The incorporation of digital technologies into corporate law
Richards, Cardinal, Tützer, Zabala & Zaefferer
Dolores M Gallo
Richards, Cardinal, Tützer, Zabala & Zaefferer
The government of Argentina has introduced a compulsory lockdown (aislamiento social preventive y obligatorio) in an effort to prevent the spread of Covid-19. The majority of workers have been forced to work from home, except those in activities the government considers essential.
What initially started as a concern to mitigate health risks, has now made local companies address the issue of holding virtual board and shareholder meetings, whether or not they have the applicable provisions in their by-laws.
Until recently, Argentinian corporate law lacked serious and thoughtful regulations regarding technological development although substantial changes, such as the incorporation of companies online, online filings and, in limited circumstances, holding meetings without attendees being present ‘in person’, had been contemplated.
The Covid-19 pandemic and compulsory lockdown has forced Argentinian corporate law to make significant progress in matters of digitalisation in the operations of private entities.
In so far as the solutions provided by the digitalisation prove trustworthy, technological progress will continue to effect corporate law. Lawyers shall be forced to change models and learn how to deal with the digital concepts, or otherwise they face the risk of extinction.
Shareholders and board of directors meetings
Argentinian corporate law did not regulate for the holding of meetings without the presence of attendees in person.
In 2015, the Argentinian Civil and Commercial Code (ACCC) introduced the possibility for partners to take decisions without their physical presence, through media allowing simultaneous communication, the only requirement being that the minutes had to be signed by the president or relevant officer certifying the media used for such decision making. Even though the provision refers to the ‘decisions of partners’, it has been construed that this can also apply to board of directors’ meetings.
This provision encountered an important operational obstacle in General Resolution No 7/2015 of the Public Registry of Commerce of the City of Buenos Aires (IGJ), which in its section 84 states that decisions of the board can be taken electronically, ‘provided the quorum of the meeting is duly constituted with the individuals physically attending the meeting.’
In other words, according to the criterion of the IGJ, until the amendment, in order to hold long-distance board of directors’ meetings, it was necessary that such a possibility was included in the by-laws and that members attending the meeting constituted sufficient quorum. Unless these conditions were met, meetings had to be held in person.
In accordance with measures adopted to reduce the economic impact of the Covid-19 pandemic, as a result of the General Resolution No 11/2020 issued by the Public Registry of Commerce on March 2020, the IGJ allowed the management bodies of companies under its surveillance to hold meetings remotely, through the use of computers, other digital means or platforms if such possibility is contemplated in their by-laws.
The new section 84 of General Resolution 7/2015 now states that the by-laws of companies registered before the IGJ may include mechanisms to hold government and management bodies meetings in a distance mode, using means which allow the attendees to communicate simultaneously between them, provided the regulations included in the by-laws guarantee:
• free accessibility of all attendees to the meetings;
• the possibility of participating remotely through video or digital platforms that allow simultaneous transmission of audio and video;
• the participation of attendees with voice and voting rights and members of the statutory auditors, as applicable;
• a record of the meeting on digital media;
• the recorded meeting is kept in digital copy, which shall be available for five years to any partner who may request it;
• the meeting held is copied to the corporate books, stating a record of the meeting’s participants and is signed by the legal representative; and
• in the call for the meeting by the legal and statutory means, the chosen means of communication and the corresponding means of access to guarantee attendees’ participation is clearly informed.
Considering the current emergency, as long as the restrictions on general circulation continue in force, and as transitory measure, companies and other entities may hold their meetings remotely, even if they are not authorised to do so in their by-laws.
Companies listed in the stock exchange
Directors of publicly listed companies have been able to hold remote board of directors’ meetings by simultaneous transmission media since 2001, under Decree 677/2001, which was then substituted by Capital Market Law No 26,831. However, such virtual meetings were not contemplated for shareholders meetings.
Again, as a consequence of the Covid-19 pandemic, on 5 April 2020, the Argentinian Securities and Exchange Commission (CNV, after its acronym in Spanish) issued General Resolution No 830, which permits holding remote shareholders’ meetings for listed companies.
The resolution states that during the period in which the restrictions continue, listed entities may hold shareholders and management meetings remotely, even if their by-laws do not stipulate the holding of remote meetings. The following requirements, similar to those established by the IGJ must be fulfilled:
• The company must guarantee free accessibility to meetings for all shareholders.
• The communication channel must allow the simultaneous transmission of sound, images and words during the entire meeting and its recording in digital format.
• The call and its notification must inform of the chosen means of communication, which is the corresponding means of access and which are the procedures established to issue voting by digital means.
• The shareholders shall communicate their assistance to the meeting by email. In the case of attorneys, a copy of the corresponding document duly certified must be delivered to the company within five working days of the meeting
• The minutes shall retain on record the individuals who participated in the meeting remotely, the places in which they were located and the means of communication used.
• The company must keep a copy of the minutes in digital format for five years.
• The statutory auditors must supervise all shareholders’ meetings, to govern the compliance of the legal, regulatory and by-law provisions.
In addition, in cases where the possibility of holding remote meetings is not included in the by-laws, the following requirements must be complied with: the entity must announce the call by all the reasonable means; and shareholders must constitute a necessary quorum for holding an extraordinary meeting and approve the holding of a remote meeting as first item on the agenda, with a majority of votes being required to approve an amendment to the by-laws.
Board of directors' meetings may be held as stated in the resolution, provided that: the statutory auditors retain a record of the regularity of the approved resolutions; and a record is kept of members who participated remotely.
If the possibility of holding board of directors' meetings is not included in the company’s by-laws, the first shareholders’ meeting held following the lifting of emergency restrictions must ratify the resolutions with quorum needed for extraordinary meetings and a majority of votes for amending by-laws.
Although we will know more clearly in the next few months, everything suggests the current health crisis will leave its mark on the life of modern business. Many of the regulatory amendments are here to stay. We welcome the incorporation of new technologies to the regulations if they simplify and facilitate the governance and administration of companies, even once the pandemic is over.