In 2021, companies are required to approve and submit their annual reports of 2020 by 30 June 2021, at the latest. This is in contrast to 2020, where amendments in the law brought about by the COVID-19 pandemic prolonged the term for submission of annual reports to the commercial register. Sorainen is therefore happy to provide some helpful tips and reminders what to keep in mind upon calling shareholders’ or general meetings. Since we are still not free of the COVID-19 pandemic’s impact, we have placed special emphasis on general recommendations applicable to electronic meetings.
Different ways to adopt resolutions
Estonian law provides for three ways to adopt shareholders’ or general meeting resolutions:
- All shareholders adopt a unanimous written resolution and no meeting is called;
- The management board does not call a meeting but rather sends draft resolutions to shareholders, sets a date for them to submit their votes and results of the voting are recorded when the deadline has passed;
- The management board calls a shareholders’ or general meeting, which can be held partly or entirely electronically.
Electronic meetings – how do they work?
The law does not provide exhaustive or even very detailed requirements as to how shareholders can meet electronically. Therefore, it is to a large extent dependent on the management board’s discretion and it is the management board that is responsible for making sure that the meeting is called and conducted correctly. Therefore, the following is a short general overview for management board members for organising remote participation at shareholders’ or general meetings.
Instructions to shareholders
As with all other important details concerning a shareholders’ or general meeting, the possibility to participate electronically and to vote on the draft resolutions in advance needs to be indicated in the meeting notice. In the meeting notice or in separate instructions of the management board, the shareholders should be informed of the application which will be used (including the links with which they can access the meeting room) and other requirements they need to be prepared for, e.g. how they will need to identify themselves (see more below). For advance voting, it is necessary to also include in the meeting notice the voting ballot, instructions on filling it in and how it is to be submitted.
Applications to use
The law does not mandate the use of any particular electronic meeting applications and in the age of ever-increasing remote work and meetings, such applications are numerous (Microsoft Teams, Zoom, Skype, etc.). Upon making your decision, consider the following:
- The application should be free of charge – shareholders cannot be required to pay additional fees for exercising their lawful shareholders’ rights;
- The application should allow the recording secretary to record the meeting or download the chat log and, if possible, a separate voting function – this will be helpful upon drafting the minutes of the meeting and proving what occurred at the meeting, should it become necessary;
- The application should be able to accommodate the amount of shareholders the company has – many applications have a participant limit and/or only allow for a limited number of webcam pictures on the screen (the pictures may switch upon individual shareholders speaking up).
There are no clear requirements as to how shareholders who participate at meetings electronically should be identified. As the management board is in charge of the meeting’s logistical details, it is up to the management board to decide how strict requirements apply to identification. Some companies may be comfortable with simple telephone conferencing (without video), whereas some companies may require shareholders to turn on their webcams and/or show their identity documents to the camera. If even more strict measures are needed, then currently, there are unfortunately no applications which have a built-in option to use national ID-cards for identification. All in all, this depends on how much the management board needs to gain comfort that the person participating electronically truly is who they say they are.
The minutes of the meeting should indicate which shareholders participated electronically, those shareholders who are present physically must sign the list of participants.
At physical meetings, voting usually takes place by hand-raising or by writing positions on physical ballots. In the case of electronic meetings, the options are varied. You could use the “hand-raising” functionality available in some applications. If shareholders are using webcams, you can have shareholders indicate their positions via video. Or voting can take place by shareholders writing their positions to the connected chat functionality, if available. As noted before, it is best to use such applications, which enable you to record all the details of the meeting, including the process and results of the voting.
It is also entirely possible that the meeting itself is only a forum where the management board delivers an overview of the company’s activities and the shareholders can ask questions. Depending on the management board’s voting rules, the actual voting can for example take place after the video session by the shareholders sending their votes to the management board.
What else to keep in mind?
- Prior to calling the shareholders’ or general meeting, the supervisory board (if one is formed) needs to draft a report where the supervisory board describes how it has administered the company and whether it approves the annual report drafted by the management board.
- The shareholders need to be presented with the management board’s annual report, the supervisory board’s and the sworn auditor’s reports (if applicable) and the profit distribution proposal.
- If the company’s net assets are below half of the company’s share capital or the minimum share capital amount prescribed by the law, the shareholders must decide on measures to alleviate the situation.
- Shareholders whose shares represent at least 1/10 of the share capital may claim that the sworn auditor who delivered its report regarding the annual report participates upon deciding the approval of the annual report and gives clarifications in relation thereto.
- The annual report needs to be approved by the shareholders before it is submitted to the commercial register.
Should you need any more assistance, please do not hesitate to contact our corporate governance and shareholder relations specialists.