Approval of financial statements of joint-stock companies and limited liability companies during the pandemic
Under the current circumstances, when the right to assemble has been restricted due to the spread of COVID-19, it remains to be discussed how corporations should fulfil their corporate duties, especially in connection with holding general meetings. The current legislation offers some options; new ones will be introduced by lex COVID.
According to current legislation, general meetings of joint-stock companies and limited liability companies must still discuss their ordinary financial statements within six months from the end of the prior accounting period. The Corporations Act contains legal concepts that may help corporations fulfil their duties even under the current circumstances while ensuring an effective and safe decision-making process.
Decision-making outside general meetings (per rollam) is carried out in writing between the concerned parties sending one another proposed resolutions and opinions, etc. The basic rules are regulated by law; more detailed conditions can then be stipulated by the acts whereby corporate entities are founded (such as memoranda/articles of association).
Limited liability companies may decide per rollam unless their memoranda of association exclude this possibility; joint-stock companies, on the other hand, may only do so if their articles of association explicitly permit it.
The Corporations Act also provides for the option to use technical tools (e.g. teleconferencing or communication via Skype), but with respect to limited liability and joint-stock companies, this is only possible if explicitly allowed by their memoranda/articles of association.
The government bill on certain measures to mitigate the effects of the SARS CoV-2 pandemic (lex COVID) brings certain hope to companies that would like to use the above legal concepts under the current circumstances but are limited in doing so. The bill proposes to allow bodies of corporate entities to decide per rollam even if their relevant founding acts do not explicitly say so. The right to proceed pursuant to this special measure would only apply in the duration of the imposed emergency measures.
Lex COVID might also introduce a change to the approval of ordinary financial statements, postponing the statutory deadline for their approval where the time limit for doing so would expire earlier than three months after the end of the extraordinary measure. The new deadline would be three months after the end of the extraordinary measure, but no later than on 31 December 2020.
Lex COVID would thus make the life of joint-stock and limited liability companies easier. However, it remains to be seen what the bill will look like after the legislative process.