Beyond all distances: E-democracy in today's companies

As of 1 January 2012, shareholders of listed companies will obtain more rights as a consequence of the transposition of the EU Shareholders’ Rights Directive into Belgian federal law. However, unlike the Directive, the new Belgian Act also allows non-listed companies, mainly on an optional basis, to apply the Shareholders’ Rights Act.

On 20 December 2010, the Shareholders’ Rights Act was ratified. On 18 April 2011, the Act was published in the Official State Gazette. The Act faithfully implements Directive 2007/36/EC of the European Parliament and the Council of 11 July 2007 into Belgian law. Its goal is to eliminate obstacles to access to the general shareholders’ meeting, as well as those hindering its operations, especially in a cross-border context. The Act also explicitly confirms the principle of equal treatment for all shareholders who are in a same position. Unlike the Directive, certain non-listed companies can also opt to apply the Act to themselves. So the Belgian Act has greatly enhanced the Directive’s practical relevance.

The innovations of the Shareholders’ Rights Act particularly pertain to the convocation of, and the attendance at, the general shareholders’ meeting. In addition to the extension of the notice period from twenty-four to (at least) thirty days and the introduction of a convocation notice through “such media from which one can reasonably expect an efficient dissemination of the information to the public throughout the European Economic Area in a manner ensuring fast access to it on a non-discriminatory basis” in addition to the publication in the Official State Gazette and national newspapers, the Shareholders’ Rights Act introduces a new Article 533bis to the Belgian Company Code that contains the minimum contents of convocation notices. Listed companies must also make all convocations, draft resolutions, proxy forms, postal vote forms, question forms and any other relevant information available on their websites, at least thirty days before the general meeting.

Furthermore, the Act introduces the right to add items to the Agenda and to submit draft resolutions for existing Agenda items to shareholders individually or jointly owning at least 3% of the share capital (Article 533ter §2 C.C.). However, the Act does not specify whether or not these rights may be used to alter the nature of a general meeting (e.g. by adding draft amendments to the company’s Articles of Association to the Agenda, requiring an extra-ordinary general shareholders’ meeting held in the presence of a notary public).

For listed companies, the registration date, which is currently optional, becomes compulsory. Shareholders registered by no later than midnight fourteen days before the general meeting is held, are entitled to vote at the general meeting, even if they no longer hold shares on the day of the general meeting.

Finally, the Shareholders’ Rights Act also includes some minor clarifications and modifications, for instance to the right of shareholders to adjourn a general meeting or to ask questions at a general meeting. Previously, the directors and the statutory auditors could refuse to answer questions if this would cause severe damage to the company, its shareholders or employees. Now, such a refusal is only allowed if answering the question could damage the company’s business interests or breach confidentiality undertakings of the company, its directors or statutory auditors. The shareholders will also be entitled to address questions by post or by electronic means in advance of a general meeting.

Non-listed companies
For non-listed companies, the new rules regarding remote voting and electronic voting are relevant. Both listed and non-listed Belgian public limited-liability companies are granted the option to set up, within the framework of the company’s Articles of Association, a system that enables voting by post or by electronic means before the general meeting. This must be done using a form which enables the company to verify the shareholder’s identity and capacity (e.g. using an electronic signature or password). The use of electronic voting may only be limited to ensure the security of electronic communications.

Moreover, the Shareholders’ Rights Act allows shareholders to participate in general meetings by electronic means (e.g. using video or telephone conferencing or internet chat rooms). The proceedings of the general meeting must be transmitted in “real time”, to enable the shareholders accessing the meeting remotely to follow the discussions and cast their votes simultaneously with the shareholders who are present in person. This option is not only open to non-listed public limited-liability companies, but also to private limited-liability companies and co-operative limited-liability companies. It is, however, not open to the members of the committee of the general meeting, the directors and the statutory auditors who all still need to attend in person. It goes without saying that shareholders participating in the meeting by electronic means must be counted when calculating whether or not a quorum has been reached.

Practical relevance
Particularly with respect to remote voting before a general meeting and electronic voting, we expect that this new legislation will have a profound impact on the daily operations of most Belgian companies. First, these rules are not exclusively limited to the small number of listed companies, and, second, practice confirms that companies with large numbers of shareholders have long desired the introduction of electronic voting. The success of directors’ meetings by telephone or video conferences can thus be extended to general meetings, which can only be beneficial to the level of shareholder participation.

Amendments to the Articles of Association
In practice, the companies concerned need to modify their Articles of Association to allow remote voting before a general meeting as well as electronic voting during a general meeting. Most listed companies have already carried out these amendments, even though the deadline to do so is not until 31 December 2011. However, non-listed companies seem to be waiting to see which way the wind blows. Should they also wish to make full use of the new participation and voting options provided by the Shareholders’ Rights Act (in order to optimise their corporate bodies and to tailor them to the needs of the current “digital generation”), we encourage them to include these new provisions on remote voting before a general meeting and electronic voting during a general meeting in the next set of amendments to their Articles of Association. Accordingly, non-listed companies can also amend their Articles of Association to bring them in line with the current and future business context. Foreign shareholders and shareholders who travel frequently as part of their work would thus have a chance to become more involved in their companies in a more efficient and contemporary manner.