With effect from 1 September 2009, new rules governing annual general meetings (AGM) of the shareholders of public German stock corporations (Aktiengesellschaften) (AG) allow for a much more flexible handling of the AGMs, including participation by shareholders via electronic media and absentee votes.

The new rules governing AGMs were brought about by the act (Gesetz zur Umsetzung der Aktionärsrechterichtlinie) (ARUG) implementing Directive 2007/36 EC on the exercise of certain rights of shareholders in listed companies (Shareholder Rights Directive) and will significantly modernise AGMs in Germany.

The Shareholder Rights Directive aims at strengthening sound corporate governance by effective shareholder control and therefore by facilitating and encouraging the use of voting rights associated with shares in listed companies and at giving shareholders equal opportunities to participate in general meetings regardless of where they are residing (that is, how close to the venue of the relevant AGM they live).

In Germany, AGMs were traditionally subject to a somewhat onerous and dated regime that did not cater to the fact that AGMs are the only venue for shareholders to exercise their rights in respect of essential matters of the listed company, such as mergers, issuances of new shares, and so on. So far, the only way for a shareholder to participate in the discussions and decision making in respect of these essential matters has been by attending the AGM in person or sending a proxy to attend.

The ARUG now allows shareholders to exercise their rights in AGMs, be it in part or in whole, via electronic communication and, most importantly, to cast votes in writing or by e-mail. Combined with the electronic broadcasting of AGMs, which has been permissible since 2002, this now allows shareholders to personally participate and exercise their rights in AGMs without having to travel to the venue.

The new rules are optional in nature and, to apply, they must be implemented into a corporation's articles of association.

In addition, the requirements for convening AGMs have been expanded, facilitating shareholders' access to information that they feel they require to make informed decisions in AGMs. Going forward, invitations to AGMs will have to include notifications regarding shareholders' rights to demand amendments to the meeting's agenda and additional information from the corporation and will have to make reference to the corporation's website where information about the AGM will be made available (listed companies will be obliged to make available comprehensive information on their website). Also, whereas specific documents, such as control/profit and loss transfer agreements, and certain information, for example, in respect of re-organisations, had to be put on display or distributed to shareholders under the old regime, it will now suffice for these documents and information to be published on the corporation's website.

In addition, the invitation to the AGM now has to include, among other things, the aggregate amount of shares and voting rights and, if applicable, the forms that have to be used for votes by proxy or absentee votes.

The changes to the Companies Act were published on 4 August 2009 and, for the most part, will enter into force on 1 September 2009. The new rules pertaining to AGMs apply to meetings that are being convened after 1 October 2009.