In light of the health and safety concerns related to coronavirus disease 2019 (COVID-19), the U.S. Securities and Exchange Commission (SEC) has recently issued guidance to assist public companies with upcoming annual shareholder meetings.
What should a public company do if it needs to change the date, time or location of its annual meeting due to COVID-19?
- A public company that has not yet mailed and filed its definitive proxy materials with the SEC should consider including disclosures regarding any potential change to the date, time or location of its annual meeting.
- A public company that has already mailed and filed its definitive proxy materials with the SEC does not need to amend its proxy materials or mail additional soliciting materials if it (i) notifies shareholders by issuing a press release announcing such change, (ii) files the press release as additional soliciting material with the SEC, and (iii) informs other intermediaries in the proxy process (such as any proxy service provider) and market participants (such as the appropriate national securities exchanges) of such change.
What should a public company do if it needs to conduct a virtual meeting due to COVID-19?
- A public company that plans to conduct a virtual or hybrid meeting (i.e., an in-person meeting that also permits shareholder participation through electronic means) in lieu of an in-person meeting is expected to notify its shareholders, intermediaries in the proxy process and other market participants of such plans in a timely manner.
- If definitive proxy materials have not yet been filed and delivered, disclosures of clear directions as to the logistical details of the virtual or hybrid meeting, including how shareholders can remotely access, participate in and vote at such meeting, should be included in these materials. If definitive proxy materials have been filed and delivered, a public company needs to follow the steps described above for announcing a change in the meeting date, time or location.
- Applicable state law and the public company’s governing documents need to be reviewed to confirm that a virtual or hybrid meeting is permitted.
Can Alternative Means be Used to Present Shareholder Proposals?
- The SEC expects public companies to allow shareholder proponents or their representatives to present their proposals through alternative means, such as by phone, to the extent feasible under state law, even though Exchange Act Rule 14a-8(h) requires such shareholder proposals to be presented in person.
- If a shareholder proponent or representative is unable to attend and present the proposal at the annual meeting due to the inability to travel or other hardships related to COVID-19, the SEC will consider this to be “good cause” under Rule 14a-8(h) so that companies may not use this inability to assert Rule 14a-8(h)(3) as a basis to exclude a proposal submitted by the shareholder proponent for any meetings held in the following two calendar years.
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