As you may know, even though Corp Fin staff had provided relief allowing public companies a relatively simple way to advise their shareholders of a change in the date or location of their annual meetings (including a change to a virtual-only format), companies incorporated in Delaware that needed to make those same changes still had to address the complications associated with compliance with Delaware law. Fortunately, tonight, the Governor of Delaware appears to have come to the rescue with an emergency order that may ease many of those complications.
Under Corp Fin staff relief to address the COVID-19 pandemic (see this PubCo post), to change the time, date or location of its annual meeting (including changing to a “virtual-only” annual meeting), the company could simply notify shareholders of the change by issuing a press release, filing it as definitive additional soliciting material and notifying appropriate intermediaries, disclosing “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.”
Under Delaware law, however, while a company could postpone its meeting and change the location, including a change to a virtual-only meeting, it still would have to provide to its record shareholders a new notice of the meeting, indicating the new date, time and location. And, if the meeting were postponed beyond 60 days after the record date, a new record date would be required to be set and noticed. Filing a press release with the SEC did not necessarily satisfy that requirement.
Alternatively, to avoid the notice requirement, the company could “adjourn” the meeting for up to 30 days without providing a new or supplemental notice to record holders (as long as there was no change in the record date), but adjournment requires that the meeting be convened at the original location as set forth in the original notice, and that the company announce at the convened meeting the new date and location of the adjourned meeting, including a change to a virtual format, prior to adjournment. The meeting could subsequently be convened and adjourned for other successive, 30-day periods, without sending out another notice or without even setting a new record date—although there is a question about how many 30-day adjournments would be appropriate before the record date effectively becomes stale. However, with stay-at-home orders in effect in most states, it has been difficult in most cases to actually convene the meeting at the prescribed physical location in order to adjourn it.
The Governor’s emergency order is applicable to public reporting companies, and appears to be intended to harmonize with the SEC relief. The order provides that if a public company has already sent out, as of the date of the order, notice of a meeting of shareholders that indicates a physical location, but, “as a result of the public health threat caused by the COVID-19 Pandemic or the COVID-19 outbreak in the United States,” the board wants to change the shareholder meeting to a virtual-only meeting (one held through remote communication), the board may notify shareholders of the change solely by a document publicly filed by the company with the SEC (presumably, the press release filed as definitive additional soliciting material) and prompt posting of the press release on the company’s website after its release. In addition, with regard to adjournment, the order provides that, if it is impracticable to convene a currently noticed meeting of shareholders at the physical location specified in the original notice due to the public health threat caused by the COVID-19 pandemic or outbreak, the company may adjourn the meeting to another date or time, to be held by remote communication, by providing notice of the date and time and the means of remote communication in an SEC filing with a press release promptly posted on the company’s website after its release.
Companies should verify that their bylaws authorize their boards to determine the place of a meeting of shareholders (which, under Delaware law, allows the board, in its sole discretion, to determine that the meeting may be held solely by means of remote communication) and otherwise permit shareholder meetings by remote communication. In addition, companies should be sure that their press releases also include information required under Delaware law for notice of a virtual-only meeting, including providing the website for admission to the meeting, indicating how shareholders will be admitted (typically, by entering a voting control number found on their proxy card, voting instruction form, notice of internet availability of proxy materials, or email previously received), and indicating that shareholders will be able to vote by following the instructions available on the meeting website during the meeting. The press release should also indicate whether shareholders will be able to use the proxy card or voting instruction form included with the notice and proxy statement that they have already received. In addition, it should provide information necessary for shareholders to access the list of shareholders of record.
Note that the order contains a severability provision indicating that if these provisions were held invalid under the Delaware, to violate Delaware law or to be unenforceable in any respect, the invalidity, violation or unenforceability would not affect any other provision of the order.