Public Companies may Consider Virtual Annual Meetings in Light of Coronavirus 

March, 2020 - Marlee Mitchell, Wes Scott, Steffen Arters, Elliott Smith

In light of the Coronavirus-2019 (COVID-19)pandemic, many companies are now having to consider in real-time whether a virtual or hybrid annual shareholders’ meeting as an alternative to an in-person meeting is in the best interests of the company and its shareholders.

Virtual meetings may be conducted via telephone or webcast and may use a combination of audio and/or video, whereas a hybrid meeting is an in-person meeting that also permits shareholder participation through electronic means. Virtual meetings allow shareholders who are certified to participate in the annual meeting to participate remotely via the Internet or by telephone (a telephonic meeting), read or hear the proceedings of the meeting, pose questions to the board of directors and management team electronically and cast votes regarding any proposals properly brought during the meeting.

When considering whether to hold a virtual or hybrid meeting, a company must comply with applicable state laws, the rules and regulations of the SEC, and the company’s own organizational documents and should consider other pertinent factors. This Alert discusses such items as well as provides practical information and ISS and Glass Lewis guidance about the use of virtual and hybrid meeting alternatives.

Applicable State Laws

A state’s corporate laws govern the requirements concerning the call and conduct of an annual shareholders’ meeting. A company should review its state corporate laws to confirm whether those laws allow the company to conduct a virtual or hybrid meeting and, if so, the requirements that must be satisfied for the meeting to be compliant with state law.

State corporate laws will frequently require that an annual shareholders’ meeting be called and conducted in accordance with a company’s bylaws. Companies should review their bylaws to determine if shareholders may participate in meetings by means of virtual communication. If so, participation by virtual means is subject to the guidelines and procedures adopted by the board of directors, and each participant must be properly certified as a shareholder before being allowed to participate.

SEC Staff Guidance and Applicable Regulations

On March 13, 2020, the SEC published guidance to assist companies with their upcoming annual shareholders’ meetings. The guidance is designed to facilitate the ability of a company to hold its annual meeting through the use of a “virtual” meeting while simultaneously complying with the federal securities laws.

Changing the Date, Time, or Location of an Annual Meeting.

A company that (i) decides to change the date, time, or location of its annual shareholders’ meeting due to concerns related to COVID-19 and (ii) already mailed and filed its definitive proxy materials with the SEC may notify shareholders of the change without having to mail additional soliciting materials or amend its previously filed proxy materials if the company:

  • issues a press release announcing the change in the date, time, or location;

  • files the announcement with the SEC as definitive additional soliciting material; and

  • takes all reasonable steps necessary to inform other intermediaries in the proxy process and other relevant market participants (such as any proxy service provider and the appropriate national securities exchanges) of the change.

 

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