At the end of 2017, the digital Circular Resolution (dCR) was integrated to the Sherpany Boardroom App. The new feature enables companies to take decisions remotely and in an asynchronous way. The dCR is the perfect way to confirm a resolution digitally, without the need to hold a meeting or a conference call.
To find out more about digital Circular Resolution (dCR) and how it is used around different European countries, we invited reputable lawyers to share their knowledge on the practice of dCR. Our first interview is with Jørgen Kjældgaard, Danish attorney-at-law and partner at Mazanti-Andersen Korsø Jensen, the oldest law firm in Denmark.
Sherpany: What are the legal foundations for Circular Resolutions in Denmark (law, statutes, regulations)?
Jørgen Kjældgaard: The legal foundations are: Danish Companies Act, Chapter 7 Article 125. This article permits the possibility of conducting written Board meetings and Board meetings by means of electronic media. The rules aim to make holding of Board meetings with the most possible flexibility. This entails no legal restrictions on the possibility of using Circular Resolutions.
However, a (single) Board Member may at any time require oral dissertation. This may be convened and conducted as a video or telephone conference. There is no legal requirement for a physical Board meeting in a Danish company.
Sherpany: What must be defined in the statutes and/or regulations in terms of Circular Resolutions for them to be licit (i.e. legally valid)?
Jørgen Kjældgaard: In reality, no specific terms and conditions would be needed in the statutes for using Circular Resolutions for them to be legally valid. However, corporate governance would warrant that the use of and rules for the use of Circular Resolutions would be included in the Board’s rules of procedure.
Sherpany: How widely spread are Circular Resolutions in Denmark: high, medium, low?
Jørgen Kjældgaard: I would assess the prevalence of dCRs in my country as low to medium. The use of Circular Resolutions hinges pretty much with composition of the Board, for instance geographical (domicile) conditions, frequency of meetings, industry of the company etc.
Sherpany: How are Circular Resolutions generally disseminated in your country (via post, e-mail, fax, digital or other)?
Jørgen Kjældgaard: Companies generally use mail and digital transfer.
Sherpany: Are there regulations in your country in terms of Digital Circular Resolutions, particularly the use of electronic media?
Jørgen Kjældgaard: Yes, there are the following regulations: The aforementioned article 125 in The Danish Companies Act. The language in the article directly mentions and requires written meetings and meetings by means of electronic communications. As mentioned before the rules are very liberal and flexible.
Sherpany: Are there quorum-related requirements in regard to the dCR or what is your specific recommendation?
Jørgen Kjældgaard: A quorum is present when: a majority of the Board Members are represented (not necessarily physically present). The statutes may define specific higher quorum standards for specific resolutions and so may the Board’s rules of procedure.
Sherpany: In your opinion, are Digital Circular Resolutions legally permissible?
Jørgen Kjældgaard: Yes, because The Danish Companies Act specifically has made the rules for convening and conducting Board meetings as flexible as possible.
Sherpany: When is a Circular Resolution void or contestable in your country? Who can contest it?
Jørgen Kjældgaard: The Circular Resolution is void if a Board Member has required an oral dissertation, which has been neglected by circulating the resolution. A resolution, also a Circular Resolution, will be void if it does not meet the quorum requirements. It can be contested by Board Members only. The auditor may contest a resolution, but solely by writing in the audit protocol. The Board may then decide on the input.
Finally, if the audit gives reason for auditing remarks in the financial statement in the annual report, for instance if the Board disagree with the auditor’s remarks, the general assembly may have the final word. Then again possibly followed by a court ruling.
Sherpany: Is there a form of best practice for Circular Resolutions in Denmark? If yes, what does this entail?
Jørgen Kjældgaard: No, there is no recommendation. Other than those of the Danish corporate governance recommendations, for instance recommendation no. IV on the duties, tasks and responsibilities of the Board by which it is the responsibility of the Board of Directors to take care of the interests of the shareholders with due regard to the other stakeholders. If such responsibility is duly taken care of by partly using Circular Resolution during the performance of the Board’s work when this seems fit, then the use of Circular Resolutions to a limited extent seems recommendable.
Sherpany: In your country, must (Digital) Circular Resolutions be confirmed in the actual follow-up meeting? What is your recommendation in this regard?
Jørgen Kjældgaard: In practice, all resolutions of the Board must be reflected in the minutes. How a Board decision made by means of Circular Resolutions will be reflected in the minutes depends on the choice of the Board of Directors and probably as stated in the Board’s rules of procedure.
My recommendation is that Circular Resolutions be used sparingly and only if it is absolutely appropriate. Routine matter and for instance matters that have been previously discussed, but not decided and with the sense of the Chair that a substantial part of the Board are pro an outlined suggestion.
Sherpany: How are the results of Circular Resolutions generally disclosed by companies in Denmark? Is everyone named? Number of “yes” votes vs. number of “no” votes? Only the result? To those who voted? To the authorities?
Jørgen Kjældgaard: There is no specific response to these questions cf. my remarks to Q. 10 above.
Sherpany: Which matters and types of resolutions are generally included in Circular Resolutions in the companies in Denmark?
Jørgen Kjældgaard: Companies generally vote in Circular Resolutions on routine matters and matter of a more practical nature. The need for this mechanism or institute would be lower with the possibilities of telephone and video conference meetings. These possibilities limit significantly the need and practical use of Circular Resolutions.
Sherpany: Thank you for your responses.