Frankfurt, 9 September 2024 – The international law firm ADVANT Beiten has rende…
Previously – more specifically: before COVID – meetings of members had to be held in person unless – as was the case for most associations - association by-laws expressly provided the option of holding virtual or hybrid meetings, or all members explicitly approved this option. In early 2020, with the COVID pandemic in full swing, legislators introduced transitional statutory rules to facilitate virtual shareholder, AGM and member meetings for stock corporations and associations. Associations and stock corporations widely used these possibilities. The virtual formats were well received and made it possible to reach members who lived further away. The COVID transitional rules expired on 31 August 2022. Legislators adopted permanent statutory rules for virtual shareholder and general meetings of the limited liability company (GmbH) and stock corporations (AG) before then; the relevant provisions of association law remained unchanged. It wasn’t until 9 February 2023 that a draft bill was adopted, introducing a new second subsection in § 32 of the German Civil Code (Bürgerliches Gesetzbuch, BGB) and making it possible to hold virtual or hybrid meetings of members. [UPDATE: The amendments entered into force on 22 March 2023, the day after the publication of the law in the Federal Gazette (Bundesgesetzblatt) (BGBl. I 2023, 72 on 21 March 2023).]
The new rule allows members to use electronic forms of communication to participate in meetings and exercise their rights as members without having to be present in person at the meeting place (hybrid meetings). Under the law, associations can now hold in-person meetings of members, where some members are present virtually. It is no longer essential for all members to be physically present to exercise their rights. If a hybrid general meeting is called, members can decide whether to be present in person or attend virtually.
In addition, the new rule makes it possible to hold purely virtual general meetings. In this case, members attend via electronic communication. For both purely virtual and hybrid meetings, the term electronic communication means audio and video transmissions as part of a video conference, as well as electronic forms of communication such as telephone, chat, and voting by email. Legislators leave it to the association board to choose which electronic communication form is best for the association.
The association chairperson can call a hybrid meeting of members at any time without further involvement of members in the decision to hold the meeting.
In contrast, the members must either resolve to hold the meeting only virtually or empower the board, by resolution, to call virtual meetings of members. The members can adopt a resolution by a simple majority within a general meeting, although only subsequent meetings may be held virtually. Alternatively, outside of the general meeting, the members can adopt a resolution on calling a virtual meeting or empowering the board to call virtual meetings using the written consent procedure providing the members unanimously approve the resolution. Once the power to call virtual meetings has been conferred on the board, it can hold all future general meetings in this form until members revoke the power by resolution.
When calling a hybrid or virtual general meeting, the board must inform members how to exercise their rights. The notice must provide sufficiently precise information about the form of electronic communication and technical means required to attend and participate in the meeting. This should ensure that all members have enough time to prepare (technically) to participate in the meeting.
The new rule is welcome. It promotes the increased digitalisation of society and gives associations more flexibility when organising general meetings of members. Limited liability companies and stock corporations have embraced the option of holding hybrid and especially virtual general meetings and meetings of shareholders; many associations are likely to adopt these formats, too. The board’s discretion in selecting the form of electronic communication allows each association to decide which communication platform best befits the association.
Finally, it makes sense that the legislator distinguishes between hybrid and virtual general meetings and who can call them. While hybrid general meetings simply expand member participation options, purely virtual meetings can be restrictive for members who do not have the necessary technical equipment to participate. It is therefore only right that these options are made available to members in principle. Even with the new rule, associations are free to adopt arrangements in the by-laws making hybrid and virtual general meetings generally admissible or to exclude the use of these forms.
