16.01.2025

A legal framework for participation in general meetings of shareholders by electronic means of distance communication

On December 6, 2024, Law No. 299/2024 entered into force, which made some important amendments and additions to Company Law No. 31/1990, in particular with regard to the conduct of general meetings of shareholders and the voting at such meetings, where there have been no significant changes since the adoption of the law, i.e. twenty-five years ago.

In practice, the only legislative improvement likely to allow digitization in the realization of the will of the company was made by Law 441/2006, when the possibility of sending the convening notice by electronic letter, signed with an electronic signature (extended, according to the regulations in force at that time), was introduced, to the extent that such a possibility is provided for in the company's articles of association.

Thus, company law required general meetings to be held in physical presence, at the company's registered office as a rule, but the company's articles of association could also provide for other locations for holding meetings. An exception was recognized by Article 122 of the Act only in the case of closed companies (where the right of shareholders to transfer their shares is limited), where the articles of association could provide for the possibility of holding general meetings by correspondence, in the "classic" sense of postal correspondence, i.e. by printing the ballot paper and sending it by post. At the same time, in the case of companies to which Law no. 24/2017 on issuers of financial instruments and market operations applies, i.e. companies listed on the stock exchange, the possibility of voting by electronic means of remote communication at general meetings of shareholders is provided for.

Although, in practice, many companies have provided in their articles of incorporation for the possibility of holding general meetings of shareholders (and voting at such meetings) by means of remote electronic communication, the absence of an unequivocal legal basis in company law has led to some uncertainty as to the legality of the resolutions adopted.

Thus, the newly introduced Article ¹²⁵¹ provides that shareholders may participate and vote in general meetings, in person or by proxy, in person or by electronic means of remote communication. However, the latter possibility does not arise ope legis for all companies as from December 6, 2024, but it is necessary either for the articles of incorporation to provide for this or for the shareholders to so decide with the majority provided for by Article 115 of the Law ("the majority of the votes held by the shareholders present or represented").

A discussion could arise as to the framework in which the second hypothesis would be realized - whether it would be another general meeting held in advance, but under the conditions of ordinary law (physical presence), in which it is decided that in a future general meeting votes may be cast by electronic means of remote communication, or the situation provided for in Art. 119 para. 1) of the Law, i.e. the convening of a general meeting at the request of the shareholders (in this case, of course, it would not be sufficient to have 5% of the share capital, but the majority provided for in Article 115). We tend to believe that only the first hypothesis is the one intended by the legislator, and this is the conclusion reached by a systematic interpretation of the corresponding provisions introduced in the field of limited liability companies: "If the articles of association so provide or if the members so decide with the majority provided for in Article 192 or if all members so agree in writing...".

It should be pointed out that the possibility introduced by the legislator in Art. ¹²⁵¹ concerns only the exercise of the vote and the shareholder's participation in the meeting by electronic means of remote communication - this does not mean, however, that the meeting itself will be "held" by the same type of means of communication. In other words, the general meeting will still be held in physical form and shareholders will be able to attend in person or by proxy. Therefore, the "holding" of the meeting by means other than physical presence will continue to be possible only under the conditions of Article 122 of the law, i.e. in the case of closed companies and only by correspondence.

The law provides for a certain standard with regard to the means of distance communication, which must meet the technical conditions necessary for "the identification of the participants, for their effective participation and the continuous retransmission of the deliberations, for the exercise of the shareholders' right to address the meeting, for the casting of votes", so as to allow the identification of the shareholders, the subsequent verification of the way in which the vote was cast and the possibility for each shareholder to verify his vote. Resolutions adopted at general meetings where shareholders participate by electronic means of distance communication shall be signed by handwritten or electronic signature.

The same Article ¹²⁵¹ provides that "shareholders may also vote by correspondence". The relationship between this new provision and Article 122 (referred to above) is as follows: in the case of closed companies, the memorandum of association may continue to provide for the possibility of holding general meetings by correspondence - in this case there will be no general meeting "held" in physical form. In the case of the other companies, the instrument of incorporation may provide for the possibility of postal votes, which will be forwarded for a general meeting at which shareholders will continue to be able to participate in person or by proxy.

In order to ensure the effectiveness of the possibility of casting votes by electronic means of distance communication, the law provides for the obligation to insert in the convening notice a description of the procedures to be followed by shareholders in order to participate and vote in the general meeting.

The above amendments will apply to all forms of company, i.e. joint stock companies, partnerships, limited partnerships, limited partnerships limited by shares and, last but not least, limited liability companies.

It is worth noting that, in the past, there has been a legislative intervention on the possibility of holding general meetings of shareholders by electronic means of remote communication, but this had a temporary applicability limited to the state of emergency established in the period March 16 - May 14, 2020. Thus, by GEO no. 62/2020 for the adoption of measures in the field of companies, in order to hold meetings of the statutory bodies, it was provided that "during the state of emergency, general meetings of shareholders/associates may also be held, even if the articles of association do not provide for or prohibit it, by correspondence or by electronic means of direct remote communication". Therefore, in addition to the legislative amendment introduced by Law no. 299/2024, during the period of the state of emergency in 2020 it was possible not only to participate and vote, but also to hold the general meeting itself by means of remote communication, even in the event of contrary provisions of the articles of association.

There are other novelties introduced by Law 299/2024 that are worth mentioning. One is in relation to the agenda: the board of directors will thus be able to amend the convening notice (and therefore also to propose new agenda items) after the time of publication (or, as the case may be, its transmission to the shareholders), within 15 days from that time at the latest, the obligation to publish the new form at least 10 days before the general meeting, on the date mentioned in the original convening notice, being still valid. In addition, the creation or dissolution of secondary establishments: branches, agencies, representative offices or other similar units without legal personality becomes a power that may be delegated to the board of directors/manager by the articles of association or by resolution of the extraordinary general meeting of shareholders, in addition to the powers currently allowed (change of registered office, change of secondary object of activity or increase in share capital).

Obviously, the right to vote in general meetings of shareholders by electronic means of remote communication is a welcome one, which is likely to encourage and facilitate the participation of shareholders in the formation of the corporate will (we are thinking in the first place of shareholders who do not live in the locality where the general meeting would be held), but also beneficial in terms of the time needed to organize general meetings and the costs involved. It remains to be seen to what extent shareholders will make use of the possibility introduced by the legislator and decide that votes at general meetings can in future also be cast by electronic means of distance communication or whether they will continue to work in the current way.

Article written by Mihai Stănescu - Managing Associate.