The Remote participation of shareholders in the general meetings of private companies as a tool for more inclusive shareholder engagement

• MRU CRIS: knygos tekstas

ENThe 2030 Agenda for Sustainable Development of the United Nations includes the 17 Sustainable Development Goals and their 169 related targets, and provides a new policy framework aimed at balancing three dimensions – economic, social, and environmental (profit, people, and planet) – and ensuring that no one is left behind (UN 2015). With the view that companies could take on a bigger role in contributing to the overall progress of achieving the UN Sustainable Development Goals (EC 2019a; EC 2019b; EC 2020), and considering COVID-19-pandemicrelated developments that witnessed increased debate on corporate sustainability, there are ongoing discussions over the corporate governance framework being more aligned towards sustainability objectives. Shareholders can bring changes in corporate policies and practices in order to engage companies on sustainability issues, and the corporate governance framework has to be adapted in such a way as to encourage shareholder engagement for companies to better deliver sustainability. There is the potential for company law to contribute to more inclusive shareholder participation through the mechanism of the general meeting, as the principal venue for shareholder engagement. Although a number of legal tools that could produce desirable changes in the pursuit of these policy goals can be considered, digital solutions offering remote participation can make shareholders more participative in general meetings, and digitalization can produce positive effects on sustainability in more general terms. An example of this is converting to the online format in an emergency situation when, seeking to protect the public health, a physical gathering is not permitted, or this avoids travelling cross-border to the physical address where the general meeting would take place.Assuming that shareholders can contribute to corporate sustainability, this article analyzes the company law rules that govern remote attendance and voting by shareholders at general meetings as a legal tool for more inclusive shareholder engagement in Lithuanian companies. There are divergent views as to the regulatory approaches that deal with the online and in-person participation of shareholders in general meetings in achieving the policy goals, and their effects in public and private companies. In Lithuania, the LSC provides for certain peculiarities on remote participation for listed limited liability companies, if compared with private limited liability companies (hereafter – private company). The focus of this article, however, is on private companies as the most popular legal form of company in Lithuania (Official Statistics, data for 2021), and a legal form which is not subject to harmonization under European company law. Although the central role of the general meeting as a mechanism to anchor shareholders’ democracy and to increase the accountability of corporate management is highlighted in public companies where ownership and control is separated (Nili and Shaner 2022; BETTER FINANCE-DSW 2020), the notion of the general meeting as a forum for shareholders should not be overlooked in the context of private companies. This especially holds true in the light of the rulings of the Supreme Court of Lithuania in recent years, which upheld a wider discretion of shareholders-owners that can be exercised thought the medium of the general meeting by endorsing a broader mandate of the general meeting, as a primary corporate organ with the ultimate authority of the shareholders, in a private company (rulings of the Supreme Court of Lithuania of 24 November 2021 in civil case No. e3K-3-294-823/2021, and of 2 December 2021 in civil case No. e3K-3-300-313/2021).The ease of online participation can also have a reverse side for minority shareholder to effectively interfere into management and affairs of a private company. Shareholders of private companies with partnership-type characteristics are often personally involved in the company’s management and its affairs, and thus face-to-face interaction is likely to be more appropriate. Minority shareholders who are not part of the management group and have no similar interaction with the company outside of the general meeting, compared to their fellow majority shareholders, can demonstrate a willingness to be in-person at the meeting in order to be meaningfully engaged in the company’s affairs and to influence decision-making as well as corporate policies and practices. Needless to say, striking a balance between the different interests of minority and majority shareholders can be challenging. Having this all in mind, this article starts with a historical analysis of the Lithuanian legal framework on the remote participation of shareholders in general meetings, which was in force before and during the COVID-19 pandemic (from 2009 to 2022). For the purpose of inclusive shareholder participation, it also addresses the major drawbacks of the light regulatory approach in force at that time. The article then proceeds with an analysis of the Lithuanian case law to identify the key challenges in the light of inclusive shareholder participation that both companies and shareholders have faced in applying the legal regulations governing the attendance and voting of shareholders by electronic means in practice. [Extract, p. 207-208]