reduce the number of travel movements and would therefore be an environmentally friendly, CO2-reducing and sustainable alternative, according to the Dutch legislator. Holding a fully digital meeting can save time and costs for both the participants in the general meeting and the company itself. Participants save travel time and costs and companies do not need to hire a room or purchase catering services with a view to holding a physical meeting.
In many other countries (including the US, Canada, Denmark, Germany, Ireland, Spain, UK, South Africa and Australia), holding a fully digital general meeting is already (permanently) possible or legislation is in preparation.
Outlook
At the moment, the proposed bill is still under consideration and is not expected to be accepted until after February 2023. The Dutch government may extend the temporary bill of law past 1 February 2023 to that end. Once the permanent bill has entered into force, legal entities can opt to amend their articles of association in case they wish to meet (fully) digitally.
