In response to the travel and assembly restrictions that have been announced due to the spread of Covid-19, on 21 March 2020 the Latvian Parliament introduced amendments to the Commercial Law whereby companies were allowed to hold their corporate meetings electronically. The same rights thereafter were also provided to associations and cooperative societies.
Is this indeed a novelty?
Before the amendments were introduced Commercial Law did not provide a clear position whether a shareholder may participate in the General Meeting remotely via electronic communication means (via video conference or phone conference). Even though paragraph 9 of the Article 144(1) of the Commercial Law allows supplementing Articles of Association with optional provisions (for example, opportunity to participate in the General meeting remotely via electronic communication means), many companies did not use such option and continued using the standard model of holding their General Meetings.
Amendments to the Commercial Law provide companies new opportunities for holding General Meetings and allow the shareholders to save time and expenses, related to participation in the General Meeting in person.
Novelties in holding General Meetings
New amendments provide three options for participation in a General Meeting of the company:
- casting votes prior to the General Meeting;
- using electronic means of communication for some shareholders; or
- holding the General Meeting exclusively via electronic means of communication (e-meetings).
However, what remains unclear is how to ensure the identification of a shareholder if the shareholder participates in the General Meeting via electronic communication means.
Although the highest level of security and convenience of use is provided by specialized electronic meeting platforms with integrated identification and authentication for the user, such technical solution will not become widespread due to additional costs. Instead, we believe simpler solutions combined with existing identification methods will be used. For example, companies might firstly identify the shareholder in person and thereafter may allow the shareholder to participate in the meetings via generally accepted electronic communication means (Skype, Zoom, Microsoft Teams).
It should be noted that the Management Board is responsible for accurate shareholder identification, therefore, in case of doubt the Management Board will be obliged to prove that it has chosen appropriate and proportionate means to identify its shareholders.
Novelties in holding Management/Supervisory Board’s meeting
Previously, minutes of the Management/Supervisory Board’s meeting had to be signed by the chairman of the meeting, secretary of the meeting (who may not be member of the Management/Supervisory Board), as well as, by all present members of the Management/Supervisory Board. Considering that under provisions of Article 4(4) of the Law “On legal force of documents”, the document acquires legal force only after all signatories have signed it - such procedure often was problematic especially if the signatories were multinational.
New amendments facilitate signing of minutes of the Supervisory and Management Board meetings, providing that signature of chairman of the meeting and at least 1 another participant of the meeting will be sufficient hereafter.
As to holding meetings of the Supervisory Board of the companies (SIA and AS) electronically, it should be noted that the Commercial Law has previously provided an option for the member of the Supervisory Board to cast his/her vote (prior meeting) in writing, or to participate in the meeting via electronic communication means, that enable the participating members to participate in discussion and to adopt decision simultaneously (Articles 220 and 299 of the Commercial Law).
Although, statutory provisions on participation in the meetings via electronic communication means apply only to the Supervisory Board in our view there is no reason not to extend such option to the meetings of the Management Board.
Any further queries on issues related to Commercial Law can be directed to our experts: partner, attorney at law Gatis Flinters and attorney at law Marija Berdova.