Without a doubt, the Metaverse opens up a wide range of possibilities. Numerous everyday ac-tivities can already be practiced in the Metaverse. In countless virtual worlds, users can do al-most anything imaginable, including play, travel, learn, work and meet each other. This versatili-ty raises numerous legal questions, to which Taylor Wessing has devoted a series of insights.

From the point of view of stock corporation law, the question can be raised as to whether a vir-tual general assembly of the shareholders of a stock corporation could also be held in the Metaverse. This question is addressed in this post.

The Metaverse

The Metaverse consists of different digital, persistent and shareable spaces of action in the In-ternet, which are connected and interact in a way that creates an augmented reality in the form of a virtual universe. With increasing technical progress, this "universe" should result in a sec-ond reality, which is equal to physical reality in its perception. Unlike physical reality, however, this second reality is not necessarily bound by the laws of nature and other conventional laws.

Most of the activities in the Metaverse are performed by users through their avatars. These can be understood as virtual representatives of a person. Like characters in a video game, avatars are steered through the various virtual worlds and give the users behind them a more or less immersive experience of the respective virtual environment and interaction with other avatars.

Analysis

In Germany, on 27 July, 2022, the act "for the introduction of virtual general meetings of stock corporations and changes to cooperative, insolvency and restructuring regulations" came into force. This law is intended to supersede the temporary legal situation created by the act "on measures in company, cooperative, association, foundation and residential property law to combat the effects of the COVID-19 pandemic" of 27 March, 2020 ("COVMG") and to perma-nently give stock corporations the opportunity to hold their general assemblies virtually.

At first glance, a virtual general assembly in virtual space seems conceivable if all actors, i.e. primarily the shareholders or shareholder representatives, the members of the management board and of the supervisory board as well as the notary, act together in a specific digital pres-ence area on the Internet represented by their respective avatars.

Pursuant to sec. 118a para. 1 sentence 1 of the German Stock Corporation Act (Aktiengesetz – AktG) in its most recent version, however, the virtual general assembly is legally defined as a meeting at the so-called location of the general meeting, without the shareholders or the share-holder representatives authorized by them being "physically present". Evidently, it is the under-standing of the legislator that the virtual general assembly is still a meeting. Only the sharehold-ers (or their proxies) should be electronically connected to this. The reasoning for the draft bill states that the virtual general assembly is a meeting in which no shareholder can participate by being present at the meeting place (cf. draft by the German Federal Ministry of Justice of a law introducing virtual general meetings of stock corporations, p. 14). In sec. 118 para. 2 AktG the law answers who is obliged to gather or participate by being present at the meeting place: It is the chairman of the meeting, the members of the management board, the members of the su-pervisory board and, if applicable, the auditor and any proxy appointed by the company. Only the participation of the members of the supervisory board, unless they act as chairperson of the meeting or are needed as representatives in the event the chairperson is hindered to act, may also take place via video and audio transmission if this is provided for in the articles of associa-tion.

Thus, due to the concept of meeting on which the law is based, there are several obstacles to a virtual general assembly in the Metaverse.

• First, it seems impossible that the articles of association can specify a digital space as the "location of the general meeting". Even if the 3D worlds in the Metaverse are to be perma-nent according to the conception of this structure and can at least be determined by means of a code or an "address", a meeting in virtual space would undermine the legisla-tive idea that the persons stated in sec. 118a para. 2 AktG attend the meeting in person and are "physically present".
• Furthermore, the requirement for the physical presence of the chairman of the meeting, the members of the management board and, if applicable, the auditor and a proxy ex-cludes them from taking part in the general meeting in the form of their avatars. This is because the law only allows shareholders and, under certain conditions, members of the supervisory board to connect electronically. All other actors cannot be connected. They are obliged to physically attend the meeting at the location of the general meeting. The reasoning for the draft bill states that the virtual general meeting is not a purely virtual meeting in the sense that no one comes together at one physical location (cf. draft by the German Federal Ministry of Justice of a law introducing virtual general meetings of stock corporations, p. 26). With reference to the exercise at the face-to-face meeting, the mem-bers of the company’s administration should also be obliged to attend a virtual general assembly and fulfil this obligation by appearing in person at the meeting location, so that the shareholders can also see them in a virtual general assembly “on a podium in the meeting”. The design of the virtual general assembly with this peculiar element of the per-ceptible simultaneous presence of the protagonists of the general assembly in one room has been variously criticized in the legislative process from the practical side. For exam-ple, the German Lawyers Association (DAV) and the German Share Association (DAI) stated in their comments to the draft bill that the requirement for all members of the admin-istration to be present at the location of the general meeting has no apparent added value from the point of view of the shareholders and does not leave the companies, for example in the case of pandemic-related distance and entry restrictions, the necessary room for manoeuvre to react to the situation. Despite this criticism, the government draft and the fi-nal wording of the law stuck to it.

Conclusion

Although the law introducing virtual general meetings of stock corporations was conceived against the background of the fundamentally positive experiences with the new format over the last three seasons of general meetings and the ongoing digitization of stock corporation law, its provisions do not go so far that it already allows the relocation of the general assembly in the Metaverse.

This finding may not come as a surprise. The legislator does not have to pick up on every trend when considering new legal provisions. Since the Metaverse is currently a not yet sufficiently established structure in the making, the legislature can continue to monitor the development and wait and see which elements will prevail in the long term and be accepted by users.

However, the discussed example of the Metaverse also shows that the virtual general meeting according to sec. 118a AktG is not as virtual as the term suggests. Seen in the light, it is a hy-brid event. From this it follows for the departments and legal practitioners involved in the com-panies with the implementation of the general meeting that a less progressive and more practi-cable intended approach, as it was still possible during the validity of the COVMG, is de lege lata ruled out. A virtual general assembly in which only some of the participants are together in one place or in which all participants act together exclusively via video or telephone conference is not possible. The possibility of such an approach would have been well worth considering for some companies, for example with a manageable group of shareholders and members of the administration.

The requirement to be present for all board members, in particular the entire supervisory board, appears to be a relic even in a general meeting in person, which requires increased effort in the preparation and implementation of the meeting - just think of the spatial requirements for the meeting location - but brings not even remotely proportionate added value. It is also unlikely that the emissions associated with the travel to and from the meeting of all supervisory board mem-bers can be reconciled with the sustainability efforts of the legislator and many companies. Since with today's technical means the members of the supervisory board could participate just as well by means of video and audio transmission and - like the shareholders - could express themselves if necessary, it is not clear why the legislator would require their simultaneous pres-ence at the location of the general meeting in both formats (virtual general meeting and pres-ence general meeting).

While shortly after it came into force, approval of the new legal regulation was expressed only very cautiously and the assessments in practice were in the middle (cf. the results of the survey carried out by Taylor Wessing together with Edelman Smithfield in July and August 2022), critical voices even see the new format as merely a replica of the traditional general meeting in a digital guise and a missed opportunity for real advancement. Some companies are reportedly consid-ering not making use of the new model and instead returning to the classic format of face-to-face meetings.

Beyond the issue of presence discussed here, however, the law also contains opportunities. Many companies are open to using and testing the new possibilities. In addition, no irrevocable determinations have been made on many individual issues. The law offers various discretionary decisions and design options that enable companies to adapt the format to their specific needs to a certain extent. Only in the next few years will it become clear which designs will work and which points require reform. The legislators should also keep a close eye on this development.