SEC Issues New Guidance for Stockholder Meetings in Response to COVID-19

In response to developments related to COVID-19, the Securities and Exchange Commission has issued new guidance (available here) to assist public companies, investment companies, shareholders, and other market participants with their upcoming annual shareholder meetings. The guidance sets forth procedures for updating the time, date or location of a stockholder meeting and eliminates the federal securities law requirement that such change require a full mailing of notice to stockholders.

The SEC staff has taken the position that an issuer that has already mailed and filed its definitive proxy materials can notify shareholders of a change in the date, time, or location of its annual meeting without mailing additional soliciting materials or amending its proxy materials if it:

  • Issues a press release announcing such change
  • Files the announcement as definitive additional soliciting material on EDGAR and
  • Takes all reasonable steps necessary to inform other intermediaries in the proxy process (such as any proxy service provider) and other relevant market participants (such as the appropriate national securities exchanges) of such change

Notwithstanding the SEC’s flexibility, state laws—including the Delaware General Corporation Law—may still require notice be mailed to stockholders if there is a change of location for a called meeting. Accordingly, companies that have not yet filed a proxy statement should include provisions to hold a joint/hybrid virtual meeting with the physical meeting that is planned, and include disclosure that the company will issue a press release notifying stockholders if the physical meeting is canceled due to public health or logistical concerns.

Sample language for this disclosure reads as follows:

“Our 2020 Annual Meeting of Stockholders will be held at [Place], at [Time], on [Date]. We intend to hold our annual meeting in person. However, we are sensitive to the public health and travel concerns our shareholders may have and recommendations that public health officials may issue in light of the evolving coronavirus (COVID-19) situation. As a result, we may impose additional procedures or limitations on meeting attendees (beyond those described herein) or may decide to hold the stockholder meeting in a different location or solely by means of remote communication (i.e., a virtual-only stockholder meeting). We plan to announce any such updates through a press release and on our proxy website ([]). We encourage you to check this website prior to the meeting if you plan to attend.”

Companies considering a virtual meeting should reach out to their proxy services firm as soon as possible. We encourage companies that have already filed their proxy statement but are thinking about moving to a virtual meeting structure or have any other questions about the logistics of holding a virtual meeting, to reach out to their Fenwick attorney to discuss.

Read also “Coronavirus Update: Employer Response, Contract Performance, and Public Company Disclosure Guidance” and “Coronavirus Impact on M&A and Other Strategic Corporate Transactions.”