With the rapid move by issuers to adopt virtual annual meetings because of the COVID-19 pandemic, we want to provide best practices, including practical information and legal factors, for companies to consider when planning to hold a virtual shareholder meeting.
Choose the right provider. Decide quickly if you will be holding a virtual meeting, as demand for these services has risen significantly in recent months. Ensure the provider’s virtual meeting platform permits shareholders to exercise all rights and privileges assured to them under both federal and state securities laws. Also look at the technical capabilities, such as technical support, available to the company and its shareholders.
Understand company bylaws. Review your company’s charter and bylaws to ensure they do not prohibit virtual meetings. In addition, examine these documents for any restrictions or processes that must be followed to authorize a virtual meeting, such as requiring board approval of the virtual meeting format.
Work with legal counsel to understand your state laws. State law controls the form and location of the annual shareholder meeting. Your company's in-house counsel and corporate secretary should confirm whether you can hold a virtual shareholder meeting under applicable state law and whether any changes to your company's governing documents are required.
Properly notify shareholders and comply with SEC filing and state law obligations. If participation at the annual shareholder meeting via remote communication is permitted under both state law and the company’s bylaws, then you need to take additional steps in notifying your shareholders and satisfying SEC filing obligations.
Proxy statement has already been filed
Any change to the meeting needs to be communicated no fewer than 10 nor more than 60 days before the meeting date. Issue a press release disclosing the change in format, file the release with the SEC as supplemental proxy materials, and add it to posted proxy materials.
Proxy statement has not been filed
If you are considering moving to a virtual meeting, disclosure indicating the possibility of a change, and the reason for such a change, should be included in the proxy statement, both in the meeting notice and in the meeting logistical information.
Consider logistics. Determine the logistics of managing a meeting with remote communication and participation—if you have the necessary infrastructure, technology and procedures to host a virtual annual meeting. For example:
- How will the company allow for shareholder participation in the meeting?
- What remote technologies are necessary to successfully hold the meeting and do those technologies provide sufficient security for participants?
- Will a technical support line be available for shareholders who experience technical difficulties prior to or during the virtual meeting?
Have rules of conduct available before the meeting. Rules can address the opportunity to submit questions before or during the meeting, as well as the process for screening, combining, and responding (or declining to respond) to questions. They can also establish time limitations, guidelines for behavior that is out of order, and technology support.
The coronavirus is commanding attention and we expect a continued increase in virtual shareholder meetings. If you are considering holding a virtual annual meeting, strive to adhere to these best practices. If you have questions or would like assistance, please contact us at firstname.lastname@example.org.
You can learn additional best practice advice for handling key aspects of governance during this pandemic at Corporate Secretary’s virtual event, “Governance during Covid-19 – and where it goes next,” on May 14. Our President and COO Sherry Moreland will serve on the panel. Find out more about the event here. You can also download our free Best Practices Checklist for Virtual Annual Meetings for more tips here.