On January 15, 2024, the bill of the Digital General Meeting of Legal Entities Act (the Bill)(1) was submitted to the House of Representatives. The Bill aims, among other things, to amend Book 2 and Book 5 of the Dutch Civil Code (the BW) with a view to amending the rules on the digital general meeting of legal entities and the rules on digital convocation for the general meeting. This Insight describes the background and main features of the Bill.
Currently, the law does not allow general meetings to be held entirely digitally. A physical meeting must always be held. However, it is possible to hold a so-called hybrid general meeting. This involves remote participation in the physical meeting by means of an electronic means of communication. The Bill equalizes the rules for hybrid meetings and fully digital meetings.
The Temporary COVID-19 Justice and Security Act (2) did have the possibility of holding general meetings entirely digitally as well as rules that simplified the holding of hybrid meetings. These legal regulations applied until Feb. 1, 2023.
The positive experience during the corona crisis with the holding of fully digital meetings and the desire expressed by both academics and practitioners to introduce permanent arrangements for digital meetings led to a preliminary draft of the Bill. This preliminary draft was consulted at www.internetconsultatie.nl from December 10, 2022 to February 7, 2023. The consultation did not result in any changes that affected the core of the preliminary draft.
The Bill applies to public limited companies (the NV), European public limited companies (the SE), private limited companies (the BV), associations, owners' associations (the VvE), cooperatives, European cooperative societies (the SCE) and mutual societies.
According to the Explanatory Memorandum to the Bill (the Explanatory Memorandum), the purpose of the Bill is to facilitate and standardize the use of electronic means of communication at general meetings of legal entities under private law. The Bill has three main elements: (i) the introduction of an optional arrangement for holding a fully digital general meeting; (ii) the imposition of (further) conditions for holding a hybrid and fully digital meeting; and (iii) the amendment of the notice rules for a general meeting.
Introducing an optional arrangement for holding a fully digital general meeting
The Bill places freedom of choice in the hands of the legal entity. After the enactment of the Bill, a general meeting can be held in three ways: through a (i) physical meeting; (ii) hybrid meeting; or (iii) fully digital meeting.
Setting (further) conditions for holding a hybrid and full digital meeting
The first condition set concerns the consent of shareholders and members for holding a fully digital meeting: The Bill assumes a support for holding a fully digital general meeting by a majority of shareholders or members. NVs and BVs, SEs, cooperatives, SCEs and mutual societies will therefore require a statutory basis to hold a fully digital general meeting. In doing so, the legal entities themselves determine the content of the statutory scheme.
A statutory basis will not be a requirement for associations and unions. To ensure support among the members of associations and VvEs, the Bill proposes that the general meeting of members may grant an authorization to the board to hold a hybrid or fully digital general meeting of members. The requirement of an authorization is of a regulatory nature: it can be deviated from in the articles of association. Members of associations and CoEs can determine the content of the authorization themselves.
The second condition sees to full digital participation and related interaction of members and shareholders as if they were physically present in the meeting. In order to meet this, the Bill stipulates that members and shareholders must be able to follow the meeting directly with image and sound. In addition, they must be able to participate directly in the deliberations with image and sound.
The third condition is that the identity of the person participating digitally in the meeting can be established through the electronic means of communication used. In what way the identification takes place is up to the legal entities.
The last condition relates to the exercise of voting rights. With respect to this, the Bill provides that shareholders and members must be able to exercise voting rights directly through an electronic means of communication.
Adapting the notice rules for a general meeting
The Bill also aims to simplify and modernize the rules for digital notice of a general meeting. Currently, all legal entities may convene by electronic means unless the articles of association provide otherwise. In addition, the person (for example, the shareholder, member or other person entitled to attend the meeting) to whom the notice is sent must have consented. In the Bill, this consent requirement has been dropped. In addition, a non-listed NV is obliged to announce the convocation in a national newspaper. This requirement is also dropped. The Bill provides that the convocation may also be made by an announcement published electronically, which is directly and permanently accessible until the general meeting. In other words, the notice of a general meeting may be posted on the NV's website.
For all legal entities, it will apply that when the general meeting is hybrid or fully digital, the notice of meeting must state the procedure for participating in the general meeting and exercising voting rights through an electronic means of communication. This includes, for example, information on which application or website is used and how to vote.
The MoT identifies a number of advantages of the Bill. For example, by introducing the possibility of holding a fully digital general meeting, company and legal entity law will remain flexible and up-to-date. Nor does the legislator rule out that when a general meeting is fully digital (and thus has become location independent), more shareholders and members will participate than if a physical meeting were held. Members and shareholders save travel time and the legal entity saves costs now that, for example, it is no longer necessary to rent a hall where the meeting can take place. An additional but no less important advantage is that because travel will be less necessary, the fully digital general meeting is also a sustainable alternative.
The Bill provides for five transitional provisions:
a call made before the entry into force of the Digital General Meeting of Private Legal Entities Act (the Act) remains valid thereafter provided that such call complied with the legal requirements in force at that time;
the general meeting of a legal entity, which has continued to hold fully digital general meetings after the expiration of the Temporary Covid-19 Act, may, under certain conditions, remove the nullity or voidability of resolutions passed in such a fully digital general meeting.
This transitional provision was not included in the preliminary draft of the Bill. In what manner the "taking away" should be done is not mentioned in the current text of the Bill. This appears to be an omission because the MoT notes that "for the sake of simplicity, the term "ratify" has been chosen in the legislative text '. The MoT continues that this ratification should take place through the general meeting.
a statutory provision that refers to or reflects the substantive content of a statutory article in effect before the effective date of the Act shall be deemed to refer to the new statutory provision after the effective date of the Act, unless this is inconsistent with the intent of the provision;
the legal entity may hold a general meeting in accordance with the law and the articles of association as they read before the entry into force of the Law for up to one year after the entry into force of the Law; and
an (existing) statutory provision of an association or CoE that deals with the exercise of voting rights by electronic means or the participation of those entitled to vote in the deliberations via an electronic means of communication will, after the Act comes into force, in principle also be deemed to apply in the case of a fully digital general meeting.
The Bill responds to the widely supported desire to be able to hold fully digital general meetings. Besides the fact that this will not become an obligation but a choice of the legal entity, the Bill also provides flexibility in other respects for legal entities as to how they will hold their hybrid or fully digital general meetings in the future.
We will closely follow the further consideration of the Bill and will be happy to keep you informed of its progress.
(1) https://www.tweedekamer.nl/kamerstukken/wetsvoorstellen/detail?cfg=wetsvoorsteldetails&qry=wetsvoorstel%3A36489
(2) https://wetten.overheid.nl/BWBR0043413/2023-06-01
