20.03.2020

CORONA - securing the entrepreneurial ability to act

The absence of senior employees or a shareholder/partner can delay or even prevent decisions in day-to-day business and strategic measures. Is your company ready for the quarantine case?

Background

It is true that the daily business of the company does not necessarily require the management to act itself, especially not on site. However, in day-to-day business, it must be ensured that payments are released, contracts signed, and legally effective declarations made on behalf of the company even in the event of quarantine.

Resolutions of the management, of supervisory or advisory boards as well as of the shareholders of a GmbH or the partners of a GmbH & Co. KG can often be adopted and implemented by way of circulation outside of physical meetings. However, if a shareholder or partner falls ill in such a way that he/she is unable to attend meetings "virtually" and also cannot grant power of attorney, the holding of a "general meeting" fails and thus decisions are delayed, for example on the dismissal or appointment of managing directors or even on the adoption of the annual financial statements or the approval of important transactions such as taking out loans or applying for public measures.

How you can ensure the ability of your company to act:

Appointment of further managing directors or authorised officers, (enduring) powers of attorney

The frequently used clause in articles of association that one of several managing directors together with another managing director or an authorised officer (Prokurist) may represent the company should be made use of. As a precautionary measure, authorised officers from different locations should therefore be appointed. It should be noted that - as with managing directors - the entry in the commercial register is only declaratory, even with authorised officers. However, the registration leads to good faith and thus to unproblematic transactions. For the entry in the commercial register, in turn, the application in certified form is required. For this purpose, the managing directors must sign in front of a notary public in a number authorised to represent the company. In addition, (general) powers of attorney can be an important tool in individual cases.

Enduring powers of attorney (including proxies) are particularly advisable at shareholder/partner level. The best possible attempt should be made to authorise several persons who are not in close personal or local contact with each other individually. The power of attorney should explicitly include measures with regard to the position of the shareholder/partner of the company and must at least be certified in order to cover possible applications to the commercial register as well. Therefore, please note that the involvement of a notary is required here as well. In addition, according to the case law, it is essential in the case of a proxy, that the wording of the proxy explicitly includes the casting of votes, waiving requirements as to time limits and form.

In addition, individual powers of attorney and powers of attorney limited to a specific purpose may be considered for individual cases. For example, bank mandates must be issued in such a way that payment transactions are guaranteed for an entire location even in the event of quarantine. Access to online banking should be possible when working from home.

Compliance with formal requirements, entry in the commercial register

It cannot be ruled out that public authorities (commercial register, land registry office, tax office, Chamber of Industry and Commerce, trade office) may experience delays. Longer postal delivery times may also occur, for example, for the delivery of executed copies of powers of attorney to the authorised representatives. It should therefore be reconsidered whether measures may already be taken early while timely implementation in registers, offices and courts is still possible.

 

Amendments to by-laws, articles of association or partnership agreements

The vast majority of corporate rules and regulations will be sufficiently flexible to allow decisions to be taken even when not all decision-makers can be present. Should this not be the case, this flexibility should be introduced as soon as possible. Please note that changes to the articles of association of corporations require notarisation and then registration and entry in the commercial register in order to be effective.

Most important point in this context: The de facto lack of management in a company should be avoided: Articles of association, according to which a company has to have at least two managing directors at all times and / or managing directors have only joint powers, are critical in this context if one of the two managing directors falls ill. This is true in particular where the shareholders are at the same time managing directors (“managing shareholders”). There is the risk that no action can be taken neither at management nor at shareholder/partner level. In order not to have to change the articles of association, either (at least) one further managing director, or an authorised officer must be appointed or sole power of representation shall be granted to each director. The shareholders should make use of powers of attorney to enable (inter alia) the immediate appointment of (additional) managing directors or a change in the powers of representation of the directors by resolution of the general meeting even if one or more shareholders should fall ill and therefore could not participate – not even in a remote way.

Securing knowledge

If employees are no longer available this always results in a lack of knowledge and access to knowledge. Access to databases and accounts of any kind, must be guaranteed. On the other hand, in order to prevent access data from being disclosed to unauthorised persons, it is advisable to deposit them with one or more notaries, for example.

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