After the state of emergency has been declared in Romania by Presidential Decree No. 195/2020 (the Presidential Decree), an increasing number of drastic measures have been taken by the government, with a view to prevent the spread of the COVID-19. In this context, the Romanian Financial Supervisory Authority (the FSA) approved on 8 April 2020 Regulation No. 5/2020 for the establishment of measures regarding the organisation of general meetings of shareholders of issuers during the emergency state generated by Covid-19 (Regulation 5/2020) which is expected to shortly enter into force, when published in the Official Gazette.
This regulation was highly expected by issuers in the context of the fast approaching date for the mandatory approval of the annual financial statements.
Regulation 5/2020 shall be applicable for the entire duration of the emergency state.
1. Concerned entities and applicability
- Concerned entities. The new requirements shall apply in the context of organising general meetings of shareholders (GMSs) of issuers (i) having their registered offices in Romania and (ii) having their shares traded on a regulated market (e.g., the main market operated by the Bucharest Stock Exchange (BSE)) or on a multilateral trading facility (e.g., the AeRO market).
- Applicability. Regulation 5/2020 shall be applicable to those GMSs for which the deadline for submission with the issuer of powers-of-attorney/ ballots for voting by correspondence falls at least four (4) business days after Regulation 5/2020’s entry into force.
- For GMSs which have already been convened, re-convening or republishing the convening notices will not be required, but when holding such GMSs the restrictions detailed in section 3 below must also be observed.
2. Issuers’ pre-GMS obligations
As a matter of principle, issuers falling under the scope of Regulation 5/2020 are required to ensure the proper organisation of GMSs, without any breach of the applicable legislation, while at the same time complying with the recent normative acts of an exceptional nature (e.g., the Presidential Decree, the various military ordinances, etc.).
To this end, the following (without limitation to such) measures must be complied with by issuers in the process of organising the GMSs:
- Publishing current reports (to be also communicated to FSA and BSE) on the issuers’ websites containing recommendations for shareholders to use electronic means (and avoid, to the extent possible, the use of mail or courier services) when acting with a view to exercise their rights in respect of GMSs, e.g., (i) when consulting documents related to the respective GMS; (ii) when proposing new items to be included on the agenda; when asking questions regarding the relevant GMS; (iii) when submitting powers-of-attorney or (iv) when voting (it shall be expressly stated therein that, preferably, votes shall be cast by e-mail); and
- Publishing current reports (to be also communicated to FSA and BSE) on the issuers’ websites containing disclaimers regarding: (i) the possibility for issuers to apply restrictions in force at the date of the GMS, regarding the number of participants to events within closed premises upon express decisions of the competent authorities, as well as (ii) an explicit warning that participation to events/ public gatherings within closed premises, subject to the conditions imposed by the authorities at the time of the GMS, will expose participants to a potential contamination with SARS-CoV-2 and that the issuer/ its management cannot be held liable for such risk.
3. Vote by correspondence or through use of electronic means
At this stage, considering the existing restrictions in the context of the COVID-19 outbreak, issuers must ensure the possibility of GMSs to be held exclusively by use of the vote by correspondence or through use of electronic means. However, physical presence is only permitted if the GMS can be held with the observance of the existing restrictions imposed by authorities at the time of the GMS (e.g., the number of present participants not to be higher than the maximum number permitted for indoor gatherings, the space of the GMS to allow observance of the social distancing measures, etc.).
What Regulation 5/2020 further provides is that, should authorities issue decisions for express restriction of holding GMSs by physical presence, holding GMSs by way of using the vote by correspondence and by casting the votes through electronic means (where the issuers has the latter in place, in accordance with the applicable legislation) becomes an obligation in all cases.
- In such latter situation, issuers must publish on their website with at least three (3) business days in advance of the deadline for submission with the issuer of the powers-of-attorney/ the ballots for voting by correspondence a current report (to be also communicated to FSA and BSE) stating that the respective GMSs cannot be held by physical presence. Regulation 5/2020 does not however regulate the transitory situation in which the measures rendering physical presence impossible are approved inside of the three (3) business days deadline.
The FSA aims at limiting physical presence during GMSs, which is something likely to be achieved to a significant extent.
However, in the context of the approved measures, issuers will have to comply with additional reporting obligations as per the above.
Also, Regulation 5/2020 still does not address several technical questions in relation to several issues, a few of which being (i) what will be the regime in respect of issuers of other financial instruments as Regulation 5/2020 only approaches issuers of shares (e.g., bondholder meetings)? (ii) is there still an obligation for management to attend meetings? (iii) how will the requirement of appointing a meeting secretary from within shareholders be treated in case no shareholder is present? (iv) depending on potential further measures from authorities, will there be any flexibility on the term for approving annual financial statements? etc.
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