Changes to Chapter 5 of the Finnish Companies Act regarding General Meetings
The Finnish Companies Act was amended as of 11 July 2022 to allow fully virtual remote general meetings of shareholders, and to amend the provisions originally introduced in 2001 on so-called hybrid general meetings or additional technical means of participating in general meetings. The amendments also clarify the definition of hybrid general meetings and include a number of other changes e.g. to decision-making procedures to enable and promote the use of remote and hybrid meetings.
The background to the changes is a Government Bill introduced in April 2022 (HE 47/2022 vp) proposing similar changes to the Companies Act, the Housing Companies Act, the Co-operatives Act and the Associations Act. While amendments have also been adopted with respect to the other pieces of legislation, this article specifically concerns the changes to the Companies Act.
The Finnish Parliament had enacted temporary legislation in 2020 because of the COVID-19 pandemic which allowed companies to hold remote general meetings at which shareholders could exercise their rights only by way of advance voting and asking questions in advance without participating in a physical or virtual meeting.
The temporary legislation expired at the end of June 2022 and the arrangements provided by the temporary legislation are no longer possible. However, the amended Companies Act includes a transitional provision allowing companies listed on a regulated market and First North companies to make use of an advance voting procedure similar to the temporary legislation until the end of 2022 to give them time to amend their Articles of Association so as to allow fully virtual general meetings without a physical venue.
What has changed
Going forward, companies will be entitled to make use of three alternative ways of holding a general meeting, all of which can be further supplemented with additional participation methods (such as advance voting).
The first is a traditional general meeting at a physical venue at the company’s domicile or another location permitted under its Articles of Association, fully corresponding to the practice before COVID. The second is a fully-remote virtual meeting without any physical venue, where shareholders are able to exercise all shareholder rights fully and in real time during the meeting through an online connection. And the third, a so-called “hybrid meeting”, is a combination of the two whereby shareholders can elect to participate either at the physical venue or remotely but must be allowed to exercise all shareholder rights during the meeting on an equal footing, regardless of participation method.
The changes made to the Companies Act allow for general meetings to be held as fully-remote virtual meetings. All participating shareholders must, however, be able to exercise their shareholder rights in full at the general meeting in a manner that is in all material respects equivalent to a traditional physical meeting. This includes for instance the possibility to exercise the shareholders’ right to speak verbally and the right to vote in real time during the meeting.
The new remote meeting concept differs from that made available by the temporary legislation which allowed remote general meetings where shareholders could only exercise their rights in advance. The precondition for arranging a remote meeting without any physical venue is that the company’s Articles of Association include a provision that specifically permits it. If the Articles of Association allow for a remote meeting to be held, the Board of Directors (or the Supervisory Board where applicable) decides on the method by which the meeting will be held.
A change to the Articles of Association to permit remote meetings without any physical venue requires a customary 2/3 qualified majority of shares and votes at the meeting.
The transitional provision for listed companies and First North companies during 2022 allows such companies the additional possibility to hold a general meeting in accordance with the advance voting regime of the temporary legislation, provided the general meeting decides only on a change to the Articles of Association enabling (or obligating) the future use of fully-virtual general meetings without a physical venue.
The changes made to the Companies Act also amend the provisions originally introduced in 2001 regarding the use of technical means that allow remote participation in a traditional physical general meeting. In particular, the amended Companies Act introduces the concept of a hybrid general meeting.
A hybrid meeting, as defined in the new provisions, allows for participation at the physical venue of the general meeting as well as participation via a remote connection, but all participants, both at the physical venue and online, must be able to exercise their shareholders’ rights in full in real time and in an equal manner.
For example, participants attending via a remote connection must be able to follow the meeting and exercise their right to speak and vote during the meeting simultaneously with the participants present at the physical venue. The Board of Directors (or the Supervisory Board where applicable) is authorized to decide that a general meeting will be held as a hybrid meeting, unless the Articles of Association specifically limit or prohibit this.
In order to promote the use of full hybrid participation rights, from now on an amendment of the Articles of Association that imposes a requirement on the company to hold general meetings in the hybrid format can be passed with a simple majority of votes cast, whereas other amendments to the Articles of Association generally require at least a 2/3 qualified majority of shares and votes at a general meeting.
Supplementary means and technical changes
In addition to defining the above-described means of full remote participation in a general meeting, the Companies Act continues to permit supplementary technical means of participation, which can be combined with any of the general meeting formats (i.e. traditional, remote, or hybrid) and can be subject to limitations.
According to the amended Companies Act, these means may be used as supplementary tools in addition to participating at the general meeting with full rights at the meeting venue or remotely. This type of supplementary participation may be used also in advance before the meeting. Such means could include the ability to vote, ask questions and make counterproposals before the meeting, the ability to write questions and comments during the meeting, or the ability simply to watch a meeting broadcast.
The Board of a company is generally free to decide at its discretion on the use of such supplementary means, unless this right is restricted in the Articles of Association.
The use of supplementary means in addition to a traditional physical general meeting also enables the possibility for advance participation that closely resembles the participation methods used under the temporary legislation, whereby shareholders could be given the ability to vote and ask questions or make counterproposals in advance and to follow a meeting broadcast, which would not constitute a full hybrid meeting under the amended Companies Act.
Importantly, in the event advance voting is permitted, the amended law introduces the requirement that any proposal that has been subject to advance voting will be deemed to be made unaltered at the general meeting. This could give rise to certain technical problems in rare situations where a proposal must be amended for unexpected reasons, e.g. in the event a proposed Board candidate has to withdraw before the general meeting.
The amendments to the Companies Act also include certain other new or amended provisions that aim at clarifying a number of more technical questions arising with the use of remote participation at a general meeting or supplementary participation methods. These concern, inter alia, the possibility for the chairman of the general meeting to adjourn the general meeting for up to four weeks in the event of a technical malfunction that could affect the validity of decisions passed at the meeting and is expected to materially delay the meeting.
There are also specific provisions concerning the use of nonverbal shareholder communication during the general meeting, such as the use of written questions, in cases where such possibility is offered. Such nonverbal communications may be edited or combined before being displayed at the meeting.
Furthermore, responses to written questions that are made during the meeting may be provided after the general meeting, in cases where written questions or comments are permitted in the first place.
The amendments made to the Companies Act do not exclude the use of traditional physical meetings but instead add tools to the ways of organizing a general meeting. The amendments give companies a significant amount of freedom in terms of how to hold a general meeting, and therefore we expect to see increasing variance in practice.
In the future, the use of fully remote or hybrid general meetings will place more emphasis on the technical means that are used to ensure the proper identification of shareholders and to secure their ability to exercise shareholder rights in full during the meeting in an equal manner.
The increased availability of alternative participation methods may also require further attention to the instructions provided to shareholders, not only by companies but by technical service providers and e.g. by custodians when communicating with nominee-registered foreign shareholders.