Legal Alert: SEC Issues Annual Shareholder Meeting Guidance in Response to COVID-19
On the afternoon of Friday, March 13, 2020, the SEC published guidance to assist public companies, investment companies, shareholders, and other market participants affected by COVID-19 with upcoming annual shareholder meetings. The guidance is designed to facilitate the ability of companies to conduct these meetings, including through the use of technology, and engage with shareholders while complying with the federal securities laws.
The guidance allows companies to change the date and location of meetings and use technologies, such as “virtual” meetings that avoid the need for in-person shareholder attendance. Specifically, a company that has already mailed and filed its definitive proxy materials can notify shareholders of a change in the date, time, or location of its annual meeting without mailing additional soliciting materials or amending its proxy materials if it:
- issues a press release announcing such change;
- files the announcement as definitive additional soliciting material on EDGAR; and
- takes all reasonable steps necessary to inform other intermediaries in the proxy process (such as any proxy service provider) and other relevant market participants (such as the appropriate national securities exchanges) of such change.
Companies that have not yet mailed and filed their definitive proxy materials should consider whether to include disclosures regarding the possibility that the date, time, or location of the annual meeting will change due to COVID-19.
Companies may announce in filings made with the SEC the changes in the meeting date or location or the use of “virtual” meetings without incurring the cost of additional physical mailing of proxy materials. The SEC’s guidance encourages companies to provide shareholder proponents with alternative means, such as by telephone, to present their proposals at the annual meetings in light of the difficulties that shareholder proponents face due to COVID-19.
Companies considering virtual meetings should be mindful of the perspectives of institutional investors and proxy advisory firms regarding these meetings. These constituencies generally require disclosure affirming that a virtual meeting will provide full opportunities for shareholders to participate, ask questions, and present shareholder proposals.