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New SEC guidance allows flexibility for companies hosting shareholder meetings

published in McAfee & Taft LINC | March 27, 2020

The Securities and Exchange Commission recently published guidance recognizing the health concerns and logistical challenges that COVID-19 presents for companies with upcoming annual shareholder meetings. In the guidance, the SEC provided detailed directions for how companies considering changes to their annual meetings in light of these challenges must notify affected parties.

First, companies considering alterations to the date, time, or location of their annual meetings that have already mailed and filed their definitive proxy materials may notify shareholders of the changes by issuing a press release, filing an announcement on EDGAR, and taking reasonable steps to inform other relevant parties and participants. The companies do not have to mail additional soliciting materials.

Second, the SEC indicated that companies may switch from an in-person shareholders meeting to a virtual meeting, as long as a virtual meeting is permitted by the applicable state law and the company’s governing documents. If a company opts for a virtual meeting, it should notify all relevant parties in a timely manner and provide clear directions regarding the logistics of the meeting, including how shareholders can access and participate in the meeting, as well as how they can vote during the meeting. Companies that have not filed and mailed their proxy materials should include these logistical disclosures within their proxy statements and soliciting materials. Companies that have filed and mailed their proxy materials should follow the steps outlined above for changes to the date, time, or location of a meeting.

Finally, the SEC encouraged companies to provide shareholder proponents or their representatives with the ability to present proposals through alternative means, such as via telephone.

While the SEC’s guidance is helpful for companies dealing with potential changes to their annual meetings, there are other considerations that companies should be prepared to address. For example, companies that plan to change to a virtual meeting should be aware of guidance issued by proxy advisory firm Glass Lewis. Typically, Glass Lewis requires a company to provide detailed disclosures related to shareholder participation if the company plans to hold a virtual meeting, or else the firm may recommend a vote against members of the company’s governance committee. However, for proxy season 2020, Glass Lewis has indicated that only a brief explanation regarding the basis for a virtual meeting is required. The disclosure should simply indicate that the company is moving to a virtual meeting due to concerns related to COVID-19.

For assistance in navigating these issues, please contact Will Holland, Justin Jackson, or one of our other Governance and Compliance lawyers.