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Remote corporate meetings in light of coronavirus situation
DLA Piper, Kyiv, Ukraine,
Mon, Mar 23, 2020
March and April are traditionally when annual general participants' meetings (GPM) and general shareholders' meetings (GSM) are held in Ukraine. Given the coronavirus COVID-19 outbreak, businesses should consider holding such meetings remotely.
This alert provides additional information and considerations for limited liability companies (LLC) and joint stock companies (JSC) considering videoconference, absentee voting and polling options as an alternative to in-person meetings.
Videoconference
Under the Law of Ukraine On Limited Liability and Additional Liability Companies (LLC Law), LLCs are allowed to hold GPM (both annual or extraordinary) either in person by physically meeting in one place or by a videoconference that allows all participants to be seen and heard simultaneously. Unless specifically forbidden by the charter, LLCs can use a videoconference to hold their GPM.
The option of holding GPM via a videoconference was introduced in 2018, and there is not enough statutory regulation and court practice to assess what requirements should be met in order to minimize any risks related to this form of meeting (e.g. identification of participants or confirmation of voting results). Therefore, such issues should ideally be covered by internal documents of a particular LLC, for example a charter or internal regulation on convening and holding the GPM.
Participants shall be notified of the videoconference format of the GPM in a notification sent by the company before the GPM.
Is a "hybrid" option allowed, where some participants are physically present at the meeting and others participate via the videoconference?
The law isn’t clear on this. LLCs must send a prior notification to all participants regarding the convening of the GPM. Such notification shall include information about the date, time, and place of holding the GPM, and the agenda.
As such, if the place of holding the GPM is a physical place indicated in the notification, the participants are considered present at such GPM only if they are present in person. At the same time, if the notification provides for both options – an in-person meeting as well as meeting via videoconference – the participants attending via videoconference should be considered as attending the GPM, provided that all relevant formalities are complied with, if any are specified by the relevant notification, company charter or internal regulations.
How should identification of the participants (or their representatives) be performed?
Neither law nor court practice provide clear guidance on this. Adoption of the detailed internal procedures in this respect is highly recommended.
It is advisable to determine in such internal documentation the procedures regarding verification of participants' (or their representatives') identity, fixation of the GPM process (e.g. by saving a copy of the video and chat), voting (e.g. by way of verbal communication or fixing it in the chat or in any other manner), and the procedure for drafting and signing the minutes of the GPM by the chairperson.
Is the videoconference option available for JSCs?
No. A JSC cannot hold a GSM via a videoconference or by any other electronic means.
Absentee voting
The LLC Law provides for the possibility to participate in the GPM by way of absentee voting. This means that if a participant – after being informed about the convening of GPM – cannot attend in person, they can express their will by sending a document expressly confirming their opinion on the agenda issues.
Such document can be in a free form but must be executed in writing and certified by the notary and sent to the company. If the participant is located outside Ukraine, such document should also be legalized (apostilled).
What is the deadline for sending the document to the company?
The law does not provide for any guidance in this respect. However, in order to properly calculate the number of votes during the GPM, it is advisable that the company receives such document in advance before the date of the GPM.
Is the absentee voting option available for JSCs?
The Law of Ukraine On Joint Stock Companies (JSC Law) provides for a possibility of holding the GSM in the form of absentee voting by way of poll as described in more detail below.
Poll
Unlike videoconference or absentee voting, voting by poll is permitted for both LLCs and JSCs (although the recent bill on restating the JSC Law proposes to exclude such possibility).
Voting by poll allows companies to hold a general meeting (both annual and extraordinary) without in-person presence of participants/shareholders by way of exchange of all necessary materials. The will of the participant/shareholder on the agenda issues should be expressed in writing. Although not directly required by law, it is common practice to send voting ballots to the participants/shareholders together with the notification on convening the GPM/GSM, to standardize the form of expressing participants'/shareholders' opinion on the agenda issues.
When voting by poll there is no possibility to discuss the agenda items nor make any adjustments and proposals to the agenda.
How is communication between the participants/ shareholders and the company organized?
For JSCs, the law requires all documents to be sent by post. For LLCs there is a possibility to send materials by electronic means as specified by the LLC charter.
Should the voting ballots be notarized?
The law does not require this either for LLCs or for JSCs. However, the charter of a particular company may provide for such obligation. If so, a participant/shareholder residing outside Ukraine should also legalize (apostille) such notarized voting ballot.
How is the identity of the participant/shareholder verified?
If notarization of the voting ballot is required by the charter of the company, no additional identification of the signatory should be performed, since the notary checks its authorities during the notarial certification.
Otherwise, in order to verify the identity of the signatory, companies usually require a copy of the participant’s/shareholder’s passport (and of a power of attorney or other documents duly confirming the authorities, if signed by the participant's/shareholder's representative) along with the voting ballot.
What is the deadline for sending the voting ballot to the company?
The JSC Law gives the shareholders five days from the date of receiving the materials from the company to provide a response to the agenda issues. Within ten days after receiving the last response, the JSC shall notify the shareholders of the decisions.
The LLC Law gives 15 days for providing a response. Responses from all participants comprise the minutes of the GPM (i.e. no separate minutes should be prepared).
What are the requirements for the decisions to be adopted as a result of polling?
For both LLCs and JSCs, the law requires that all participants/shareholders vote unanimously on the particular agenda issue – this is a prerequisite for the decision to be adopted.
In addition, the law restricts certain issues to be resolved by way of poll for LLCs:
- election and termination of powers of the supervisory board and executive body;
- amending the charter, transfer to the model charter;
- reorganization of LLC, approval of its legal successors' charters;
- liquidation of LLC;
- determination of the amount of the charter capital of LCC and participatory share(s) of LLC participant(s);
- exclusion of participant(s); and
- other issues as provided by the charter.
In case of JSCs, the charter of a particular JSC with no more than 25 shareholders shall determine the cases when voting by poll is allowed.
Anticipated alternative
Currently, voting by poll is the only possible option for JSCs to have a remote GSM. Given the recent legislative initiatives of the Ukrainian Parliament, remote GSMs for JSCs will become more widespread in the future by means of voting through electronic systems of the National Depositary of Ukraine. This will require shareholders to receive electronic signatures, allowing them to be properly identified in the National Depositary's system. The bill is still subject to review by Parliament.
