Shareholders may not generally be prohibited from merely carrying mobile phones or any other devices by which the general meeting of a German stock corporation (Aktiengesellschaft) could be recorded, and the shareholders may not be denied access to the meeting when refusing to hand over their mobile phones or devices.
Berlin Higher Regional Court (Kammergericht) - Judgment of 26 January 2024 - 14 U 122/22
The right of shareholders to attend the general meeting of a German stock corporation is a fundamental membership right and may only be restricted to the extent necessary to ensure the proper conduct of the meeting. An inadmissible restriction of the participation right may result in the contestability of resolutions adopted at this general meeting. The Higher Regional Court (Kammergericht) in Berlin had to deal with the question of whether a ban on bringing private devices able to make image or sound recordings infringes the participation right of the shareholders.
In the case decided by the Berlin Higher Regional Court, a German stock corporation as defendant and several of its shareholders as plaintiffs had a dispute over the lawfulness of various general meeting resolutions.
The invitation to this general meeting had contained the information that image and sound recordings were not permitted during the general meeting for the protection of the personality rights of the shareholders and that devices able to make image or sound recordings may not be brought by the shareholders. Access controls were carried out at the entrance to the meeting room to ensure that the ban on such devices was complied with.
The defendant offered security lockers for storing the banned devices at the place of the general meeting. The defendant in addition provided the participants with PCs with internet access in the meeting room. Apart from that, the company set up signs in the entrance and common area informing the attendees that a service provider would receive important calls for them at an emergency number and would immediately inform them in the event of a call.
Some of the shareholders taking legal action were denied access to the general meeting after they had refused to hand over their mobile phones and laptop computers at the access control. The other plaintiffs attended the general meeting but, for the record, declared their objection to the resolutions adopted.
The Berlin Regional Court upheld the action for annulment and declared the contested resolutions null and void. The defendant filed an appeal against this judgment.
The Berlin Higher Regional Court dismissed the defendant's appeal.
The Court reasoned that the plaintiffs' participation rights were violated by the ban on bringing certain devices.
The Higher Regional Court first established that the defendant's articles of association did not contain any provision on certain devices in the general meeting which could justify the ban on bringing these devices.
The Court stated that the prohibition of the corresponding devices in the meeting room was also not covered by the disciplinary power of the chair of the meeting, but rather constituted an inadmissible restriction of the shareholders' rights to participate in the general meeting. This right did not apply without restraint but found its limits in the authority of the chair of the meeting to properly conduct the general meeting. The chair of the meeting had to respect the principle of proportionality when exercising his disciplinary powers. The ban on bringing certain devices, however, was not proportionate.
In its proportionality assessment, the Higher Regional Court first established that the ban on bringing certain devices pursued a legitimate purpose, namely the enforcement of the (basically admissible) prohibition of making image or sound recordings. The ban on bringing certain devices was also suited to achieve this goal. Secret recordings could not be fully excluded by the ban. However, the measure was still suitable because the means chosen here at least served the purpose.
Yet, the Higher Regional Court already expressed serious doubts as to the necessity of the ban on bringing certain devices. A more lenient means for preventing audio or video recordings would be to allow bringing such devices only when using camera and microphone blockers (as software or hardware). Cost-effective solutions were already available.
The Court argued that the necessity of the ban on bringing certain devices could, however, be irrelevant, as this ban was generally not appropriate. For the shareholders' participation right resulting from the property right of Art. 14 of the Basic Law of the Federal Republic of Germany (Grundgesetz, GG) outweighed the general personality right of the attendees in its manifestation as the right to one's own image and the right to one's own word, protecting them against unauthorised image and sound recordings.
The Court stated that the weighting of the attendees' personality right would have to consider that the feared encroachment on the attendees' personality right through unauthorised image or sound recordings would not have affected their privacy, but only their social sphere, as the general meeting was an event public to the members of a specific group. Secondly, there was only an abstract danger of a violation of the general personality right through unauthorised recordings. However, it was not the task of the chair of the meeting to enforce the law per se, and to prevent any legal violations preemptively. Rather, the chair’s task was limited to ensuring the proper conduct of the general meeting. In addition, the attendees were not left unprotected in the event of a violation of the prohibition on making recordings. The general personality right was provided with a reactive protection by allowing legal protection for those affected before the courts and by punishing violations in the form of claims for damages and under criminal law.
With regard to the shareholders' participation right, however, the Court was of the opinion that the weighting would have to take into account that the ban on bringing certain devices significantly affected the legitimate shareholders' membership rights. For instance, shareholder representatives would not have been able to consult with the shareholders represented by them without leaving the meeting room. In addition, the shareholders' ability to work was restricted significantly, as an effective participation in a general meeting nowadays was not meaningfully possible without using notebooks, mobile phones or tablets.
The Court did not deem the provision of the emergency number and of PCs in the meeting room suitable to sufficiently mitigate the severity of the encroachment on the participation right. The Higher Regional Court stated with regard to the emergency number that it was not sufficient that shareholders could be reached by third parties, but it was also about their ability to send information. The Higher Regional Court emphasised regarding the PCs provided that the access to the shareholder's own documents was not necessarily allowed by a web-enabled PC and, therefore, this PC was no adequate replacement of their own device.
According to the Higher Regional Cort, the Regional Court had therefore been right to uphold the action for annulment and to declare the contested resolutions of the general meeting null and void. The judgment of the Higher Regional Court is not final, proceedings are currently pending before the German Federal Court of Justice.
Comments and practical advice
In its decision, the Berlin Higher Regional Court has emphasised the high significance of the shareholders' right to participate in the general meeting. This right is not limited to the mere attendance, but also includes the right to remain able to work and communicate during the meeting. The Court recognises that nowadays this is practically not meaningfully possible without using one's own (mobile communication) devices.
Any regulation with regard to the participation in the general meeting must therefore be covered by the articles of association or the disciplinary power of the chair of the meeting. The Court has rightly stated in this regard that the disciplinary power is not intended to enforce the legal order per se or to protect attendees against violations of the law, but only comprises measures for ensuring the proper conduct of the general meeting. If the chair of the meeting exceeds their disciplinary power, this may result in the contestability of all resolutions adopted at the general meeting. To avoid this, any restriction of the participation right should be carefully examined in advance and, in case of doubt, regulations to this end should be used only with caution.
The Berlin Higher Regional Court could leave it open whether the regulation of a ban on bringing certain devices would be admissible in the articles of association. The reasoning of the Court may, however, be transferable to a corresponding regulation in the articles of association, making such regulation potentially inadmissible, because also the articles of association cannot restrict the statutory participation rights. Only provisions in the articles of association that make the attendance at the general meeting dependent on a prior registration or stipulate how the right to participate in the meeting is to be proven are admissible.
This post also appears in the Haufe Wirtschaftsrechtsnewsletter.
