Luxembourg companies were required to adapt quickly to the unprecedented circumstances surrounding the Covid-19 pandemic. In particular, Luxembourg companies were required to hold, almost exclusively, non-physical board and shareholder meetings. We look back on the last months to see how companies have adjusted to this changing environment. We also consider how the increasing prevalence of non-physical meetings potentially opens the door for new technology service providers in the market.

The key legislation adopted for the holding of non-physical meetings of Luxembourg companies

Grand Ducal Regulation of 20 March 2020 authorised, through temporary measures, companies and other legal entities to hold non-physical board and shareholder meetings. This legislation permitted companies to require their shareholders to exercise their voting rights, either by distance voting and/or via videoconference or any other similar means of electronic communication. It also permitted the companies’ management bodies to adopt resolutions by way of written circular resolutions and to hold meetings via videoconference. These measures have been extended a number of times, most recently by the law of 23 September 2020, until 30 June 2021.

Impact on board meetings of Luxembourg companies

As Luxembourg is home to many companies, which are part of larger international groups, it is very common for their boards to be composed of members who are located all over the world. As such, with travel restrictions and the limitations on gatherings of people, it was essential that the Luxembourg legislature act quickly to implement legislation allowing all companies to hold non-physical board meetings (or to adopt written resolutions). For most Luxembourg companies, this was not a new phenomenon.

The Luxembourg company law requires that for board meetings held by videoconference or by other means of telecommunication, these means must satisfy technical characteristics, which ensure an effective participation in the board meeting, and the proceedings must be online without interruption. This is not always easy to achieve; with busy board members dialing into calls on-the-go, it is not unusual for a phone connection to drop; indeed a call may continue for some time before the other participants realise that someone has dropped off. There are some other practical disadvantages to audio conference calls, such as the difficulty in establishing who is speaking. Overall, we think most board members would agree that face-to-face meetings are significantly better when it comes to effective discussion and decision-making. As physical board meetings were put on hold this year, the flood gates opened to video calls…

For sure, video conferencing is not perfect nor is it without risk.
Pierre-Alexandre Degehet

Pierre-Alexandre DegehetPartnerBonn Steichen & Partners

The benefits of the video conference call

We are all well aware of the skyrocketing success of Zoom, Microsoft Teams and similar companies. We believe the use of video calls should be strongly encouraged – for the same reasons that physical meetings (when possible) should be preferred to conference calls: face-to-face interaction is always better for communication and active discourse compared to audio calls. A perhaps surprising advantage to the video call over audio calls is confidentiality: some of these companies, like Zoom, got off to a rocky start with security breaches, earlier this year. However, with most of such security issues having now been resolved, we see that many boards are much more confident in the use of video conferences than audio conference.

Many of us have been on audio calls with a number of people, when we think we know who is on call. As the call ends, there is a beep as each person drops off and it becomes clear that there were many more people participating to the call than announced themselves. This will not always be an issue, but often, very sensitive topics are discussed at board meetings. Therefore, as a general rule, it is of paramount importance that the person chairing the meeting is aware of exactly who is in attendance at all times. The great practical advantage of a video conference is that the administrator of the video conference can see a list of the participants. If a participant has not identified himself or herself, they can be ejected.

For sure, video conferencing is not perfect nor is it without risk. However, in the meantime, we think companies’ boards should embrace this technology and enjoy its benefits.

Impact on general meetings of Luxembourg companies

The Covid-19 pandemic and related legislation had very little practical impact on the holding of general meetings for most Luxembourg companies. Many private companies have only a sole shareholder or a handful of shareholders. Therefore, physical general meetings throughout the pandemic continued to be held either by attendance in person by shareholders (due to the low numbers involved) or through the granting of proxies.

On the other hand, public companies, in particular listed companies, did have to take swift action to arrange general meetings so that shareholders could participate without physically attending. It is worth pointing out that even though Luxembourg companies were always required to hold a physical general meeting in Luxembourg, the physical attendance by shareholders has always been very low compared to other jurisdictions (with the granting of proxies to a handful of proxy holders being common). Luxembourg law has provided, for many years, the possibility for Luxembourg listed companies to allow their shareholders to attend general meetings by electronic means, i.e., by:

- real-time transmission of the general meeting,

- real-time two-way communication enabling shareholders to attend from a remote location,

- a mechanism for casting votes, either before or during the general meeting, without the need to appoint a proxy holder who is physically present.

Surprisingly, the take-up of these electronic options has been historically very low, even non-existent.
Nuala Doyle

Nuala DoylePartnerBonn Steichen & Partners

Surprisingly, the take-up of these electronic options has been historically very low, even non-existent. Luxembourg companies seemed to be more comfortable with the tried and tested formula of the physical meeting with attendance in person/by proxy. By reviewing the publicly available information of Luxembourg listed companies, we have seen that the vast majority of such companies opted to hold non-physical meetings rather than truly “virtual” meetings. Indeed, most of these companies required their shareholders to grant a proxy to a proxy holder designated by the Company, and the meetings were often held without any real-time electronic transmission. In some cases, companies provided an audio/video transmission – without any two-way communication – so that shareholders were not permitted to interact in the meeting and ask questions.

It is our understanding that the main reason for this approach was due to a general scepticism of the tools available on the market. What this has shown, in our view, is that there is a genuine gap in the Luxembourg market for service providers who can provide reliable technology.

What will 2021 general meetings look like?

Noting that the legislation allowing non-physical general meetings has been extended until 30 June 2021, should Luxembourg listed companies consider modernising and holding their 2021 AGMs in a virtual manner? Even if it is again possible to hold physical general meetings next year, should these companies facilitate remote attendance by shareholders?

In theory, the answer is a clear “yes”; companies should always do their best to encourage shareholder engagement. However, to do this, the technology must be available, it must be reliable and it must be affordable. We shall conclude on an optimistic note: let’s hope that 2021 brings new service providers to the Luxembourg market, allowing companies to open the door to the virtual general meetings.