Shareholder meetings – will COVID speed modernisation?

New ILA publication: Meeting the digital challenge:  Recommendations for Luxembourg shareholder meetings

Shareholder meetings – will COVID speed modernisation?

New ILA publication: Meeting the digital challenge:  Recommendations for Luxembourg shareholder meetings

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The COVID-19 pandemic has forced the rethinking of governance practices, where shareholder meetings were often the repeating of the same tired formulas for engaging with shareholders year after year.  Not only were companies forced to put in place new ways to engage with shareholders due to the inability to travel and meet physically, but they were also given the opportunity to experiment and rethink how they would like this to be done.   

Temporary COVID regulations have enabled holding both Board and shareholder meetings remotely, even where the entity’s articles did not provide for this.  These allow (but do not require) the holding of corporate meetings with only remote participation - and without any physical presence - regardless of whether this is allowed by the entity’s articles or the usual laws, and this irrespective of the intended number of participants.  These laws have been extended through the 2021 AGM season, ensuring remote meetings continue to be held while COVID restrictions continue.  

The 2020 AGM season, albeit rushed, allowed for experimentation with many different formulas.  As a result of this flurry of innovation it has been possible to study the different efforts – both the good and the bad – and use these to assess what worked well and what didn’t.  Covid forced dramatic shifts in practices – which are only the beginning.  A review of practices has shown that technology is only part of the solution, as efficiency must not come at the expense of meaningful communication and debate.  This is an opportunity for change, 

The lack of face-to-face meeting has raised concerns around Board accountability and the ability to avoid having to deal with unwanted and challenging questions – especially where communications are limited, or where shareholder questions were ignored in whole or in part.   Moving online should not allow Boards to hide from accountability towards their shareholders, nor should these become another webinar or sales pitch.  Any new practices must reflect the fundamental purpose of shareholder and member meetings - to remain an essential democratic mechanism for shareholders.  It is only by being able to voice their concerns, to ask questions, and to cast votes such as re-election of the Board and auditors that they can and are able to exercise their fundamental rights, and to hold management to account.

The ILA Think Tank has been looking at this topic reviewing both current practices as well as recommendations for best practices, and issues now the publication,

Meeting the digital challenge:  Recommendations for Luxembourg shareholder meetings

The work of the committee will continue following the paper, with further work presenting recommendations to the Luxembourg legislators with suggested changes to modernise relevant company, non-profit and other laws to enhance the ability to hold remote shareholder meetings, including without physical presence, and for these to be held in a manner respectful of shareholder rights.