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COVID-19: Digitise your corporate governance

The Covid-19 pandemic and the emergency ordinances that have been issued by the French Government for a temporary period are an opportunity to reflect on setting up permanent measures for the digitisation of corporate governance. The upcoming annual deliberation season therefore offers an opportunity to bounce beyond the existing constraints in order to modernise current practices.

Indeed, some of the measures authorised on a temporary basis could have been definitively adopted beforehand, in particular by adapting the articles of association of companies and internal regulations, and by using legally accepted new technologies.

In addition, a recent decree no. 2019-1118 of October 31, 2019 allows companies to certify by electronic signature the minutes of the decisions of shareholders and certain corporate bodies, as well as a digital maintenance of corporate registers (these last aspects are the subject of the following Corporate Client Briefing).

The digitalisation of corporate law can therefore now be effective "end to end", including the formalities to be carried out.

As a reminder, these corporate law interim measures, which form a genuine "catalogue" of blockages to be removed, are contained in Ordinances No. 2020-318 and No. 2020-321 of 25 March 2020, a summary of which is presented below. The most important derogations can be examined with a view to their long-term implementation.

  • The measures contained in Ordinance No. 2020-318 are those relating to the preparation, order, audit, review, approval and publication of annual accounts and other documents and information to be filed or published during a health state of emergency and within one month thereafter.
  • The measures contained in Order No. 2020-321 are those relating to meetings and deliberations of the general assemblies and governing bodies during the period from 12 March 2020 to 31 July 2020, unless extended by decree until 30 November 2020 at the latest. Most of these measures apply without any clause in the articles of association or internal regulations being necessary or opposing them.

ORDINANCE NO. 2020-318

adapting the rules relating to the drawing-up, adoption, auditing, review, approval and publication of the annual accounts and other documents and information that legal persons and entities without legal personality governed by private law are required to file or publish in the context of the COVID-19 epidemic

Extensions of time limits for all private law entities

Approval of the annual accounts:

The deadlines imposed by French laws or regulations or by the articles of association for approving the annual financial statements (corporate and consolidated) and the documents attached thereto (in principle, 6 months following the end of the financial year), or for convening the general meeting called for such approval, are extended by 3 months.

This extension applies to entities closing their accounts between 30 September 2019 and the expiry of a period of one month after the date of termination of the state of health emergency declared by Article 4 of the Emergency Law No. 2020-290 of 23 March 2020 (the "State of Health Emergency").

warning This extension shall not apply to entities that have appointed a statutory auditor and where that auditor has issued its report on the accounts before 12 March 2020.

Other accounting documents:

The deadlines imposed on the Board of Directors, the Management Board or the Managers to draw up the accounting documents provided for in the first paragraph of Article L. 232-2 of the French Commercial Code (situation of realisable and available assets, excluding operating values, and current liabilities, projected income statement, cash flow statement, projected financing plan) are extended by 2 months.

This extension applies to documents relating to accounts or half-years closed between 30 November 2019 and the expiry of a period of one month after the date of termination of the State of Health Emergency.

SA with Management & Supervisory Boards

The deadline given to the Management Board to present to the Supervisory Board (cf. fifth paragraph of Article L. 225-68 of the French Commercial Code) the annual financial statements and, where applicable, the consolidated financial statements, the management report and the corporate governance report (cf. second paragraph of Article L. 225-100 of the same code) is extended by 3 months.

This extension applies to entities closing their accounts between 31 December 2019 and the expiry of a period of one month after the date of termination of the State of Health Emergency.

warning This extension shall not apply to entities that have appointed a statutory auditor and where that auditor has issued its report on the accounts before 12 March 2020.
Judicial Liquidation

The period of 3 months from the end of each financial year, given to the liquidator to draw up the annual accounts and the written report by which he summarises the liquidation operations during the past financial year (first paragraph of Article L. 237-25 of the Commercial Code) is extended by 2 months.

This extension applies to entities closing their accounts between 31 December 2019 and the expiry of a period of one month after the date of termination of the State of Health Emergency.

Subsidized entities

The deadline for producing the financial report certifying the conformity of the expenditure incurred with the purpose of the grant (sixth paragraph of Article 10 of Law No 2000-321 of 12 April 2000) is extended by 3 months.

This extension applies to financial reports relating to accounts closed between 30 September 2019 and the expiry of a period of one month after the date of termination of the health state of emergency.

ORDINANCE NO. 2020-321

adapting the rules governing the meetings and deliberations of meetings and governing bodies of legal persons and entities without legal personality governed by private law as a result of the COVID-19 epidemic

SCOPE
Ratione temporis This ordinance applies to meetings of the directors, supervisory and management boards held from 12 March 2020 until 31 July 2020, unless this period is extended to a date set by decree and no later than 30 November 2020.
Entities involved

Notwithstanding any legislative or regulatory provision to the contrary, this ordinance applies to the following entities:

1° Civil and commercial companies;

2° Holders of transferable securities or financial securities;

3° Economic Interest Grouping and European Economic Interest Grouping (in French "Groupement d'intérêt économique");

4° Cooperatives;

5° Mutual funds, unions of mutual funds and federations of mutual funds;

6° Mutual funds insurance companies and mutual funds insurance group companies;

7° Provident institutions and group companies providing social protection insurances;

8° Municipal credit unions and mutual agricultural credit unions;

9° Endowment funds;

10° Associations and foundations.

ASSEMBLIES

Meeting notices
(Listed companies)

As regards to meeting notices to be sent by post (to registered shareholders who have requested a meeting notice by post):

  • No meeting shall be invalidated by the mere fact that one (or more) notice(s) could not be sent by post due (solely) to "circumstances beyond the control of the company".

In the event of a decision to hold the meeting over the phone or by videoconference (see "Meeting & Remote Voting",below) when all or part of the formalities for convening the meeting (see first paragraph of Article L. 225-104 of the French Commercial Code for shareholders' meetings; first paragraph of Article L. 228-59 of the French Commercial Code for meetings of bondholders) have already been completed prior to the date of such decision:

  • Shareholders are informed as soon as possible by means of a press release, which is effectively and fully distributed by the company;
  • The company remains obliged to carry out the remaining formalities;
  • The modification of the place of the meeting or the methods of participation does not give rise to the renewal of the formalities for convening the meeting and does not constitute an irregularity.

Meeting notices
(Other companies & entities)

In the event of a decision to hold the meeting over the phone or by videoconference (see "Meeting & Remote Voting" section below) or by written consultation (see "Written Consultation" section below) when all or part of the formalities for convening the meeting have already been completed prior to the date of such decision:

  • The members of the meeting shall be informed by any means that ensures that they are effectively informed at least 3 working days before the date of the meeting;
  • The company remains obliged to carry out the remaining formalities;
  • The modification of the place of the meeting or the methods of participation does not give rise to the renewal of the formalities for convening the meeting and does not constitute an irregularity.
Responses to requests for information

In the event of a request for communication of a document or information by a member of a meeting prior to the holding of the meeting:

  • Communication may be validly made by email, provided that the member indicates in its request the email address to which the communication may be made (and the entity is required to comply with the request for communication under the provisions applicable to it).
warning If an email address is not provided in the application, the company remains obliged to send the requested documents and information by post.
Remote Meeting & Voting

Where a meeting is convened in a place affected, on the date of the convocation or on the date of the meeting, by an administrative measure restricting or prohibiting collective gatherings on health grounds:

  • The body competent to convene it (or its legal representative acting on delegation may decide that it shall be held "without the members and other persons entitled to attend being present physically or by phone or videoconference".

In this case:

  • The members of the meeting and other persons entitled to attend shall be notified by any means capable of ensuring that they are effectively informed of the date and time of the meeting and of the conditions under which they will be able to exercise all the rights attached to their capacity as members or as persons entitled to attend the meeting;
  • Members vote or participate in the meeting "in accordance with the other procedures provided for in the texts governing the meeting as amended and supplemented, where appropriate, by this Ordinance" (e.g. postal vote via a paper form, blank proxy to the chairman, electronic vote via a secure platform, remote vote by videoconference).

Decisions are then regularly made.

warning For listed companies, holding the meeting by phone or videoconference is not recommended due to the practical difficulties in identifying shareholders, ensuring the effectiveness of votes cast during the meeting and maintaining a continuous connection throughout the meeting.
Quorum & Majority

The body competent to convene the meeting (or its legal representative acting by delegation) may decide that members of the meetings who participate in the meeting over the phone or videoconference allowing their identification shall be deemed present for the calculation of the quorum and the majority.

Other persons entitled to attend meetings may attend by the same means.

thumbs up These provisions shall apply without any clause in the articles of association or the contract of issue being necessary or capable of opposing them.
Deliberations

The technical means used must transmit at least the voice of the participants and satisfy technical characteristics allowing continuous and simultaneous retransmission of the deliberations.

warning Exception: For meetings of SA held by videoconference or by means of telecommunication allowing the identification of shareholders (cf. II of Article L. 225-107 of the French Commercial Code) or bondholders (cf. Article L. 228-61 of the same code), the nature of the technical means permitted and the conditions of application of the above provisions are those determined by the decree provided for in II of article L. 225-107 of the French Commercial Code (shareholders' meetings) or in article L. 228-61 of the same code (bond holders' meetings), as the case may be.
thumbs up The above provisions apply regardless of the subject matter of the decision on which the assembly is called to vote.
Written consultation

Where the law provides that the decisions of the meetings may be taken by written consultation of their members (this possibility is in particular excluded for listed companies), the body competent to convene the meeting (or the legal representative acting by delegation of this body) may decide to make use of this option.

thumbs up This option shall apply without any clause in the articles of association or the contract of issue being necessary or capable of opposing it.
thumbs up These provisions apply regardless of the subject matter of the decision on which the meeting is called to vote.
DIRECTORS, SUPERVISORY AND MANAGEMENT BOARDS
Remote meeting

Directors, supervisory or management boards shall be deemed to be present at meetings of such bodies if they participate by means of a phone or videoconference:

  1. Enabling their identification and ensuring their effective participation;
  2. Transmitting at least the voice of the participants and satisfying technical characteristics allowing continuous and simultaneous retransmission of the proceedings.
thumbs up These provisions shall apply without any clause in the articles of association or internal regulations being necessary or capable of opposing them.
thumbs up These provisions apply regardless of the subject matter of the decision on which the body is called upon to rule, including the preparation of the annual financial statements (corporate and consolidated) and the management report, which requires the physical presence of the members of the body for certain companies (e.g. Article L. 225-37 of the French Commercial Code).

In application of the pre-existing regulatory provisions, the use of such a means will have to be indicated in the minutes of the meeting.

Written consultation

Decisions of directors, supervisory or management boards may be made by written consultation of their members under conditions ensuring collegial deliberation.

thumbs up These provisions shall apply without any clause in the articles of association or internal regulations being necessary or capable of opposing them.
thumbs up These provisions shall apply irrespective of the subject matter of the decision on which the body is called upon to decide.

For more information, please contact:

Aline Poncelet
Associé, Paris
T +33 (0)1 44 94 31 55
E aline.poncelet @hfw.com

Jens Waldner
Of Counsel, Paris
T +33 (0)1 44 94 31 70
E jens.waldner@hfw.com

Diane Dusserre
Collaboratrice, Paris
T +33 (0)1 44 94 31 92
E diane.dusserre@hfw.com

We are working with clients across our international network to help them minimise the impact of COVID-19 on their business and to prepare for what's next. To find out more, visit our dedicated Covid-19 hub.

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