Companies can decide to opt in and perform the subsequent alteration of their articles of association, at one single Extraordinary General Meeting. So spoke the Justice Minister in response to a parliamentary question on the opt-in arrangement for the Companies and Associations Code.
The aim of the opt-in arrangement is to allow companies to already opt to fall under the application of the Companies and Associations Code, which is only due to enter into force on 1 January 2020.
In previous advice, the Federation of Notaries Public stated that: (1) the first requirement is an Extraordinary General Meeting decision (and an alteration of the articles of association) to opt in; before (2) the articles of association can be altered (except the compulsory provisions).
The decision to opt in and adapt the articles of association to the Companies and Associations Code, which forms an integral part of this, must be made in accordance with the rules on altering articles of association of the (former) Companies Code, as the Companies and Associations Code is not yet applicable.
There is nothing to prevent the Extraordinary General Meeting from deciding to have the decision to opt in apply to all shareholders from the decision date, provided that this decision is published.
In such case, after the opt-in decision, the same General Meeting may, under a separate agenda item, decide alterations of the articles of association other than those just resulting from adaptation of the articles of association to the Companies and Associations Code. This decision may be taken in accordance with the provisions of the Companies and Associations Code, subject to the suspensive condition that the decision to opt-in and the associated adaptation of the articles of association are published.
What are the consequences of this?
- Any abstentions, at the Extraordinary General Meeting deciding the alterations of these articles of association, will be neutralised;
- Under these new rules for alteration of articles of association, the General Meeting can lift the unavailable - in accordance with the articles of association - character of a private limited company’s equity account. However, it can only actually be distributed in compliance with the new rules governing the distribution of profits (balance sheet and liquidity tests);
- The double voting right can be introduced in listed companies by a two-thirds majority;
- The company object or aim can be changed without requirement to draw up a statement of assets and liabilities;
- In the case of a company with several types of shares, any change of rights attaching to the types of shares requires an alteration of the articles of association, and majorities must be obtained for each type of share. In addition, the management body must draw up a report which justifies the changes and their effects on the rights of the existing types.
This kind of retroactive contractual effect of the new act shall not be subject to criticism, provided that the agenda of the Extraordinary General Meeting is clear.
Given that (the compulsory provisions of) the Companies and Associations Code will automatically apply to all existing companies and associations from 1 January 2020, this opt-in arrangement will only apply for a few more months. See concerning this our previous article, which you can read by clicking here.