/ CMF authorizes use of technological means for remote attendance to board meetings23 November, 2020
Chilean securities, banking and insurance regulator – CMF – issues General Rule 450 authorizing the use of technological means for remote attendance to board meetings of corporations subject to its supervision, thus guaranteeing the right of directors to exercise their role.
This is a welcome development that brings much needed certainty.
On November 17th, 2020, the Chilean securities, banking and insurance regulator, the Comisión para el Mercado Financiero (CMF) issued General Rule No. 450 (NCG 450) authorizing the use of technological means for remote attendance to board meetings of regulated corporations. It is in line with regulations on remote shareholders meetings which had been issued in March as a result of the Covid-19 lockdown (see our newsletter https://alessandri.legal/shareholders-meetings-of-regulated-entities-in-chile-may-now-be-held-remotely/).
This new regulation was issued after a productive period of consultation that went from August 31st to September 21st of this year. The regulation that was finally issued took into account numerous comments from industry participants and practitioners and is more in line with reality and market needs than the original draft. So it is always appreciated that the regulator welcomes constructive feedback.
This regulation modernizes a by now outdated regulation on remote attendance of meetings (Circular 1530) which was issued back in 2001. Although the old regulation allowed the holding of board meetings remotely, the technological means it authorized were limited and the different means to be used required an individual and express authorization from the CMF. By contrast, NCG 450 provides for a general authorization for all those technological means that meet the conditions set forth in the regulations.
This general authorization is an important step forward. The original draft regulation included a list of technological means which, although not exhaustive, meant that it was going to become obsolete at some point. The use of general criteria allows this regulation to be in line with what has been established in other jurisdictions, which is important, considering how integrated Chilean corporations are to global markets and the number of foreign directors sitting on their boards.
This regulation also means an important contribution for the directors of the companies to be able to exercise their right to attend the meetings, by establishing as a duty of the company to have at least a system that allows them to effectively exercise such right. The exercise of this right is to benefit of the company and its shareholders, as it enables all directors to be up to speed with corporate matters (in real time) and to appropriately exercise their management powers. In short, to carry out their role, thus promoting good corporate governance.
Another important contribution, which also resulted from the various comments made to the draft regulation, was the definition of location of a board meeting that is held entirely remotely, in the context of legislation that had hitherto been interpreted as requiring a physical address at which the board had to be held. Up to now it had been understood that all board meetings had to be held at the company seat unless there was a full attendance by board members.