In a previous blog post, we discussed the availability of virtual shareholder meetings (i.e., “virtual-only” and “hybrid” meetings) as a potential alternative to the traditional in-person meeting during the 2020 proxy season in light of the emerging public health and safety crisis posed by the coronavirus pandemic (COVID-19). The Staff of the U.S. Securities and Exchange Commission’s Division of Corporation Finance and Division of Investment Management subsequently issued guidance for conducting virtual annual meetings under these unprecedented circumstances.

Post-Proxy Filing

The Staff confirmed that if a company has already mailed and filed its proxy materials, the company can notify shareholders of a change in the date, time or location of the annual meeting without amending its definitive proxy materials or mailing additional soliciting materials if the company issues a press release announcing the change, files the announcement as definitive additional soliciting material on EDGAR, and takes all reasonable steps necessary to inform other interested parties in the proxy solicitation process (e.g., any proxy service providers and applicable national securities exchanges) of the change. These actions should be taken promptly after the decision to hold a virtual meeting is made and, in any case, sufficiently in advance of the annual meeting. Therefore, companies that have already filed and mailed their definitive proxy materials would not need to mail additional soliciting materials (including new proxy cards) solely to switch to a “virtual” or “hybrid” meeting if they follow the steps described above for announcing a change in the meeting date, time, or location.

Pre-Proxy Filing

To the extent a company has not filed its proxy materials and plans to conduct a virtual meeting, the Staff emphasized the importance of notifying shareholders, proxy service providers and other interested parties of such plans promptly and providing robust disclosure in the proxy statement regarding logistical details of the virtual meeting. Companies should, among other things, consider providing disclosure regarding the following logistical details:

• How shareholders can remotely access, participate in and vote at the annual meeting.
• Whether the meeting will be conducted using audio or live video webcast.
• The process for handling technical difficulties.
• General rules of procedure applicable to virtual meetings (timelines/limits for questions, ordering of questions, etc.).

Shareholder Proposals

The Staff also encouraged companies to allow proponents of shareholder proposals the ability to present their proposals through electronic media, to the extent permitted by state law. To that end, the Staff will consider a shareholder proponent’s failure to attend the annual meeting “due to the inability to travel or other hardships related to COVID-19” to be “good cause” under Rule 14a-8(h)(3) should the company seek to use Rule 14a-8(h)(3) as a basis to exclude a proposal submitted by the shareholder proponent for any meeting held in the following two calendar years. For companies holding virtual meetings, Rule 14a-8(h)(2) permits shareholder proponents to present their proposals through electronic media (if otherwise permitted by the company).

State Law & Organizational Document Considerations

As a threshold matter, the availability of virtual meetings is dependent on applicable state law, as well as a company’s organizational documents. In line with the Staff’s guidance, applicable state law and the company’s organizational documents should be reviewed to confirm what form of virtual meeting, if any, is permissible.