On March 13, 2020, the SEC Divisions of Corporate Finance and Investment Management announced guidance for issuers holding their Annual meetings and the effect of COVID-19. In light of the current outbreak, some registrants may switch from an in-person meeting to a Virtual-only or hybrid meeting.
Transitioning from Physical to Virtual Annual Meetings
Shareholder meeting requirements vary depending on state law where a company is incorporated and the exchange on which a company is listed. Some states do not permit virtual meetings. As outlined by this post from law firm DLA Piper, companies that have already called a physical annual meeting may be able to change to a virtual meeting, but corporate considerations include:
- State of incorporation – The company must be incorporated in a state that permits virtual meetings.
- Bylaws – The company’s bylaws (and perhaps its certificate or articles of incorporation) contain provisions regarding the conduct of shareholder meetings. Although in our experience most recent forms contemplate virtual meetings consistent with applicable corporate law, check to see if the company’s governing documents contain language that could limit or condition the circumstances in which the board may call or shareholders may participate in meetings via remote communication.
- Notice of meeting – State corporation statutes require companies to provide shareholders written notice of annual meetings, which generally must state, among other things, the place of the meeting (if any) and the means of remote communications (if any) by which shareholders may participate in the meeting. If the company already called a meeting with just a physical location, it may need to provide a new notice of meeting – and do so no fewer than ten nor more than sixty days before the meeting date. If the meeting is still at least 10 days away, it may be possible to provide a new notice to shareholders. As a practical matter, though, a few days will be needed to give the board the opportunity to consider and approve the change of location, to print the new notice and to arrange for its delivery to shareholders.
Changing the Date, Time or Location of an Annual Meeting
The SEC states that in light of the current conditions when “an issuer that has already mailed and filed its definitive proxy materials can notify shareholders of a change in the date, time, or location of its annual meeting without mailing additional soliciting materials or amending its proxy materials if it”:
- issues a press release announcing such change (may include an 8-K filing for Corporation Finance);
- files the announcement as definitive additional soliciting material on EDGAR; (DEFA14A filing) and
- takes all reasonable steps necessary to inform other intermediaries in the proxy process (such as any proxy service provider) and other relevant market participants (such as the appropriate national securities exchanges) of such change.
The SEC expects issuers to take these actions promptly after making a decision to change the date, time, or location of the meeting and sufficiently in advance of the meeting so the market is alerted to the change in a timely manner. To the extent that issuers have not yet mailed and filed their definitive proxy materials, they should consider whether to include disclosures regarding the possibility that the date, time, or location of the annual meeting will change due to COVID-19. Such determination should be made based on each issuer’s particular facts and circumstances and the reasonable likelihood of such a change.
The SEC reminds all parties to consider their own specific facts and circumstances in determining the need for any additional measures beyond the actions discussed below.
The SEC expects that all market participants to cooperate with one another to facilitate issuers’ obligations to hold annual meetings and disseminate timely, accurate, and clear proxy disclosures under the federal securities laws as well as to allow shareholders to exercise their voting rights under state law.
Who to contact for additional assistance?
The SEC recommends that any registrant, or other person, in need of additional assistance related to deadlines, delivery obligations or their public filings, should contact the:
- Division of Corporation Finance at (202) 551-3500 or at https://sec.gov/cgi-bin/corp_fin_interpretive;
- Investment Management at (202) 551-6825 or email at email@example.com
Additional Information and Resources
- SEC Press Release regarding virtual annual meetings.
- SEC Guidance for Conducting Annual Meetings in Light of COVID-19 Concerns.
- Toppan Merrill Blog: SEC Staff Guidance for Conducting Annual Meetings in Light of COVID-19 Concerns
- Harvard Law School overview: Best Practices for Virtual Shareholder Meetings
- DLA Piper post: Considerations for Virtual Annual Shareholder Meetings in light of the Coronavirus
- Bass Berry post: SEC Provides Guidance for Conducting Virtual Meetings in Light of COVID-19 Pandemic
* This information is intended as a service to our clients and is not intended to provide legal guidance. The content is based on the SEC written and verbal guidance from the Division of Corporate Finance. Companies should check with their legal counsel to determine their reporting obligations.