Updated as per 30 March 2020
Travel restrictions in many countries have stopped air and shipping traffic or reduced it to a minimum. We see a global call for social distancing. Aruba has introduced curfew. Non-essential businesses and organizations in St. Maarten are required to close their doors. In the Netherlands, an “intelligent lockdown” (in Prime Minister Rutte’s words) has been proclaimed. The Curacao government has gone a step further and imposed a full lockdown. These measures have major consequences for everyday life as well as the business community on our islands. Also, most managing directors, supervisory directors, and shareholders are expected to stay home for the time being.
In an ideal world, board meetings would be postponed until people can meet again safely in person. However, the current crisis will be a reason for many companies to revise the strategy, policy and/or setup of their own organization, whether or not temporarily. In the year 2020, technology fortunately provides good alternatives for physical meetings. As there is no prescribed form for passing management board resolutions, a multi-member management board can generally use electronic means of communication (e.g. video conference). It is important that technology facilitates participation of all participants in the debate and being able to hear one another properly.
If necessary, from a tax perspective (e.g. substance requirements) or otherwise that at least part of the management board convene, proxies can be used to limit the number of attendees. Alternatively, passing resolutions in writing (i.e. outside a meeting) could be considered, provided all managing directors in office agree.
Pay attention to any rules or restrictions in articles of association or regulations relating to meetings and decision-making of the board. What was just previously written about the management board generally applies accordingly to a supervisory board or a one-tier board comprising executive and non-executive directors.
While the strict government measures due to the coronavirus crisis remain in effect, an actual general meeting of shareholders of a company with a large shareholder base may be difficult or even impossible to organize. The health and safety of the shareholders and other persons involved in the decision-making must be the top priority. In Curacao, the law requires that at least once every financial year a general meeting be held or resolutions outside meetings be adopted. As shareholders’ matters such as approval of the financial statements and appointments are in most cases not urgent for non-listed companies, postponement – when necessary and if possible – seems to be an obvious solution.
The current difficult situation is the uncertainty around how long the coronavirus crisis and related measures will continue to disrupt everyday life. Adopting resolutions by voting in writing outside a meeting is an alternative method of decision-making which does not require people to get together. Curacao law allows shareholders to cast votes in writing, i.e. by e-mail or any other text-transmitting means of communication, provided that use of these means of communication has not been restricted by the articles of association. For companies with a large shareholder base, it may be difficult to organize decision-making outside a meeting given that all persons with meeting rights need to consent to this manner of decision-making. If bearer shares are in circulation, decision-making outside a meeting is not possible.
The group of people attending the meeting could be limited by issue of proxies. Presence of the chairman, the secretary, and a person authorized by the shareholders to cast the votes on their behalf suffices. The question is to what extent a company can unilaterally impose this manner of decision-making. In the notice for a meeting, shareholders can be requested kindly but urgently not to attend the meeting and instead to issue a voting proxy. But if a shareholder insists on exercising its right to attend the meeting and/or right to vote in person, it may be difficult to deny this shareholder access to the meeting. This may be different when a shareholder has symptoms of COVID-19. However, leaving this to the discretion of the chairman or secretary may be questionable. The public interest and the requirements of reasonableness and fairness have to be taken into consideration.
In case of discussion there is always a risk of contestable decision-making, but we believe that in times like these exceptional measures can be justified. Particularly when these measures are meant to secure the safety of those involved in the management of the company.
Contrary to the laws of the Netherlands, the laws of the Caribbean parts of the Kingdom do not provide the option to participate in general meetings of shareholders or members by using electronic means of communication. In the Netherlands, interest groups are currently advocating the introduction of an emergency act which would permit listed companies to hold fully virtual general meetings. The fact that the Caribbean parts of the Kingdom do not have similar legislation in place, does not mean that using electronic means of communication to participate in general meetings is not allowed on the islands. If the articles of association do not exclude this option, it may provide a solution to allow people to participate in meetings remotely. Perhaps Dutch Caribbean corporations can be inspired by the parliaments of Curacao and St. Maarten, which are actively exploring the concept of virtual parliament sessions due to the coronavirus outbreak.
Important points for attention are the identification of shareholders/members who participate in the meeting by electronic means of communication and the reliability and safety of the communication (e.g. internet connection and internet portal, if applicable).
Regardless the setup of the deliberations and decision-making of the shareholders, remember to always give the managing directors and supervisory directors the opportunity to express their advisory opinion on matters to be resolved upon. In practice, we often see that this is forgotten, resulting in voidable decision-making.