SEC Staff COVID-19 Guidance was announced, probably at least in part, driven by a Rule14a-8 Coronavirus Letter Marh 11 pdf from the ICCR, US SIF and the Shareholder Rights Group. Guidance discusses virtual meetings, 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. SEC Staff COVID-19 Guidance also included how staff views shareholder presentation requirements.
SEC Staff COVID-19 Guidance: “Virtual” Shareholder Meetings
The staff understands that some issuers are contemplating the possibility of conducting a “virtual” shareholder meeting through the internet or other electronic means in lieu of an in-person meeting. The ability to conduct a “virtual” meeting is governed by state law, where permitted, and the issuer’s governing documents. Robust disclosures that facilitate informed shareholder voting are just as important for a “virtual” meeting or “hybrid” meeting (i.e., an in-person meeting that also permits shareholder participation through electronic means) as they are for an in-person meeting.
To the extent an issuer plans to conduct a “virtual” or “hybrid” meeting, the staff expects the issuer to notify its shareholders, intermediaries in the proxy process, and other market participants of such plans in a timely manner and disclose 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. For issuers that have not yet filed and delivered their definitive proxy materials, such disclosures should be in the definitive proxy statement and other soliciting materials. Issuers that have already filed and mailed their definitive proxy materials would not need to mail additional soliciting materials (including new proxy cards) solely for the purpose of switching to a “virtual” or “hybrid” meeting if they follow the steps described above for announcing a change in the meeting date, time, or location.
Delaware requirements regarding virtual meetings are minimal. I hope issuers go way beyond those requirements and provide mechanisms for shareholders not only to ask questions, but to see the que of questions and who they are from. Ideally, they would facilitate the ability of shareholders to chat with each other and exchange contact information. Additionally, announcements should include that any virtual-only meeting is a temporary measure and that the company fully expects to hold a hybrid meeting in future years.
SEC Staff COVID-19: Presentation of Shareholder Proposals
Exchange Act Rule 14a-8(h) requires shareholder proponents, or their representatives, to appear and present their proposals at the annual meeting. In light of the possible difficulties for shareholder proponents to attend annual meetings in person to present their proposals, the staff encourages issuers, to the extent feasible under state law, to provide shareholder proponents or their representatives with the ability to present their proposals through alternative means, such as by phone, during the 2020 proxy season.
Furthermore, to the extent a shareholder proponent or representative is not able to attend the annual meeting and present the proposal due to the inability to travel or other hardships related to COVID-19, the staff would consider this to be “good cause” under Rule 14a-8(h) should issuers assert Rule 14a-8(h)(3) as a basis to exclude a proposal submitted by the shareholder proponent for any meetings held in the following two calendar years.