Declaring a state of emergency- General shareholders meeting, convening and organising procedure

Declaring a state of emergency- General shareholders meeting, convening and organising procedure


I. Background

In the context of the spread of the SARS-CoV-2 virus, the Romanian Government has intervened with a series of specific measures in order to balance the desire to ensure public health with that of assisting the activity of economic operators.

A first measure in this regard was the extension of the deadline for the submission of annual financial statements for the financial year 2019, respectively the annual accounting reports closed on 31 December 2019 until July 31 2020. This measure was ordered by Emergency Ordinance no. 48/2020, published in the Official Journal of Romania no. 319 of  April 16th 2020.

Subsequently, having found that this measure was not sufficient, the Government intervened again by issuing Emergency Ordinance no. 62/2020, published in the Official Journal of Romania no. 372 of 8 May 2020 - a regulatory act with implications for the time and manner of convening and organising general meetings of shareholders/associates (in short "GEO no. 62/2020").

II. News concerning the convening of general meetings of shareholders/shareholders introduced by GEO No 62/2020.

Under GEO no. 62/2020, the deadline for general meetings has been extended from 31 May to 31 July. As such, the publication of the convocation in the Official Journal of Romania shall be possible until 30 June at the latest.

The convocation of the general meeting may be made by any means of remote communication that ensures the transmission of the text - even if this possibility is not provided for in the company's articles of association, provided that the following conditions are met:

- communication in writing by each shareholder or member to the administrator/board of directors/management of the company of the postal address at which he/she may receive the convocation, if this address is not shown in the register of shareholders/members;

- publication of the convocation on the company's website - if the company has one, coupled with the sending of the convocation by e-mail to all members/shareholders;

In the event that shareholders shall submit proposals for the inclusion of new items on the agenda, the company will retransmit the amended convocation to all associates/shareholders in the same way as indicated above.

In regards to the informative materials relating to the general meeting of shareholders, these  shall  be published on the company's website and, in the event that the company does not have a website, they will be sent to shareholders/associates by e-mail or by post/mail - at the company's expense;

In the event of general meetings held by means of correspondence or by remote means of communication, the notice of meeting must contain all the information concerning the date and time of the meeting, the form of participation and the manner in which the general meeting is to be held and how shareholders/associates may access it, the place where proxies are to be sent and the arrangements for exercising voting rights.

III. News concerning the organising procedure for the general meeting of shareholders/associates introduced by GEO no. 62/2020.

General meetings may also be able to be held by electronic means of remote communication or by correspondence, even if the company's articles of association do not provide for or even prohibit this.

In the event of general meetings being held in the manner indicated above, voting on items on the agenda requiring a secret ballot will be carried out by means that do not allow the vote to be revealed to persons other than those responsible for counting and validating the votes.

In case of participation in the general meeting through a representative, the original proxies are sent or submitted at the place indicated in the convocation, by registered letter or postal or courier services, respectively by e-mail (in the case of proxies signed with extended electronic signature), so that they are received by the company by the date of the meeting.

In the case of general meetings held exclusively by correspondence:

- physical presence at the general meeting is not compulsory for the members/shareholders or for the company's management bodies;

- votes shall be communicated by the members/shareholders in the manner indicated in the convocation notice for the meeting, so that the vote is received by the company by the date of the meeting;

In the case of general meetings held by electronic means of distance communication, by teleconference or videoconference, they must be capable of allowing:

- compatibility with the most common fixed or mobile access technologies, with as many operating systems as possible and with connection to public fixed or mobile electronic communications networks;

- identification of participants and their effective participation in the meeting;

- continuous real-time transmission, recording and archiving of the general meeting;

- real-time two-way communication so that shareholders/associates can address the general meeting remotely;

- the casting of votes during the general meeting and their recording;

- subsequent verification of how the meeting voted.

The minutes of the general meeting will be drawn up by the company's management bodies, together with an employee acting as technical secretary (where this can be appointed), and should expressly state that the formalities for convening the meeting have been completed in accordance with the provisions of GEO no. 62/2020.

IV. Considerations regarding the applicability of the provisions of GEO no. 62/2020:

The provisions of GEO no. 62/2020 are applicable to the case:

4.1. General meetings convened prior to the publication of GEO no. 62/2020 in the Official Journal of Romania, for which the holding of the meeting is established during the state of emergency - in which case:

- the statutory body that convened the general meeting is obliged to inform the shareholders/associates about the manner of holding the meeting and the modalities of exercising the right to vote at least 5 days prior to the date set with reference to the holding of the meeting;

- in exceptional circumstances relating to the measures taken by the authorities to stop the spread of the SARS-CoV-2 coronavirus, the statutory body responsible for convening the general meeting may change the date, time and place of the meeting at least 5 days before the date set for the meeting, without being obliged to repeat the convening procedure;

4.2. General meetings convened during a state of emergency, for which the meeting is scheduled after the end of the state of emergency;

General meetings resolutions adopted during the state of emergency, but prior to the publication of GEO no. 62/2020, in compliance with the procedures stipulated in GEO no. 62/2020 and with the exercise of voting rights in one of the procedures stipulated in GEO no. 62/2020, with the consent of all shareholders/members, are deemed legal. The exercise of voting rights shall be deemed to constitute consent to the holding of the general meeting of shareholders in this manner. These resolutions may not be annulled for failure to comply with the procedures for holding and exercising voting rights.

The provisions of GEO no. 62/2020 are not applicable to companies subject to Law no. 24/2017 on issuers of financial instruments and market operations.

V. Issues raised by the provisions of GEO no. 62/2020 that may generate debates and/or litigation.

The adoption of GEO no. 62/2020 is welcome as most companies (especially joint stock companies) have already convened Ordinary (and in some cases Extraordinary) General Meetings to approve their financial statements, but there are numerous technical problems due to the COVID-19 pandemic that make a traditional corporate debate difficult.

On the other hand, it should not be forgotten that Law no. 31/1990 is in many cases outdated by the speed of the present times and business.

As always, the lawmaking process leaves room for interpretation and questioning. In this context, the adoption of GEO no. 62/2020 is not without controversy, and the following points are worth noting here:

Firstly, the establishment of an alternative way of convening the General Meeting of Shareholders is a measure on the borderline of legality, and which does not necessarily bring benefits in view of the ongoing pandemic. Thus, the traditional convening of general meetings required, according to Article 117 para. (3) of Law no. 31/1990, the notice of meeting must be sent to the Official Journal of Romania ,or a local newspaper with wide circulation. This method of convening does not involve physically going to the offices of the Official Journal or the newspaper in question, but correspondence by email. From this point of view, GEO no. 62/2020 gives the management bodies a discretionary right to convene alternative meetings by registered letter, courier, email, fax etc.

The alternative methods of convening meetings prove to be useless, since the limitations imposed by the COVID-19 pandemic were in any case respected by the traditional method of convening meetings (publication in the Official Journal and local newspaper).

From the correlation between Articles 2, 3 and 4 para. (1) of GEO no. 62/2020, it follows that it is the statutory body that convenes the general meeting (Board of Directors, Director, etc.) that decides not only the manner in which the general meeting is convened, but also the manner in which it is held. From the wording of Art. 4 para. (1), it follows that the manager may decide to hold the general meeting exclusively by correspondence. This prerogative may prove dangerous, as it practically deprives shareholders/associates of the possibility of debating the items on the agenda, as they have the exclusive right to vote.

At the same time, however, the Emergency Ordinance raises problems in terms of the actual organization of the General Meeting. On the one hand, as we have pointed out, managers can decide to hold the meeting exclusively by correspondence. At the same time, however, Article 5 of GEO no. 62/2020 stipulates that the General Meeting of Shareholders/Associates may be held by direct electronic means of distance communication, such as teleconferencing or videoconferencing, while respecting the secret nature of the vote, if applicable, and the right to vote by post.

Therefore, the regulatory act raises a question and at the same time a fundamental problem: can the administrators/directors decide that the General Meeting of Shareholders/Associates be held exclusively by correspondence, thus depriving the shareholders/associates of the possibility to effectively debate the agenda in a formal setting, including by videoconference?

Of the reading of the provisions of Article 3 para. (2) of GEO no. 62/2020, it is very clear that the statutory body which has the power to convene the general meeting shall indicate in the notice of meeting all the information concerning the date and time of the meeting, the forms of participation and the manner in which the general meeting is to be held and the access of shareholders/associates to it. Consequently, Art. 4 para. (1) speaks of general meetings held exclusively by correspondence, which leads us to conclude that the management bodies may certainly decide that the general meeting shall be held only by correspondence.

While we understand that, in certain situations, the holding of GSMs by videoconference or other means of remote communication may "run up against" certain technical obstacles, we nevertheless consider that the solution chosen by the legislator "as a matter of urgency" is extreme and downright dangerous. In practice, by a unilateral decision of the company's administrators, GSM will be held without the possibility of shareholder debate on the agenda. Moreover, the decision of the management bodies to decide how to organize the General Shareholders Meeting is a legal act that cannot be challenged in court - Article 114 of Law no. 31/1990 provides for limited situations in which the decisions of the Board of Directors or the Executive Board could be challenged in court, and the decision to approve the convocation is not one of these situations.

We therefore stress the existence of a risk of censorship of shareholder democracy, whose main means of expression is the General Meeting of Shareholders/Associates.


Cluj-Napoca, 15.05.2020,
MAXIM / Associates

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