Virtual Shareholder Meetings in the Time of COVID-19

As the coronavirus (COVID-19) pandemic continues its devastating impact on individuals, families and communities across the globe, companies are experiencing a myriad of obstacles as they struggle to maintain operations and balance their responsibilities to employees, customers, investors and the public at large during these unprecedented times. With over 40 states issuing shelter-in-place orders and recommendations from public health agencies to limit public gatherings, public companies now face the dilemma of how to conduct their annual shareholder meetings during the 2020 proxy season. Advances in technology have facilitated the use of virtual meetings in recent years, but hosting shareholder meetings at a physical location had remained the most common approach for U.S. companies. Given the current environment, however, we are seeing companies forced to adopt a virtual shareholder meeting platform. This article discusses some of the key considerations public companies should take into account as they transition from a physical in-person shareholder meeting to a virtual meeting format.

Statutory Considerations

Companies considering whether to hold a virtual annual shareholder meeting should first consult the applicable corporation statutes of their state of incorporation. Shareholder meetings are a matter of state law and generally not all states permit virtual meetings. Prior to COVID-19 for those states that allow a virtual format, each one may impose different requirements with which companies must comply. For example, Delaware permits companies to hold shareholder meetings solely by means of remote communication, provided the company takes reasonable measures to verify meeting participants and there is a reasonable opportunity to participate in and vote at the meeting. California permits virtual-only shareholder meetings as long as all shareholders provide prior consent. Companies incorporated in New York may include a virtual component (subject to certain conditions), but an in-person meeting is still required. States such as New Jersey and North Carolina similarly allow a hybrid virtual/in-person meeting format, while the corporation statutes in Georgia, Alabama, South Dakota and five other states do not permit virtual shareholder meetings.