In a previous blog post, we described the steps some states have taken or are currently taking to permit or facilitate virtual shareholder meetings (i.e., “virtual-only” or “hybrid” meetings) in light of the numerous restrictions on travel and large gatherings resulting from the COVID-19 pandemic.
The governors of California, Massachusetts and North Carolina subsequently issued executive orders that suspend the application of state law that would otherwise render a virtual annual meeting impractical or impossible.
On March 30, 2020, and effective for meetings that have already been scheduled or must occur before June 30, 2020, the governor of California issued an executive order suspending the application of California Corporations Code Sections 20 and 600, which require a corporation to obtain the consent of its shareholders before holding a virtual annual meeting.
Also, to the extent that a corporation has already mailed its notice of meeting, no further mailing is necessary provided that the corporation issues a press release, makes a website posting and notifies shareholders through other means reasonably designed to inform shareholders that the meeting will occur in a virtual format. Before the executive order, California did not permit virtual meetings without prior shareholder consent.
On March 30, 2020, and effective until 60 days after the end of the previously declared state of emergency, the governor of Massachusetts issued COVID-19 Order No. 19, which suspends the prohibition on virtual meetings for public companies under Massachusetts law. The order further provides that to the extent a public company has already mailed its notice of an annual or special meeting, it may notify the shareholders of the change to a meeting held solely using remote communication without mailing further written notice if the corporation takes the following steps:
- Issues a press release announcing the change through media reasonably expected to reach the company’s shareholders.
- Provides email notice to all shareholders who have provided an email address to the company.
- Takes all other reasonable steps to notify shareholders of the change.
Before the emergency order, Massachusetts did not permit virtual meetings for public companies.
On April 1, 2020, and effective until May 31, 2020, (or until the date of an executive order rescinding the current declaration of a state of emergency), the governor of North Carolina issued an executive order permitting annual meetings to be held solely using remote communication, provided that shareholders are allowed to participate in, and vote at, such meeting. To the extent a corporation holds a hybrid meeting (i.e., a meeting conducted in-person with concurrent participation by remote communication) or the meeting is held entirely at a physical location, the board may limit the number of in-person attendees following restrictions on mass gatherings enacted by North Carolina. Before the executive order, North Carolina did not permit virtual-only annual meetings.
To the extent that pandemic conditions continue, we expect that these orders will be extended beyond currently applicable expiration dates. Companies will still need to review their organizational documents to confirm their ability to hold a virtual meeting without the need to amend their organizational documents.
If you have any questions, please feel free to email the authors directly or, if applicable, contact your primary Bass, Berry & Sims relationship attorney.
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