Autore: Lisa Fortmüller

Possibilities of holding general meetings and members’ meetings during the state of emergency II.

Posted on by Lisa Fortmüller

As from April 11, 2020, a lately issued Hungarian government decree regulates how members’ meetings and general meetings should be held during the state of emergency. The new government decree also overrides the relevant provisions of the Civil Code and the articles of association of companies and other legal entities.

What additional rights does the government decree give to the management?

In the first part of our summary of this newest government decree, we have already explained the increased „freedom” of the management regarding corporate decisions.

In many company’s case, the adoption of the annual financial report under the Hungarian Accounting Act is due in the near future. Pursuant to the interim regulation introduced by the government decree, the management is entitled to decide on the approval of the company’s financial report and the use of the after-tax profit. Moreover, the management can take emergency measures during the state of emergency, which would normally fall within the competence of the decision-making body.

These are very far-reaching decisions. Aren’t the hands of the management tied?

Yes: the decisions mentioned before can only be taken if a meeting of the decision-making body cannot be held, either by the participation of the members by electronic means or by voting in writing.

In addition, the legislature intends to set limits on the “emergency measures” of the management as a guarantee: accordingly, the management (i) may not, as a general rule, amend the articles of association, (ii) decide on the dissolution of the legal entity without a successor, (iii) nor may it decide on the transformation, merger or division of the company.

An additional restriction is that (iv) additional payments or other capital injections may be ordered by the operational management of the legal entity only with the prior written consent of the members/founders. In the case of company forms where company law imposes a minimum capital requirement (i.e. in the case of limited liability companies and public limited companies), (v) the management may not decide to reduce the subscribed capital.

Can members hinder management decisions?

Yes, this is possible before the measure in question is taken; the management may not take a decision if in their written opinion, the majority (at least 51%) of members holding more than 25% of the votes object to the proposed decision of the management. (If the legal person has a member having majority influence or a qualified majority, such member can block the measures of the management on its own.)

What happens if the tasks of the management are not performed by one person but by a body?

Like in the case of decision-making bodies, the government decree intends to enable the widest possible use of electronic means in decision-making processes in the case of management acting as a body. If there is no agreed procedure for the use of modern means of communication (or deviates from the government decree), the chairman of the board (deputy in case of impediment) and ultimately the member requested by the management are entitled to determine the rules of meeting and decision-making. It is important that written consultation and decision-making can also take place by electronic message exchange (i.e. by e-mail).

These facilitations should apply not only to the decision-making of the board of executive officers, but also to the decision-making of the supervisory board (or, if one exists, the audit committee).

What happens to mandates that expire during the state of emergency?

If the mandate of the executive officer of the company expires during the time of the state of emergency, his/her position shall last until the 90th day after the end of the state of emergency. The executive officer shall perform duties during this period. The cited rule applies ex lege, i.e. without a decision of the decision-making body.

If the executive officer resigns, he/she shall still perform his/her duties during the emergency or for 90 days after its termination. The same is true if the mandate is for a fixed term and the fixed term would expire during the state of emergency.

On the other hand, the mandate of the executive officer shall terminate if he/she is removed from office by the supreme body or if a reason for exclusion or conflict of interest arises. It goes without saying that in the event of the death of executive officer, the mandate cannot be maintained either, the just implemented interim rules do not bring change in this, of course.

It is important to emphasize that in the above time interval – similarly to the rules described for the executive officer – the mandate of the permanent auditor does not expire, and the permanent auditor is also obliged to perform duties during this time.

Possibilities of holding general meetings and members’ meetings during the state of emergency I.

Posted on by Lisa Fortmüller

How can corporate decisions be made during the pandemic?

Government decree about holding members’ meetings during the state of emergency

Restrictive measures imposed due to the coronavirus pandemic pose companies to many difficulties. The current situation requires not only financial considerations, but the need for seamless legal operation of the companies also calls for the use of solutions that are not often used otherwise. In our article we briefly overview what decision-making alternatives does the current Hungarian legal system offer to avoid personal contact.

Holding events and gatherings has been prohibited in Hungary since mid-March in general, and the convening of the main bodies of companies has not been named as an exception in the relevant government decree.

As from April 11, a new government decree is in force regulating how to hold members’ meetings and general meetings during the state of emergency. The new government decree overrides the relevant provisions of the Civil Code and founding documents of companies and other legal entities in certain aspects. The decree deals with how decision-making bodies, such as general meetings, members’ meetings and boards of trustees can make decisions during the limited curfew implemented in the course of the state of emergency.

Who is affected by the regulation?

The decree applies to both legal and non-legal entities. So, the scope of the ones affected includes, among others, general partnerships and limited liability companies, and public limited companies, cooperatives, associations and foundations. However, the government decree does not apply if the decision-making body is not prevented from taking a decision in compliance with the rules on meeting restrictions. Nevertheless, the provisions of the decree may be applied even in such cases on a voluntary basis.

Is there a case where the decision-making rules under the government decree apply even if the meeting could otherwise be held under the movement restriction rules?

Yes, if the number of members of the decision-making body is not more than five and decision-making can be made in the manner specified in the government decree. In the case of a decision-making body with more than five but not more than ten members, the majority of members with a majority of votes may request the management to initiate decision-making under the rules of the government decree, while in case of a decision-making body of more than ten members, the management can initiate it on its own.

How should the meeting be held under the regulation?

There are two ways. Either the meeting may be held with the participation of the members by electronic devices, or a decision may be taken in writing without holding a meeting on the initiative of the management, even if the articles of association does not provide for these possibilities and conditions.

Decision making without holding a meeting

Hungarian company law provides an opportunity for companies – excluding public limited companies – to make decisions without holding a meeting. Decision-making without holding a meeting serves as a possible alternative for the members to vote from home, as it does not require personal appearance. It is important to emphasize, however, that this is a written decision-making process in practice (for example voting by letter or email), so it is not the same as holding a meeting by electronic communication devices.

The decision-making may be initiated by the management by sending a draft of the resolution to the members. Members shall be given a period of at least fifteen days to send their votes to the management unless it is otherwise provided in the articles of association. In decision-making without a meeting, the decision-making process is effective if at least as many votes are sent to the management as would be necessary for a quorum if the members would hold the meeting.

Holding meetings by electronic communication devices

Company decisions can also be made online. In this case, participation shall be provided by means of an electronic communication device which allow the identification of members and mutual, uninterrupted communication between members. If the articles of association do not provide the rules for meeting held by electronic devices the management is entitled to establish these rules and communicate them to the members. The management must determine the electronic devices and IT applications that can be used and, if the management does not know the members (representatives) personally, the method of proving their identity.

Before the meeting, it is recommended to make a “test call” with the members of the company so that everything can be done smoothly during the decision-making process and the meeting can be held validly. Meetings can also be held on the nowadays popular applications like Skype, Zoom, Microsoft Team or Jitsi. It is important that the decisions taken and everything which was said at the meetings should be recorded so that they can be recalled later. All this means that there is no need to make a written record, it is only important that what is said on the meetings should be recallable in the future.

In conclusion, the current Hungarian legal system, in particular the new government decrees offer companies a number of choices how members should avoid personal contact in their decision-making. The new government decree also defines the cases when the management may decide on certain matters within the competence of the general meeting, the members’ meeting, regulates the operation of the executive bodies separately, and also contains additional rules concerning public limited companies. We will analyze these issues in our next publication.

Some important questions nowadays in Hungary: Conversion of business methods, employee’s leave, suspension of business activity for small and mid-sized enterprises

Posted on by Lisa Fortmüller

Conversion of regular business methods into ordering and contracting by telephone

The spread of the coronavirus poses new challenges for businesses that have so far been using primarily personal contact or paper-based methods during their activities. Many would introduce processing orders and making contracts by telephone in their administration to replace personal contact. In our newsletter, we represent the most important legal aspects should companies consider such conversion of their business methods.

The first question is how detailed the tenderer must describe the content and elements of the contract in the telephone contracting process in order for it to be validly concluded. In order for the contract to be valid, the essential elements of the contract must be agreed by the parties. Such material elements are typically the amount of the product or service, the payment deadline, the main features of the product or service, or the method of payment, but it varies from contract to contract as to what may qualify as a material item. Many companies already enter these essential elements into their contracts in accordance with their general terms and conditions (GTC) and regulate their details therein.

We would also recommend this method as a starting point for regulating telephone and online contracts, as it is the simplest form of detailed and prudent contracting. When concluding a telephone contract, it is always necessary to inform and draw the customer’s attention to the detailed knowledge of the GTC and the terms of purchase.

Recording telephone conversations

Another important aspect of telephone order is the matter of voice recording. Most customer services record calls and a machine voice automatically notify customers thereof. This can later be important to a business, if we think about what happens if the customer claims to have been invoiced for a different amount than the amount of the order, or if he/she received a different product. Recording the telephone conversations serve as a perfect solution in the event of a dispute, as the voice recording has probative value if it is lawfully recorded.

According to the information provided by the Hungarian National Authority for Data Protection and Freedom of Information, telephone conversations can only be recorded and stored pursuant to the mandatory requirements of law or upon the prior consent of the person concerned as data subject.

However, in addition to the consent of the data subject, it is a further condition that the data subjects are to give their consent after being duly informed of the purpose, duration and conditions under which the conversation will be recorded, stored and used. For this purpose, a statutory privacy statement published on the company’s website and accessible to all may be appropriate. However, data management must always remain within the necessary framework and be capable of achieving the desired purpose.

From the above summary, it is pointed out that there are relatively many legal obligations associated with lawfully recording telephone orders, but its introduction in accordance with the law can be a long-term solution for businesses. Of course, our summary does not cover all aspects of regulatory design, we have only highlighted some important issues.

Independent 14 days of the employee’s leave

This time, we draw attention to a lesser-known provision of Hungarian labor law that may be useful for companies where it is not feasible to work from home, or which are forced to shut down temporarily as a result of preventive government measures.

Granting leave by the employer

Employers generally seek to treat the current situation fairly, within the limits of economic reasonableness, and to avoid, as far as possible, dismissing workers. If the employer is unable to meet its employment obligation, it seems an obvious solution to grant leave to the workers concerned.

The „14 days rule”

Leave is generally granted by the employer, but the parties must pay attention to certain restrictions. Such a restriction is that, unless otherwise agreed, the leave must be granted in such a way that the employee is released from his/her obligation to work and to be available for at least fourteen consecutive days once per calendar year.

Unless otherwise agreed, if the employer is forced to grant leave to its employees anyway, they can use the current situation to fulfill their obligation described above.

Idle time/Downtime

If the employer is unable to meet its employment obligations, i.e. to give work to its employees during the working hours, we are talking about downtime/idle time. In this case, the employee is still entitled to the base salary or, if he or she was entitled to a wage supplement according to his or her position, the employer is also obliged to pay it to him or her. An employer may be released from its payment obligation only if it can prove that it was unable to fulfill its employment obligation for an unavoidable external reason.

By external reason we mean all the reasons that fall outside of the scope of interests and powers of the employer, and the employer could not prevent or eliminate, and this was not to be expected from the employer. However, we would like to draw your attention to the fact that we cannot automatically talk about the occurrence of force majeure at the same time as the introduction of the state of emergency. At present, no „general quarantine” has been ordered, so in theory the employer would still be able to employ the employee if the employer can provide the employee with safe and healthy working conditions.

Suspension of the business activity

Entrepreneurs subject to KATA taxation (a special form of simplified taxation applicable to certain small and mid-sized enterprises, entrepreneurs in Hungary) who have not been exempted from paying their KATA tax  , but who cannot generate income in the present situation, should consider suspending their business activities. , The suspension of the business activity must be communicated towards the tax authority, the local government responsible for the local business tax and to the competent professional chamber. During the break, these small and mid-sized enterprises still have to pay a small amount of monthly contribution to social security.

Changes to leases due to the law to mitigate consequences of the COVID-19 pandemic

Posted on by Lisa Fortmüller

As expected, the German Parliament and Federal Council have passed a law to mitigate the consequences of the COVID-19 pandemic. The law applies to both entrepreneurs and consumers as well as to commercial and residential tenants.

In general, landlords can terminate leases, if tenants are in arrears with their rents for two consecutive dates. Another reason for terminating leases is when the tenants are arrear with their rent in an amount equal to the total of the rent for two months during a period extending over more than two months.

What has changed?

The new law to mitigate consequences of the COVID-19 pandemic is limiting these termination rights temporarily as follows: if tenants are not able to pay their rent between 1 April 2020 and 30 June 2020 due to the COVID-19 pandemic, landlords cannot terminate leases. This period will possibly be extended until 30 September 2020, depending on whether the COVID-19 pandemic will continue to have a significant impact on social life or not.

What are tenants required to do?

In the event of a dispute, tenants must prove that their arrears are based on the COVID-19 pandemic. This can be done, for example, by means of a certificate of state aid or a certificate of reduced income or loss of earnings. Commercial tenants must indicate that the operation of their businesses has been prohibited or significantly restricted due to the COVID-19 pandemic.

For how long are the termination rights excluded?

The ban on termination for arrears from this period is valid until 30 June 2022. This means that tenants can remedy their arrears until 30 June 2022. Therefore, the law does not affect the tenants’ obligation to pay, but only allows them to fulfil their obligation later.

The right to terminate leases due to other reasons than the COVID-19 pandemic remains unaffected.

Amendments to public procurement law in view of drafted “Anti-Crisis Shield 2.0”

Posted on by Lisa Fortmüller

A draft of so-called “Anti-Crisis Shield 2.0” has just reached the Sejm (the “Draft Bill”). The Draft Bill contains further amendments to the special-purpose act already in place, incl. ones revising the Public Procurement Law (the “PPL”). Below you will find a summary of the proposed changes.

AMENDMENTS TO PUBLIC CONTRACTS

1.1. It is still possible to modify a contract executed under PPL in terms of deadline, manner of contract performance, scope of services and preclusion of contracting authorities’ liability (incl. those that award utility contracts) for refraining from determination and pursuit of contractor’s financial obligations (e.g. contractual penalties), or for introduction of amendments to contracts – upon the conditions specified in the Draft Bill.

1.2. The Draft Bill expands the list of circumstances (related to COVID-19) which affect or may affect contract performance, of which the parties should notify each other. Based on the Draft Bill, the circumstances will include “other circumstances which prevent or materially hinder contract performance.”

1.3. The circumstances listed in the last version of the Anti-Crisis Shield, as well as the ones proposed in the new version will apply to subcontractors and further subcontractors equally.

1.4. The Draft Bill includes a new provision applicable to contractors based outside Poland which reads as follows: “where a contractor is based or carries out actions related to contract performance outside Poland, the documents issued by relevant institutions in the countries or such contractors‘ statements shall be required instead of the documents referred to in subsections 1 – 5. ”

1.5. The Draft Bill also modifies the rule of amending public contracts in terms of remuneration. The provision currently in effect: “a change of the scope of services provided by the contractor and a corresponding adjustment of the contractor’s remuneration, provided that the increase of the remuneration resulting from each consecutive change is not higher than 50% of the original contract value” will be replaced with the following provision: “a change of the scope of services provided by the contractor and a corresponding adjustment of the contractor’s remuneration or manner of settling the contractor’s remuneration.” This means that an adjustment of remuneration or the manner of settling the remuneration will go hand in hand with the change of the scope of the services – based on the special-purpose act (its former and new version) it is not possible to seek an adjustment of the remuneration (the manner of settling the remuneration) without changing the scope of the services as well.

1.6. Based on the Draft Bill, public contracts will be executed in accordance with the following provision: “During the state of epidemic threat or the state of epidemic and the ensuing travel restrictions, public contracts are executed in written form (or are otherwise null and void) or in electronic form with qualified electronic signature, provided that the contracting authority consents to such manner of executing the contract. ”

1.7. It is expected that the provisions of the Draft Bill will apply to those public contracts which are not covered by the provisions of the PPL.

1.8. The same rules of notification and contract amendment were introduced with respect to offset contracts executed on the basis of the Act on Selected Contracts Executed in Connection with the Performance of Contracts of Fundamental Importance for National Security of June 26, 2014.

1.9. On a side note, it is worth adding that in order to introduce amendments to a public contract, it is necessary for parties to reach an understanding and enter into an amending annex. This means that claims of one of the parties do not automatically lead to amendments. The same is true for changes that could be related to the current COVID-19 threat.

CONTRACTING AUTHORTIES’ LIABILITY

There have been no changes to the provisions involving the preclusion of contracting authorities’ liability, arising from the Liability for Breach of Public Finance Discipline Act, for amendments to a public contract and refraining from determination and pursuit of claims arising from non-performance or improper performance as a result of circumstances related to COVID-19.

NATIONAL APPEALS CHAMBER

1.1. The Public Procurement Office together with the National Appeals Chamber and the Ministry of Development are working on solutions that would allow the National Appeals Chamber to resume hearing appeals.

1.2. Based on the information available on the Public Procurement Office’s website, a temporary procedure has been developed, where the National Appeals Chamber is to issue rulings on the basis of documents provided by the parties, however, further organizational and legislative changes are required for the purpose of implementing this solution.

Given the foregoing, we recommend filing appeals online, using a qualified electronic signature.

We reiterate all our recommendations for contractors and contracting authorities, related to the current situation, as provided in the previous alerts (alert 1 i alert 2).
We are ready to assist you in evaluating your particular situation. Please feel free to contact us any time by email or telephone.

Main changes in Hungary due to the announced state of emergency

Posted on by Lisa Fortmüller

Since the World Health Organization (WHO) declared the rapidly spreading coronavirus a pandemic, people are increasingly affected by government, employers and many other decisions.

Due to the COVID-19 disease, the government declared a state of emergency in the territory of the Hungary on March 14, 2020. In the state of emergency, the Hungarian government has ordered extraordinary measures to prevent the health and life of the Hungarian people from the now pandemic coronavirus.

Exceptional measures led to create the 47/2020 (III.18.) and 61/2020 (III.23.) Government Decrees, which aim to ensure economic performance and survival of the small and medium-sized enterprises in Hungary.

  • Loan moratorium

Government Decree 47/2020 (III.18.), on the measures to protect the national economy, has been published in the Hungarian National Gazette. The decree contains the details of the loan moratorium announced by the Prime Minister previously. Furthermore, it declares provisions to reduce the burden on the sectors most affected by the effects of the COVID 19 epidemic.

Under the decree, all the debtors – whether businesses or individuals – will be deferred until December 31, 2020 in respect of payment obligations arising from loan, loan or financial lease contract entered. During the moratorium, the debtor is not obliged to pay any capital, interest, or other charges arising from such contracts, as the deadline extended.

The payment extension period modifies the period of completion and the maturity, meaning that the terms of these contracts are extended from March 18, 2020 to December 31, 2020. Thus, it is not to be expected that the banks will eventually seek a lump sum repayment during the moratorium, but the contracts (and all repayment installments) will be extended by approximately 9 months. Of course, the debts will continue to yield interest, but this additional cost is expected to be included by the banks in the future installments.

  • Temporarily the Government exempts low-income enterprises and individuals from paying their taxes

In addition to the credit moratorium, another major change came into force by the 47/2020 (III. 18.) decree. The Government exempted the „low-income” entrepreneurs such as taxi drivers, passenger transport companies, from taxation. (In Hungary this tax type is named ’KATA’, hereinafter: „KATA”).

The 61/2020 (III.23.) Government Decree clarified the scope of the activities which „benefit” from the tax and contribution concessions granted by the decree. This recent decree has significantly extended the scope of activities which do not have to pay KATA until the state of emergency. It means that, at the moment hairdressers, personal trainers, painters, dentists, hospitality practitioners, waiters/waitresses etc., whose income is mostly affected by the epidemic, do not have to pay their taxes in this period.

  • Suspension of executions

One of the other changes which came into force by the 60/2020 (III.23.) Government Decree is the suspension of the executions and tax executions from March 24, 2020, until the 15th day after the state of emergency has ceased. In fact, if the end of the state of emergency occurred during the fall or winter, then the evictions could only continue next April, in 2021.

Until the end of the state of emergency, an on-the spot procedure, and an auction may not be held and no on-site procedural action may be taken. These procedures and actions can only be done once the state of emergency has ceased, with the time limit for taking the procedural action restarting on the 15th day after the cessation of the emergency.

Corporate resolutions vs. coronavirus restrictions. Updated as of April 01, 2020.

Posted on by Lisa Fortmüller

Actions aimed at quelling the spread of COVID-19, such as border closures, flight cancellations and severe restrictions on gatherings and travel, may have a massive impact on business operations, especially when it comes to resolutions adopted by shareholders, management boards and supervisory boards.

If resolutions cannot be passed by the shareholders meeting or management board, it may have a significant adverse impact on the company’s daily business.

In order to address the needs of shareholders and members of corporate bodies, we wish to offer some insight on solutions that may help mitigate the impact of the state of epidemic, as well as an overview of the amendments to the Commercial Companies Code, introduced as part of the so-called “Anti-Crisis Shield” on the basis of the Act of March 31, 2020, amending the Act on Special Solutions Related to Prevention and Combating of COVID-19, Other Infectious Diseases and Crisis Situations Arising from them, as well as amending selected other acts (the “Act”).

Supervisory Board

It might be easier for a supervisory board to operate if the following options are applied:
– passing written resolutions by circulation:
– voting on resolutions through electronic means;
– proxy voting (in writing).

Now, when the Act has been passed and come into force, adoption of resolutions in the manners listed above is possible with no need to define the basis for such action in the company’s articles of association (unless the articles of association expressly exclude such options).

Moreover, as a result of amendments to the Commercial Companies Code, introduced by the Act, resolutions on matters put on the agenda during a supervisory board meeting, election of the supervisory board president or deputy president, appointment of a management board member, and dismissal or suspension of such individuals can also be adopted by circulation or through electronic means.

Management Board

The Act has also modified the provisions of the Commercial Companies Code as regards adoption of resolutions by management boards. It is now allowed to:
– attend meetings through electronic means (unless the company’s articles of association expressly exclude this option);
– pass resolutions by circulation or through electronic means (unless the company’s articles of association expressly exclude this option);
– vote in writing by delegating the voting power to another management board member (unless the company’s articles of association expressly exclude this option).

Meetings of shareholders

Shareholders meetings may only be held in Poland, and should take place in the city/town where the company’s registered office is situated, or at a different location, as specified in the company’s articles of association or agreed upon by all shareholders.

Shareholders who are unable to attend a meeting in person may use the following solutions:

1) Proxy voting

A shareholder may appoint a proxy who will attend the meeting and vote on the shareholder’s behalf (unless applicable laws or the articles of association impose any restrictions in that respect).
A proxy should be granted in writing or will otherwise be null and void.
The company’s management board members and employees cannot attend a shareholders meeting in the capacity of a proxy.

2) Voting in writing (in a private limited liability company)

In the case of a private limited liability company, shareholders can pass resolutions in writing, i.e. by:
– expressing a written consent for a resolution to be adopted; or
– holding a vote on a resolution in writing, following all shareholders’ approval of such voting procedure.

A vote in writing may be held irrespective of the place where the shareholders are when casting a vote.

Not all resolutions may be adopted by circulation, though. Voting in writing is not an option in case voting secrecy is required (e.g. in case of a resolution on dismissal of a management board member or other HR issues).

3) Attending a meeting through electronic means

A shareholder may attend a shareholders meeting through electronic means (videoconference, teleconference, etc.).
The Act allows the possibility to participate in a meeting through electronic means, regardless of whether the articles of association so permit (unless the articles of association expressly exclude such option).

The following conditions apply to attendance through electronic means:
– a decision on attendance through electronic means is made by the person convening the meeting;
– the shareholders meeting notice needs to include information about the manner of participation, speaking, performance of voting rights and raising objections to the adopted resolution(s);
– real-time two-way communication needs to be ensured during the meeting, while all participants who are outside its venue must be able to speak at the meeting;
– shareholders can also participate and vote through proxies, exercising their voting rights before or during the meeting.

Detailed rules for participation through electronic means should be specified in bylaws adopted by the supervisory board (or in case there is no supervisory board in a private limited liability company – in bylaws adopted in a resolution of shareholders (which can be passed outside of a shareholders meeting).

However, this format of a shareholders meeting is not equivalent a virtual meeting. This means that the following rules apply to meetings held through electronic means:
– a meeting should be held in a specific venue in Poland, determined in accordance with the Commercial Companies Code and the company’s articles of association;
– the chairperson and the clerk (or a notary public, if the notarial form is required for minutes from the meeting) must be present at the meeting, while the remaining participants are allowed to communicate electronically;
– written minutes from the meeting are required.

In case of public companies, the Act also implements the obligation to ensure a real-time broadcast of a shareholders meeting.

Moreover, the Act includes provisions governing the manner in which companies receive, register and count electronic votes. These provisions will come into effect as of September 03, 2020, though.

4) Using the IT system

Shareholders may make decisions using the model resolution available in the IT system but this option is only available to private limited liability companies established through the IT system.

There is no need to hold a formal shareholders meeting in order to pass this type of resolution, with the only condition for its valid adoption being that all the shareholders should vote by submitting a relevant statement through the IT system.

The above-mentioned voting statements must be confirmed with an electronic signature, a qualified electronic signature or a trusted signature.

Extension of deadline for preparation and approval of financial statements in relation to CVOID-19

The Act includes solutions aimed at helping companies to meet the deadline to hold an annual shareholders meeting, at which shareholders approve the company’s financial statements for the previous financial year.

The Act includes a provision according to which the minister competent to handle public finance affairs would be authorized to issue a regulation entitling him/her to postpone the deadlines for the approval of financial statements in case of the state of epidemic threat or the state of epidemic, considering the need to ensure proper performance of obligations in that respect.

On March 2020, the Minister of Health issued a regulation specifying new deadlines for fulfillment of recordkeeping obligations, as well as obligations related to preparation, approval and publication of financial statements or information, and their submission with competent registries, units or authorities (Dz.U. / Journal of Laws of 2020, item 570), on the basis of which the deadline has been extended for preparation of separate financial statements, directors’ reports and consolidated financial documents of capital groups.

Pursuant to the regulation:
– the deadline to prepare annual financial statements, directors’ report, and consolidated financial statements / report on capital group operations has been extended by 3 months, i.e. they should be made within 6 months of the balance sheet date (if the financial year ends on December 31, 2019, the deadline is June 30, 2020);
– the deadline to approve annual financial statements, directors’ report, and consolidated financial statements / report on capital group operations has been extended by 3 months, i.e. they should be approved within 9 months of the balance sheet date (if the financial year ends on December 31, 2019, the deadline is September 30, 2020);
In case of entities that are supervised by the Polish Financial Supervision Authority, the aforesaid dates have been extended by 2 months.

The extended deadlines apply to obligations concerning the financial year ended after September 29, 2019, yet no later than April 30, 2020, whose due date did not fall before March 31, 2020.

The regulation came into force as of March 31, 2020.

Remuneration policy

According to the Act, in case of declaration of the state of epidemic threat or the state of epidemic, the minister competent to handle the affairs of financial institutions is authorized to issue a regulation specifying a different deadline for adoption of a resolution on remuneration policy for management and supervisory board’s members, as discussed in article 36 section 1 of the Act of October 16, 2019 on Amendments to the Act on Public Offerings and Conditions for Introduction of Financial Instruments into Organized Trading, and on Public Companies, and Amendments to Selected Other Acts.

In case such regulation is issued, a shareholders meeting’s resolution on remuneration policy should be adopted within the deadline specified in the regulation.

Many of the solutions outlined above may significantly facilitate and expedite the operations of corporate bodies and daily business, both during the epidemic and afterwards.

In light of the existing and planned regulations, now might be a good time to insert relevant provisions into the company’s constitutional documents, adopt the required policies or grant relevant proxies.

Our corporate law team is ready to address any questions or doubts you might have. Please feel free to contact us.

Update | Rights for debtors to refuse performance in the Corona crisis – creditors can take countermeasures

Posted on by Lisa Fortmüller

What is at issue here?

The German Bundestag has passed the act to mitigate the effects of the Covid 19 pandemic. Among other things, this provides for rights of refusal of performance for consumers and small enterprises (fewer than 10 employees and annual turnover totalling a maximum of EUR 2 million). These are to be given the right to refuse the fulfilment of the obligation to satisfy a claim in connection with a continuing obligation until 30 June 2020 if the obligation cannot be fulfilled as a result of the corona crisis or if the fulfilment leads to a threat to the existence of the debtor. The prerequisite is that the relevant contract was concluded before 8 March 2020. Generally, all agreements with continuing obligations are affected, except for rental, lease, loan and employment contracts.

What is to be done from the creditor’s perspective?

In practice, especially medium and large enterprises that have entered into continuing obligations with consumers and micro-enterprises before 8 March 2020 must therefore be prepared for defaults. Since the act does not differentiate according to which side the debtor is on, both payment defaults and default on performance can threaten companies. From the creditor’s perspective, there are now two options. Either the creditor accepts this fact and trusts that the debtor will fulfil its obligations properly. Or the creditor prefers an active approach. For example, it may make sense to renegotiate contracts that were concluded before 8 March 2020. In this way, one can evade the scope of application of the draft law. Especially as long as the debtor is still well off, he might be accept such renegotiation. After all, the parties are only renegotiating what both parties currently want.

Businesses no longer required to seek KNF’s approval for offering memorandum in case of “rolling” offerings – relief for businesses amid coronavirus epidemic

Posted on by Lisa Fortmüller

In the Supervisory Impulses Package for the Security and Growth of the Capital Market, the Polish Financial Supervision Authority (KNF) announced relief for businesses regarding (among others) the offering documents processing. As promised, the “Anti-Crisis Shield,” adopted on March 31, 2020, amends applicable regulations regarding the obligation to submit an offering memorandum to KNF in the case of the so-called “rolling” offerings.

Based on the revision of the Act on Public Offering, Conditions Governing the Introduction of Financial Instruments to Organized Trading, and Public Companies of July 29, 2005 (Dz. U. / Journal of Laws of 2005 no. 184, item 1539, as amended) (the “Public Offering Act”), which was enacted on November 30, 2019, a public offering of securities addressed to fewer than 150 natural or legal persons per a Member State, qualified investors excluded, in the case of which the number of persons to whom it is addressed plus the number of persons to whom such public offerings of the same type of securities were made over the preceding 12 months exceeds 149, requires the publication of an offering memorandum, which needs KNF’s approval.

In other words, offerings made over a 12-month period are added together. If the number of addressees of such offerings exceeds 149, an offering memorandum regarding the offering, approved by KNF, must be published (the Public Offering Act provides for one exception – an offering addressed exclusively to the holders of same-type securities originating from the same issuer or to entities which received offerings of purchasing the issuer’s bonds as part of debt conversion following a purchase of other bonds of the same issuer created earlier.

In accordance with the act amending the Act on Special Solutions Related to Prevention and Combating of COVID-19, Other Infectious Diseases and Crisis Situations Arising from them as well as amending selected other acts (Dz. U. / Journal of Laws of 2020, item 568), if the state of epidemic threat or the state of epidemic is announced, offering memoranda regarding this type of public offerings will not require KNF’s approval. The requirement is to be suspended until the state of epidemic threat or the state of epidemic is cancelled and a month thereafter.

This will significantly facilitate and expedite the procedure faced by the issuers seeking to raise capital by way of several offerings addressed to fewer than 150 persons (qualified investors excluded).

If you have any questions, do not hesitate to contact us.

Amendments to public procurement law in view of “Anti-Crisis Shield” – UPDATE

Posted on by Lisa Fortmüller


As part of the so-called “Anti-Crisis Shield,” March 31 saw the Polish President sign an act (the “Act”) that contains modifications related to the public procurement law (“PPL”). Below you will find a summary of changes to the previous version of the “Anti-Crisis Shield” (the “Draft”) that we discussed in our alert of March 24, 2020.

  1. PRECLUSION OF THE APPLICATION OF PPL ACT – article 6 section 1 of the Act

    The Act does not introduce any modifications to the Draft. PPL will not apply to orders for services or deliveries which are necessary to prevent COVID-19 if the disease is highly likely to spread in a fast and uncontrollable manner, or if required for the purposes of public health protection. Please note that pursuant to article 46c of the Human Infections and Infectious Diseases Prevention Act of December 05, 2008, “public procurement regulations do not apply to orders for services, deliveries or construction works, issued with the aim of preventing or combating the epidemic within the territory covered by the state of epidemic threat or the state of epidemic.”
    This provision specifies a clearly broader range of orders that are exempt from the application of PPL during the epidemic since it includes construction works.

  2. AMENDMENTS TO PUBLIC CONTRACTS

    2.1. It is possible to modify an agreement executed under PPL in terms of deadlines and remuneration. Also, the Act precludes liability of contracting authorities (incl. those that award utility contracts) for refraining from determination and pursuit of contractor’s financial obligations (e.g. contractual penalties), or for introduction of amendments to agreements – upon the conditions specified in the Act. Both these solutions have remained unchanged from the Draft.

    2.2. The deadline has been extended for a party to a public contract to respond to the other party’s notification about the impact (whether actual or potential) of circumstances related to COVID-19 on proper performance of the agreement. The current term is 14 days from receipt of a notification, along with justification (and evidence, i.e. relevant statements or documents). The previous deadline was 7 days.

    2.3. On a side note, it is worth adding that in order to introduce amendments to a public contract, it is necessary for parties to reach an understanding and enter into an amending annex. This means that claims of one of the parties do not automatically lead to amendments. The same is true for changes that could be related to the current COVID-19 threat.

    2.4. It has been expressly stated that COVID-19 circumstances discussed in the Act cannot independently serve as the basis to exercise the contractual right of rescission.

  3. CONTRACTING AUTHORITIES’ LIABILITY

    There have been no changes to the provisions involving the preclusion of contracting authorities’ liability, arising from the Liability for Breach of Public Finance Discipline Act, for amendments to a public contract and refraining from determination and pursuit of claims arising from non-performance or improper performance as a result of circumstances related to COVID-19.

  4. NATIONAL APPEALS CHAMBER AND INSPECTIONS

    There are new regulations related to the National Appeals Chamber.

    4.1. During the state of epidemic, declared due to COVID-19, the National Appeals Chamber does not hold any sessions and hearings
    in the presence of parties and participants to the appeal procedure.

    4.2. The Act does not interrupt or suspend the period for submission of an appeal, meaning that contractors that want to use legal protection measures will be bound by the dates specified in PPL. In case of an appeal, the standard term will be 5 or 10 days of knowledge about the basis for appeal submission.
    We recommend filing appeals online, using a qualified electronic signature.

    4.3. The Act does not suspend the inspections of prior public contracts co-financed by the European Union, which are conducted by the President of the Public Procurement Office with respect to contracts whose value is equal to or higher than: (i) EUR 20,000,000 for construction works; and (ii) EUR 10,000,000 for deliveries and services. A post-inspection report should be delivered within 14 days of receipt of all relevant documents (or 30 days – in case of a particularly complex inspection).

We reiterate all our recommendations for contractors and contracting authorities, related to the current situation, as provided in the previous alert .

We are ready to assist you in evaluating your particular situation. Please feel free to contact us any time by email or telephone.