Virtual and hybrid general meetings: Legal services for a virtual AGM
Introduction: What is a virtual AGM?
A virtual annual general meeting (AGM) is a shareholders’ meeting that is exclusively held online, without the physical presence of shareholders. It differs from hybrid models, which provide for both physical and virtual participation options. In Switzerland, the 2023 revision of the Swiss Code of Obligations introduced new provisions for virtual AGMs, which are now permissible if the company’s articles of incorporation provide for them. Such a meeting allows companies to reach their shareholders regardless of the venue and, in particular, to offer shareholders abroad the opportunity to participate personally without having to travel. This means that an AGM can also be held during a pandemic. The legislator has laid down rules to ensure that a virtual AGM is conducted properly and that shareholders’ rights are protected.
Legal basis and requirements for virtual AGMs in Switzerland
With the 2023 revision of the Swiss Code of Obligations, the legal framework for virtual annual general meetings was anchored in Art. 701d – 701f CO:
- Statutory basis: According to Art. 701d CO, the company’s articles of incorporation must provide for the possibility of holding a virtual general meeting.
- Independent proxy: According to Art. 701d para. 1 CO, the board of directors must designate an independent proxy in the invitation. For Swiss companies whose shares are not listed on an exchange, the articles may provide that the designation of an independent proxy can be waived, in accordance with Art. 701d para. 2 CO. A resolution to waive requires a qualified quorum (Art. 704 para. 1 no. 15 CO).
- Compliance with the provisions for electronic means: Pursuant to Art. 701e para. 1 CO, the Board of Directors must regulate the use of electronic means. In doing so, the requirements of Art. 701e para. 2 CO must be met. The Board of Directors must ensure that:
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- The identity of the participants is established;
- The votes at the AGM are transmitted immediately;
- Every participant can submit motions and take part in the discussion; and
- The voting result cannot be falsified.
- Technical problems: If technical problems arise that make it impossible to hold the AGM properly, it must be repeated in accordance with Art. 701f CO. However, the resolutions passed by the AGM before the technical problems occurred remain valid.
Art. 701c CO applies to hybrid AGMs. This states that shareholders who are not present at the location of the general meeting may exercise their rights virtually, if permitted by the board of directors.
Virtual AGMs in practice
1. Convening and preparation
The AGM is convened in accordance with the provisions of the articles of association and the relevant legal requirements. The Board of Directors must send the invitation to the shareholders in good time and in the prescribed form (i.e. in writing or electronically). The invitation contains:
- Date and time of the AGM
- Agenda with the items to be voted on
- Technical instructions for participating in the virtual meeting
- Access data for the secure platform
- Deadlines and modalities for voting, submitting questions or requests to speak
Most companies select a technical service provider for their virtual or hybrid AGM that provides a secure virtual AGM platform for a seamless meeting. This platform must meet regulatory requirements, particularly with regard to data protection, confidentiality and security against manipulation. The use of digital means and digital channels is tested in a rehearsal.
2. Opening of the AGM and identity verification
At the announced time, shareholders log in via the provided platform. Identification is carried out by means of multi-factor authentication or other secure procedures to prevent unauthorized access.
The meeting is opened by the chair (usually the chair of the board of directors or an authorized person). The following then takes place:
- Determining that the meeting has been properly convened and that a quorum is present
- Approving the agenda
- Confirming voting rights and proxies
3. Presenting the agenda items and holding discussions
The Chairman or other speakers present the individual agenda items, such as:
- Annual report and financial statements
- Appropriation of profits
- Discharge of the Board of Directors
- Elections and other proposals
Shareholders can request the floor via live chat or video if the platform allows it. Questions submitted in advance are answered by the Board of Directors or other responsible persons.
4. Electronic voting and hybrid participation options
During the meeting, shareholders can exercise their voting rights through a secure electronic vote in real-time. The following principles apply. Each vote is clearly assigned to a shareholder entitled to vote, and the casting of votes is tamper-proof and traceable.
Participation in the AGM can also be organized in a hybrid manner. This means that shareholders have the option of being present either physically or virtually. In both cases, voting is carried out in accordance with legal requirements.
The independent proxy ensures that votes and resolutions are carried out properly in accordance with legal requirements. He supervises the entire voting process, ensures that votes are recorded correctly and monitors compliance with all regulations.
5. Announcement of voting results
After voting has concluded, the results are automatically evaluated and published on the platform in real time. The chair officially announces the results and, if necessary, explains the next steps.
6. Minutes and conclusion
After the results have been announced, the chair closes the AGM. After the AGM has concluded, the minutes are recorded to ensure compliance with legal requirements.
The minutes are archived in accordance with legal requirements and made available to shareholders.
Advantages of a virtual general meeting
- Efficiency and cost savings: The virtual AGM reduces costs for the venue, personnel and physical infrastructure.
- Greater reach: Shareholders can participate electronically with no need for travel, which improves shareholder engagement.
- Flexibility and sustainability: A virtual or hybrid AGM reduces the carbon footprint.
- Security measures and transparency: Electronic voting systems minimize the risk of manipulation and ensure a comprehensible decision-making process.
Challenges and best practices for virtual AGMs
- Ensure data security: Encrypted communication and tamper-proof electronic means are essential.
- Avoid technical problems: Companies should conduct technical tests of the electronic tools and rehearsals in advance and have contingency plans ready.
- Protect shareholder rights: The provisions for virtual AGMs require interactive question and answer sessions and transparent moderation.
- Optimize communication: Clear instructions and technical support help to reduce uncertainties.
Conclusion
The changes introduced by the 2023 revision of Swiss Code of Obligations created the basis for the increasing use of virtual general meetings. Hybrid models that allow for both physical and electronic participation may also become a preferred solution for some companies in the long term. The board of directors plays a crucial role in ensuring that virtual general meetings are properly convened and that the legal requirements are observed. Companies benefit from more efficient processes, while shareholders are offered more flexible participation options. The COVID-19 pandemic has shown that virtual AGMs are a practical alternative, and the legal regulations ensure that they will remain an integral part of modern corporate governance in the future.
