How far does the shareholders’ right to ask questions reach?
The Belgian Code of Companies and Associations (BCCA) provides shareholders with the right to ask questions. This right of inquiry stems from the duty a governing board has towards its shareholders. The question arises how far this shareholders’ right to ask questions extends.
What does the right to ask questions entail?
The BCCA expressly stipulates that the shareholders of a NV, CV and BV have the right to question the governing body of the company in the lead up to a (annual, special or extraordinary) general meeting. The right to ask questions is thusly connected to a scheduled general meeting.
The purpose of the right to ask questions is to allow shareholders to scrutinize the policies of the governing body and subsequently participate in the general meeting in an informed manner.
Shareholders are not only able to ask questions in a written or verbal manner during the general meeting, but also in writing as early as the convocation of the general meeting.
The shareholders questions need to be related to the agenda items. However this requirement is interpreted flexibly. For example, during the annual meeting questions about the broad outlines of the company policy are accepted. After all, the company’s annual accounts and annual report are discussed at the annual meeting, and many policy questions can be linked to the company’s accounts; for example, an important investment, a takeover, a dispute or an impending dispute.
The right to ask questions is not to be confused with the shareholders’ individual right of inspection and investigation. A shareholder has this right if no statutory auditor has been appointed in the company. This right allows, among other things, to verify the accuracy of the annual report and asses the company’s financial situation. This right of inspection and investigation means, among other things, that the individual shareholder may inspect the company’s books, etc., at the company’s registered office.
Duty to answer or right to remain silent?
In principle, the governing body is obliged to answer the questions that were asked by the shareholders.
However the right to ask questions is not absolute. Apart from the requirement that the questions need to relate to the agenda items, the governing body may, in the best interest of the company, refuse to answer questions “when sharing certain information or facts could potentially damage the company or violate confidentiality agreements entered into by them or the company”. In this case the governing body has the right to remain silent.
For example the governing body will be reluctant to share information about ongoing negotiations for a sale of a part of the business. Similarly, in an exploratory phase of a potential joint venture with a supplier, the contractual confidentiality obligations will have to be respected. The governing body will always consider who the shareholders of the company are (financial partner, family shareholder, etc.) in order to make a well-considered decision to invoke their right to silence or not.
Abuse of the right to ask questions
Similarly, if a shareholder abuses his right to ask questions, the governing body may refuse to answer. The right to ask questions is abused when questions are asked that go beyond the purpose of the right to ask questions, i.e. to enable shareholders to participate in the general meeting with full knowledge of the facts. Questions purely asked with a view to political profiling are thus unacceptable. The message is to record the questions diligently in the minutes of the board meeting. This way it can be shown afterwards that a shareholder has abused his right to ask questions. Please note that a judge will only rule in clear cases of abuse of the right to ask questions.
Sanctions?
If the “unjustified” refusal by the governing body has influenced the decision making, the decisions can be declared null and void. The “unjustified” refusal to answer questions can also lead to directors’ liability.
Conclusion
A shareholder can conveniently use the right to ask questions to obtain detailed information about the company. The governing body, in turn, must always make a considered trade-off between the duty to answer questions versus its right to remain silent. To avoid later discussions about the right to ask questions, it is recommended to meticulously record the questions/answers/refusals to answer.
Sara Burm – Olivier De Witte
Published in VOKA – Ondernemers, VOKA Kamer van koophandel West-Vlaanderen, edition 06 2021
