Legal Aspects of Coronavirus in Switzerland III – Update on Assembly Ban
About two weeks ago, still at the beginning of the outbreak of the corona virus in Switzerland, we already reported on the difficulties for companies to hold a general meeting at these times and during the then newly imposed ban on meetings. In the meantime, the situation has changed drastically. In this update, we cover the newly imposed measures of the Swiss Federal Council and specially the Ordinance 2 on Measures to Combat the Coronavirus of 16 March 2020 (COVID-19 Ordinance 2), which allows company to hold their general meetings.
As the Coronavirus continues to spread in Switzerland, the Swiss Federal Council has decided to further tighten the measures it had already adopted by last Friday. In this context, the COVID-19 Ordinance 2, based on the Swiss Epidemics Act of 28 September 2012, enacted various measures that are applicable throughout Switzerland and have a strong impact on public life.
In the COVID-19 Ordinance 2, the Federal Council has now issued a partially groundbreaking regulation under Art. 6a on company meetings: During the period of validity of this ordinance, Art. 6a enables Swiss companies of all sizes to hold their general meetings under simplified conditions and in compliance with the current ban on holding meetings. Thus, the company has now the competence to determine how its shareholders can exercise their voting rights at a general meeting. Until at least four days before the meeting, the board of directors is entitled to decide, how the shareholders can exercise their voting rights. The Ordinance names the following forms: voting instructions in writing, whereby the shareholders inform the company in writing how they vote on each subject of the agenda, in electronic form or through an independent proxy appointed by the company.
One public company has already made use of these possibilities and held its Annual General Meeting in front of empty ranks by having all shareholders represented by an independent proxy.
Voting by written instructions or through the independent proxy appear to be the simplest and quickest ways to enable the shareholders to vote and the company to hold invited for a general meeting prior to the Federal Council’s measures and need now to quickly adapt to the new rules.
The exercise of voting rights by electronic means represents the first time a legally anchored basis for holding a virtual general meeting in Switzerland. However, the practical implementation, especially within a short period of time, is likely to be a challenge. The company must not only inform all shareholders by which electronic means they can participate in the meeting. It must also ensure that shareholders can participate with their electronic hardware and software, otherwise it will effectively exclude some of its shareholders from participating from the outset. Furthermore, the company must ensure that the holding of a general meeting by electronic means also functions smoothly. As Swisscom has reported in recent days that its network is sometimes overloaded or slowed down due to the large number of home office workers, this aspect alone raises the question of whether it will be possible to hold a general meeting electronically without any problems.
Therefore, giving voting instructions in writing or through one or more independent proxies seems much more practical and less burdensome. Apart from that, the preparation of a written vote, which also can be provided by email to the shareholders, seems to be easier and cheaper than holding a virtual general meeting.
Beside the choice of the voting form, there might be another aspect to consider for the board of directors before calling a general meeting. Although the present rules based on the Ordinance 2 provide the possibility to hold a general meeting without the presence of the shareholders, it might be more convenient to postpone the meeting. Now, companies can still postpone their annual general meetings to June in the hope that the situation has changed until then and the meeting can be held in the ordinary manner. This can be a better solution particularly for small or medium-sized companies, which have authoritative or large shareholders, who prefer to be personally present at every meeting. Of course, the meeting by electronic means provides also the opportunity of a personal contact, but as stated above it has its challenges. Therefore, the postponing might also be a reasonable solution under the given circumstance.
On the other hand, the present rules as in force may give a board of directors the solution to avoid the confrontation with uncomfortable shareholders and preventing heated debates at the meeting.
A prudent board of directors must consider all this before making a decision, weigh up what is the most appropriate form of voting, and what is the best point of time to convene a meeting so as not to upset its shareholders. These issues must be clarified separately for each company and according to the current situation, which makes the most sense.