18 January 2021 - As we move into 2021, there is a considerable feeling of hope, with news of vaccines appearing to signal a light at the end of the tunnel, following a year defined by the COVID-19 pandemic. Despite the desire to move forward without looking back, it seems inevitable that 2020 will be discussed and referred to for many years to come, characterised by a numerous and complex set of pressures and demands from various stakeholders.
Time for a change?
In the corporate governance industry, now is as good a time as ever to review the year from a number of angles and to challenge some long-standing assumptions. We need to use this golden opportunity to assess the capabilities and readiness to govern before COVID-19, in order to make lasting changes that will improve the industry beyond the pandemic. We want to evaluate whether a company’s corporate governance practices meet the needs of its various stakeholder groups, and whether internal policies and corporate structures are flexible enough to adapt to a fast moving environment where split-second decisions have to be made.
The full picture of the impact on corporate governance is yet to be seen, but there is no doubt that the pandemic has challenged core premises of the ways that companies have carried out tasks. Notably, as a result of lockdowns worldwide, the possibility of arranging physical meetings has been near impossible. Other examples of tasks that have been affected include arranging the execution of documents, notarisations, certification of documents, maintenance of corporate books as well as other important practical matters.
Several of these challenges are discussed below, which suggest foreseeable trends in the post-pandemic era, as we also aim to highlight the areas in which governance principles and practices are expected to change permanently.
Physical meetings will likely return in force, but online meetings are also here to stay. In such a unique and rapidly changing business environment, as we have had in 2020, it has become increasingly important for businesses to have secure, effective communication to ensure that decisions are made as efficiently as possible. Corporate governance professionals have been arranging online board meetings where possible, but in instances where there is no clear framework about whether such means are allowed, affected parties have been looking for solutions to accommodate the need, whilst remaining compliant with regulations. We have witnessed that E-meetings work in practice and feel this should be one of the temporary innovations that the industry takes advantage of going forward. Even when legal frameworks were absent or unclear on the possibility of holding online meetings, professionals have added extra clarifications to the meeting minutes explaining the background.
Another good example are the initiatives from various jurisdictions’ legislators (during the pandemic or even permanently in some cases) allowing Annual General Meetings (AGMs) to be held using electronic means. For example in Switzerland, the Corporate Law Reform was approved, and is expected to enter into force in 2022, allowing the possibility of AGMs to be held online or to be conducted abroad, unless the Company’s AoA provide otherwise. We can expect that such amendments to Corporate Law will be introduced as a key part of the post-pandemic actions from other governmental bodies as well.
The role of notaries, who provide professional services to the corporate governance industry, is another area where we expect temporary innovation to make lasting changes. Although the notaries and scope of their services differ in each jurisdiction, there have been many common situations across the globe where notaries have needed to visit clients at their premises, but have been disrupted by lockdowns and other travel restrictions.
However, by leveraging technology, notaries have been able to provide alternative solutions and accept online meetings for certification of documents, allowing them to adapt to the changing environment. In the long run, there is an expectation that technological capabilities will be used even more, which might lead to greater efficiency and availability of notary services.
Another topic which is quietly gaining more prominence in the corporate governance industry is the EU open data initiative, which is known as the “Open Data Directive” (Directive (EU) 2019/1024. This initiative aims to provide more open data for society and businesses, enhancing transparency and fair competition. This will help develop more efficient ways to extract and input information, using machine readable formats. In the future, this will allow for public authorities to collect, store and process various filings, not in weeks or months – as it is common in most of the jurisdictions – but in a matter of minutes.
Following the continual technological transformation of corporate governance, we are likely to see more initiatives become paperless in terms of document retention and e-archiving. This topic has not reached its peak yet, however, going forward we want to favour sustainable initiatives, enabled through enhanced technological capabilities. The environmental impact has to be taken into account, and it is expected that across the jurisdictions we operate in, decisions surrounding going paperless will come to the forefront of conversations – as e-meetings, e-notarisations, and e-archiving further push the digital transformation of the corporate governance industry.
By Ernestas Juska, Legal Team Manager, Citco Global Subsidiary Governance Services