(April 10, 2020) - Several states, including Delaware, California and New York, will temporarily allow corporations to hold completely virtual shareholder meetings in light of social distancing efforts during the COVID-19 pandemic.
The emergency relief granted by the states’ governors follows U.S. Securities and Exchange Commission guidance on how public companies can handle proxy statement-related issues if they originally gave notice of a physical meeting but want to switch to a virtual-only format for coronavirus safety reasons.
Delaware Gov. John Carney released an April 6 modification to an emergency declaration that addressed how corporations in the state may change a shareholder meeting scheduled at a physical location to one conducted “solely through remote communication” and at a different time.
The governor’s amended order says to make the change, a corporation must file a notice and press statement with the SEC and post the statement on its website.
Many large companies have chosen to incorporate in Delaware. About 67.2% of Fortune 500 companies were incorporated in the state as of 2018, according to the Delaware Division of Corporations.
California, New York orders
The governors of California and New York issued similar emergency orders for shareholder meetings of businesses incorporated in their states.
In a March 30 order, California Gov. Gavin Newsom suspended state statutory requirements that corporations obtain shareholder consent to hold annual shareholder meetings remotely and waived certain notice requirements.
Companies that switch their previously announced physical meeting to an online meeting must provide notice through a website posting, press statement and “other means reasonably designed to inform shareholders” of the change, Newsom’s order said.
A March 7 emergency order from New York Gov. Andrew Cuomo suspended the portions of New York Business Corporation Law Sections 602 and 605, N.Y. Bus. Corp. Law §§ 602 and 605, that normally require a physical meeting.
The Delaware, California and New York orders are consistent with guidance the SEC released March 16 to address federal proxy rules when companies wish to switch to virtual meetings.
The commission said it would allow companies to change the date, time and location of a public meeting or switch to an online format without amending their proxy documents or mailing additional solicitation materials.
Public issuers must instead issue a press statement, file notice of the change with the SEC and take all other reasonable steps to notify intermediaries and other market participants of the change.