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Shareholders meetings of regulated entities in Chile may now be held remotely

CMF
24 March, 2020

In a welcome development, particularly for foreign investors, the Chilean securities, insurance and banking regulator issued the long awaited guidance authorizing shareholders meetings of regulated firms to use technological means that permit the remote participation of shareholders and bond holders who are not physically present. It will lead to greater transparency, accountability and better corporate governance of Chilean issuers.

 

On Wednesday, March 18th the Chilean securities, insurance and banking regulator Comisión para el Mercado Financiero (CMF) issued the long awaited guidance (in the form of rule NCG 435) authorizing shareholders meetings of regulated firms, including Chilean listed companies, banks, insurance companies and asset management companies, as well as bond holders meetings, to use technological means that permit the remote participation of shareholders and bond holders who are not physically present.

While this permission to attend and vote remotely in shareholders and bondholders meetings has of course been prompted by the Covid-19 pandemic, the good news is that these new rules are permanent and, therefore, contribute to making Chile’s capital markets more global and better integrated to the world’s financial community.

Indeed, this is a welcome development, particularly for foreign investors. It will also lead to greater transparency, accountability and better corporate governance of Chilean issuers.

While prior to NCG 435, article 64, final paragraph of the Chilean law on corporations (Law 18.046) authorized listed corporations to implement remote voting systems, the rule that regulated this matter (NCG 273) imposed excessively restrictive technological requirements which made it impracticable. The new rule not only amends NCG 273 by simplifying practical implementation but also widens the scope to not restrict remote voting to only listed corporations.

Thus, given the practical complexities imposed by the old rule and its narrow scope, shareholders meetings and bondholders meetings could not be conducted remotely, so any shareholder or bondholder who wanted to attend such meetings had to do so by being physically present in the same room. In practice, only board meetings, but not shareholders meetings were being held by means such as conference call or video conference. In this respect, it is worth noting that recently, on February 13, 2020, the CMF had issued rule NCG 434 which now permits minutes of board meetings to be signed electronically, such as by scanning the relevant signature.

Under NCG 435 the technological means must guarantee the identity of the shareholders, participants or bondholders, and of their representatives, and the participation of the CMF, if such participation is required under the law. Likewise, such means must guarantee simultaneous participation of those attending the meetings and the secrecy of the votes cast.

CMF Official Letter 1141, also issued on March 18, clarifies that not only those voting, but also the person chairing the relevant meeting as well as other persons required to attend, may also do so remotely.

In line with appropriate corporate governance procedures, it will be up to the board of directors of the relevant companies and of the representative of the bond holders, as the case may be, to implement the systems or procedures necessary to verify the identity of the persons participating in the meeting and determine that they have the powers of attorney that allow them to act on behalf of the shareholders, participant or bond holder, as the case may be, and preserve the secrecy of the votes cast remotely until all other votes cast have counted on the day of the meeting.

In order to ensure transparency, NCG 435 regulates the content of the notices calling to attend the meetings, including requiring to inform how identity and powers of attorney will be verified. The new rule also provides that the list of attendees must specify when a shareholder or bondholder has attended remotely and by what technological means. Furthermore, the minutes of such meetings must leave on record that such means were used.

Finally, CMF Official Letter 1141 provides that if a meeting cannot be held due to health restrictions imposed by the authorities or due to unavailability of the relevant technological means, force majeure may be invoked subject to review by the CMF based on the merits of the relevant circumstances.

If you need further information, please feel free to contact our capital markets team.

Felipe Cousiño, Alessandri Partner

Nicole Cartier, Alessandri Senior Associate

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