Am I saying something when I abstain from voting as a shareholder? – Shareholders

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Historically speaking, uncertainty has always existed in Romania as to the meaning of abstention in general meetings of shareholders. What is at stake is the method of calculating the majority required for the adoption of resolutions of ordinary general meetings, in which case the Romanian Company Law (Law No. 31/1990) provides that the resolutions are adopted by a “majority of the votes cast”. “.

No legal provision clearly qualifies abstention as a vote cast or a vote not cast. From a practical point of view, there are circumstances where interpreting abstentions as votes cast means the decision was not passed, while interpreting them as votes not cast means the decision was passed. We must bear in mind that if the interpretation given at a general meeting of shareholders differs from the interpretation given by a court, then the decision adopted is null and void.

An amendment to the Romanian Issuers Law (Law No. 24/2017) that entered into force on August 2, 2022 solved the problem (at least for listed issuers) by introducing a default rule. Respectively, if the statutes of a company are silent on this subject, the abstention is qualified as an uncast vote.

Consequently, the listed issuer also has the freedom to stipulate otherwise in its articles of association, ie that abstention is equivalent to a vote cast. This is quite natural, since, moving away from the domain of the law, abstention is a manifestation of will and has the connotation of a vote cast, not akin to absolute silence or the simple absence at the ‘General Meeting of Shareholders. The freedom of choice is in any case welcome and each issuer can choose an appropriate option (vote expressed vs. not expressed) according to the structure of its shareholding.

Although the scope of Romanian issuer law is relatively narrow, at least in principle, following the amendment described above, a prudent interpretation for companies outside the scope of this law is that abstention should count as an uncast vote.

Companies, be vigilant

If the articles of association provide for abstention, the issuer is required to include a statement to this effect in each notice of meeting published before a general meeting of shareholders. Although at first glance this amendment creates an additional burden for the company, on closer inspection the rule gives additional protection to the diligent shareholder who will be able to accurately project the magnitude of a possible abstention from the general meeting. While abstention counts as a vote cast, it has significance in the voting process and can even be used by the shareholder as a sort of sanction – for example if the shareholder feels they have not received enough information on an item on the agenda in order to be able to opt for or against this respective item. If, on the other hand, abstention counts as an uncast vote, its impact on the voting process is non-existent.

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.

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