The Changing COVID Landscape-Virtual Shareholder Meetings
Historically, unless otherwise authorized by a corporation’s board, shareholder meetings have been held in person¹. Following the outbreak of the coronavirus, virtual meetings became more commonplace and a welcome alternative for safety purposes. To facilitate the changing times, emergency legislation was passed with regard to remote meetings, and recently, the State of New Jersey took its legislation one step further by eliminating the need for an emergent situation in order to hold a shareholder meeting remotely.
State law dictates the requirements for stockholder meetings with regard to the companies incorporated in its state. Below is a summary of the amended New Jersey law as well as the law in the State of Delaware and the Commonwealth of Pennsylvania.
For corporations organized under the laws of the State of New Jersey, if the by-laws do not provide for the location of its shareholder meetings, pre-pandemic New Jersey law provided that such meetings be held at the registered office of the corporation.
As a result of the pandemic, the New Jersey Business Corporation Act was amended to permit shareholder meetings to be held solely by means of remote communication during “a state of emergency declared by the governor” (N.J.S.A. §14A:5-1). On August 24, 2021, A-4918/S-3266 (Greenwald/Johnson/ Mukherji/Diegnan) was signed into law, further amending the New Jersey statute to remove the state of emergency requirement and to provide that shareholder meetings of corporations and certain financial institutions, including any votes to be taken thereat, may be held remotely, in whole or in part, to the extent that the corporation’s board adopts guidelines governing such remote meetings.
The State of Delaware allows for entirely remote shareholder meetings provided: (a) such meetings are not specifically prohibited under corporate by-laws; (b) the corporation is able to verify that each participant is an actual stockholder or proxy holder; (c) the shareholders have been provided with a reasonable opportunity to participate; and (d) accurate voting records are maintained (8 Del.C. 211). On April 6, 2020, the State of Delaware, in response to the COVID outbreak, provided emergency guidance to corporations seeking to change an already scheduled in-person meeting to a virtual one. Such guidance included certain Securities Exchange Commission filing requirements and the need to post notice of such change on the corporation’s website. (See: https://governor.delaware.gov/wp-content/uploads/sites/24/2020/04/Tenth-Modification-to-State-of-Emergency-04062020.pdf );
The Commonwealth of Pennsylvania permits and had permitted fully virtual shareholder meetings prior to the start of the pandemic so long as shareholders are able to vote virtually, аsk questions, comment, and present motions in real-time as the proceedings are pending (15 Pa.C.S.A. 1704(a)).
The reported positives from the past year of virtual meetings have been the improvement in virtual technology, convenience of participation, increased attendance, lower costs, and environmental friendliness. Those on the other side of the fence noted technological glitches, the necessity to increase coordination between the persons running the meetings, and a technological learning curve. Whether virtual stockholder meetings will continue to trend forward post-pandemic remains to be seen.
¹ Notwithstanding, pre-pandemic, although shareholder meetings were generally held in person, one or more shareholders may have been permitted by the corporation’s board to participate remotely.
The information contained in this publication should not be construed as legal advice, is not a substitute for legal counsel, and should not be relied on as such. For legal advice or answers to specific questions, please contact one of our attorneys.