On March 13, 2020, the staff of the Division of Corporation Finance and the Division of Investment Management provided guidance to issuers regarding the annual meetings of shareholders in light of the novel coronavirus (COVID-19). State law typically requires issuers to hold annual meetings of security holders. Due to travel and other restrictions imposed due to the outbreak of COVID-19, many issuers are contemplating changing the date, time and/or location of their annual meetings or to conduct virtual meetings.
The SEC staff guidance outlines their position on:
- Changes to the annual meeting of shareholders;
- The conduct of virtual shareholder meetings and proper notification to shareholders; and
- Presentation of shareholder proposals and the conditions for excluding a proposal from the annual meeting.
Key Aspects of the Guidance
Federal proxy rules govern the delivery of proxy materials, including definitive proxy statements and proxy cards. Due to the global pandemic of COVID-19, issuers may change the date, time or location of their annual shareholders meetings. The SEC staff has indicated that issuers who have already mailed and filed their definitive proxy materials, are permitted to notify shareholders of a change in the date, time or location of the annual meeting without a requirement to mail additional soliciting materials or amend proxy materials if the issuer:
- Issues a press release that announces the changes;
- Files the announcement as definitive additional soliciting material on EDGAR; and
- Takes all reasonable steps necessary to inform others in the proxy process, including proxy service providers and applicable national securities exchanges
These notifications should occur sufficiently in advance of the annual shareholders meeting to provide advance notice to the market. For issuers who have not yet mailed or filed their definitive proxy materials, disclosure of the possibility that the date, time or location of the meeting may change is appropriate.
For issuers who are considering whether to conduct virtual shareholder meetings, rather than in person meetings, state laws govern the ability to conduct the annual shareholders meeting virtually. The SEC staff has stated that issuers should ensure that shareholders are provided with robust disclosures for shareholder voting, regardless of the method expected to be used to conduct the shareholder meeting. Issuers are also expected to provide proper notification to shareholders and others included in the proxy process, that is timely and that includes clear directions. Logistical details of a virtual meeting, including the voting process, should be included in the definitive proxy materials. For proxy materials already provided to shareholders, issuers would not be required to mail additional soliciting materials if they follow the steps above for notification of a change in the date, time or location of the meeting.
For shareholder proposals, shareholders or their representatives are required under Exchange Act Rule 14a-8(h) to present their proposals at the annual meeting. The SEC staff encourages issuers to provide shareholder proponents the means, whether by phone or virtually to present their proposals. However, if a shareholder proponent is unable to attend the annual shareholder meeting through the methods provided, the staff deems this a good cause under the Exchange Act Rule to exclude the proposal from any meetings held in the following two calendar years.
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