Blooming lilacs are the sign of approaching high school final exams for students and, the period of annual general meetings for managing directors. Because of the epidemic special regulations apply to both high school seniors and managing directors, the latter are summarized in our article.
Prior to Easter, a government decree was issued, which regulates certain practical tasks and operations of companies due to the state of danger – thus, during this period, different rules apply to the operation of all companies.
These special rules shall apply when members of a company are prevented from exercising their membership rights by the soft curfew. So in the life of a family business where all members presumably belong to the same household, the regulation does not make a difference, as they can come together and decide at any time, and it is not necessary to go to a lawyer in person for the sake of the company procedure, as we wrote earlier. In the case of a single-member company, the rule remains unchanged that the sole member decides in writing and the decision becomes effective upon notification to the management. As any form of work is an exception to the curfew, no special rules are required even if each member of the company is also an employee of the company or is obliged to work in person under the memorandum of association.
However, if decision-making is impeded by the curfew, a meeting of the decision-making body may not be held in such a way as to require the personal participation of the member, even if the meeting has already been convened.
Instead of personal participation, it is possible to make a decision in the following two ways:
- a) by holding a meeting using an electronic means of communication, or
b) a decision may also be made in writing upon the initiative of the management, provided that this is not precluded by the statutory provision for the given company form.
These possibilities also exist if the memorandum of association of the entity does not provide for it or provides otherwise.
In the case of an entity with up to 5 members, the modalities and conditions for decision-making shall be defined in such a way that all members can participate. In companies with more than 5 members and up to 10 members, the members with the majority of votes must request the holding of a ‘remote general meeting’ and, in the case of companies with more than 10 members, the management may also initiate it.
If none of the above methods are possible, e.g. in a company with up to 5 members (with different residences) one of the members cannot vote in writing or online, or in a company with 5-10 members, the majority of votes do not consent to the holding of a ‘remote general meeting’, in the following cases the management may also decide: to accept the annual report or to decide on urgent matters necessary (i) to maintain the lawful operation of the entity, (ii) to manage the situation due to the state of danger or (iii) in the course of sound and responsible management, but even in such cases they may not amend the company’s articles of association; decide on the dissolution, transformation, merger or division of the company; or decide on the reduction of the subscribed capital, and they may decide on refilling of capital only in certain cases. The member (s) holding more than 25% of the votes may object to the proposed resolution of the management, and if the proportion of those who object reaches 51%, no decision may be taken.
If the ‘remote general meeting’ is not regulated in the company’s memorandum of association, or it contains a different regulation, the management (in the case of multiple general managers, the person exercising the employer’s rights) is entitled to lay down the rules for distance voting by doing everything in their power in order to provide members with information and documents related to decision-making and to be informed of the decisions taken.
Thus, detailed information on the agenda cannot be dispensed with and the draft decision must be communicated to the member. (According to the Civil Code, the agenda must be indicated in the invitation in such detail that those entitled to vote can form their position on the topics to be discussed.)
In the case of a meeting by electronic means, it shall be specified which programs, applications, devices may be used and how the identity is to be verified in the event that the management does not personally know the members (or their representatives).
In the case of a written decision, at least 15 days shall be allowed for the vote to be taken, and a vote shall be valid if at least as many votes are received during that period as would be required for a quorum to be held. A member’s vote is valid if it clearly identifies the member’s name (name, residence or registered office, in the case of an organization, the name of the representative), the indication of the draft resolution put to the vote and the vote cast for it. A legal entity member may send his vote only with a high-security electronic signature based on a qualified certificate, or by a document authentication service based on identification. On the other hand, private individuals may even vote via simple e-mail if the e-mail vote contains the above credentials. In the case of a written decision, members may not initiate a meeting or hold it by electronic means. In the case of a decision in writing, members may not initiate a meeting or hold it by electronic means. For managers of a company, we therefore advise to give preference to organizing recorded videoconferences in order to avoid future disputes.
The above rules shall apply to the notification and attendance of members of the supervisory board and permanent auditor of the legal entity.
Minutes shall be taken of the meeting held (prepared and signed by the designated manager) and this shall record the circumstances under which the meeting was held. An attendance form need not be prepared, but the minutes must include the details of the members attending the meeting online.
The regulation also lays down special rules for elected officials of the company. Should the term of office of a managing director, member of the supervisory board or permanent auditor expire during the state of danger, the term of office of that person shall be extended without a separate decision until the 90th day after the end of the state of danger, during which time the elected official shall continue to perform his duties. In other words, it is not necessary for the company to hold a meeting simply because the term of office has expired. Of course, even in an emergency, it is possible for the company to recall the official, and the above rule does not apply either if the official dies, his legal capacity becomes limited, or there is a conflict of interest or exclusion.