5-28-20 Scheduling Your Annual Shareholders Meeting in the Season of Covid-19
Even as businesses begin to open up following the COVID-19 crisis, corporations may still consider adding a virtual or electronic component to their annual meetings of shareholders. These alternatives are available for companies incorporated in both New York and Delaware.
Both New York and Delaware law permit shareholders to attend meetings electronically. This allows shareholders to listen and view the live meeting and to vote without having to give a proxy to management or another person to attend and vote on their behalf.[1] In each case, the corporation must give shareholders a reasonable opportunity to participate in the meeting, take reasonable steps to verify that each person attending electronically is a shareholder of record, and keep a record of votes or other actions taken electronically.[2] For Delaware corporations, the meeting may be held 100% virtually, with no live attendance in person so long as the board of directors authorizes the action and the meeting is subject to such guidelines and procedures as the board of directors may adopt.[3] For New York corporations, shareholders are permitted to attend electronically, however, the meeting must still be held at a physical location.[4]
In March, New York Governor Andrew Cuomo issued an executive order permitting corporations to hold virtual-only shareholder meetings. Governor Cuomo has extended this order to meetings being held on or before June 7, 2020.[5] It is not known whether that order will be extended for one or more parts of New York State.
In each case corporations should confirm that an all-electronic meeting is consistent with their certificate of incorporation and bylaws, and make changes if necessary.
In the event corporations that have already scheduled their annual meetings and wish to switch to an all-electronic attendance, they will need to notify shareholders. For New York corporations, the Governor's executive order waives the minimum 10 day advance notice requirement, unless otherwise required in the corporation's bylaws.[6] Delaware's Governor has also relaxed notice requirements for changing to an all virtual meeting. If the Delaware corporation is an SEC registered public company, it may notify stockholders of the change through a report or statement filed with the SEC's EDGAR system and posted to the corporation's website.[7] This notice provision will stay in effect until June 6, 2020, unless earlier changed, or extended by the Delaware Governor.[8]
The SEC has also given public companies relief from its notice requirements. Corporations that have already mailed and filed their proxy materials for the annual shareholder meeting do not need to refile their materials if they (1) issue a press release announcing the change from a physical location to a virtual platform, (2) file the announcement as additional soliciting material on EDGARD and (3) take all reasonable steps to inform other relevant market participants of the change to a virtual platform.[9] Corporations must do so promptly after deciding to switch to a virtual shareholders' meeting.
Please contact your Woods Oviatt attorney or the attorneys listed below regarding this or any COVID-19 related issues.
[1] Del. Code. Ann. Tit. 8, § 211; and NY CLS Bus. Corp. § 602(b)(i).
[2] Id.
[3] Del. Code. Ann. Tit. 8, § 211(a)(2).
[4] NY CLS Bus. Corp. § 602(a).
[5] State of New York Executive Order No. 202.29 (May 8, 2020).
[6] State of New York Executive Order No. 202.8 (March 20, 2020).
[7] Tenth Modification of the Declaration of a State of Emergency for theState of Delaware due to a Public Health Threat, (April 6, 2020), https://governor.delaware.gov/health-soe/tenth-state-of-emergency/.
[8] Fifteenth Modification of the Declaration of a State of Emergency for the State of Delaware due to a Public Health Threat, (May 7, 2020), https://governor.delaware.gov/health-soe/fifteenth-state-of-emergency/
[9] U.S. Securities and Exchange Commission, Staff Guidance for Conducting Annual Meetings in Light of COVID-19 Concerns (March 13, 2020), available at https://www.sec.gov/ocr/staff-guidance-conducting-annual-meetings-light-covid-19-concerns?auHash=zrsDVFen7QmUL6Xou7EIHYov4Y6IfrRTjW3KPSVukQs.
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