States and federal regulators are taking steps to help facilitate virtual shareholder meetings amid the coronavirus pandemic.
The Securities and Exchange Commission recently issued guidance for conducting shareholder meetings in light of Covid-19, the disease caused by the coronavirus, while California and Delaware have relaxed restrictions for virtual meetings as people around the country are being told to stay home to fight the spread of the virus.
Securities and Exchange Commission staff last month issued guidance in which it said companies that plan to hold a virtual meeting should notify shareholders in a timely fashion and provide them with clear details about how to access, participate, and vote in the meeting.
Companies that have already filed and mailed their definitive proxy materials don’t need to mail additional materials, including new proxy cards, if they 1) issue a press release, 2) file an announcement on EDGAR, and 3) take “all reasonable steps” to inform others – including any proxy service providers and the appropriate national securities exchanges – of the change.
SEC staff noted, however, that a corporation’s ability to conduct a virtual meeting depends on state law and the company’s governing documents.
Gov. Gavin Newsom has issued an executive order suspending requirements that corporations receive consent of shareholders for virtual shareholder meetings, and provide written notice of such meetings (as long as notice is provided through a press release, website or some other means).
The order applies to shareholder meetings that were scheduled, or must take place before June 30.
Still, California companies should proceed with caution.
Gov. Newsom issued the order under the California Emergency Services Act, which allows regulatory statutes or rules regarding the conduct of state businesses to be suspended during a state of emergency. It is unclear whether the governor has the authority under the act to suspend the state’s Corporation Code, which contains the rules for virtual shareholder meetings.
Gov. John Carney this month issued an emergency order allowing companies to switch a shareholder meeting from in-person to virtual by notifying stockholders of the change in accordance with the SEC’s guidance and issuing a press release, which must be posted to the company’s website.
The order also allows corporations to take similar steps to adjourn a scheduled in-person meeting to another date or time, to be held remotely.
Remote shareholder meetings may be appropriate given the health concerns in the current pandemic. Companies should, however, review their bylaws to confirm their aren’t restrictions on virtual meetings. The board of directors may be able to amend the bylaws, if a change is required.
SEC staff has also encouraged companies, to the extent feasible, to allow shareholders or their representatives to present their proposals virtually or by phone in light of the difficulties of attending shareholder meetings in person.