SEC Issues Guidance for Annual Meetings Addressing COVID-19 Concerns
Section 12 of the Securities Exchange Act of 1934 requires public companies to hold annual shareholder meetings. In light of rising concerns regarding the novel coronavirus disease (COVID-19), which continues to rapidly spread to communities around the world, the staff of the Securities and Exchange Commission (SEC) issued guidance for how to conduct these meetings in order to protect the health and safety of issuers, shareholders, and others who may be impacted.
Here is what companies and shareholders should know about the new guidance.
Changing the date, time, or location of an annual meeting
If a company has already mailed and filed definitive proxy materials, it can notify the market of changes in the date, time, or location of its annual meeting without mailing additional soliciting materials. This notification without additional soliciting materials may only occur if the issuer takes certain steps to promptly inform all stakeholders, such as issuing press releases, filing the announcement on EDGAR, and informing other intermediaries in the proxy process.
For companies that have not yet mailed and filed their definitive proxy materials, they should consider whether to include disclosures regarding the possibility that the date, time, or location of the annual meeting could change due to the impact of COVID-19.
Virtual shareholder meetings
Companies and businesses around the world are turning to technology in order to avoid large in-person gatherings. If an issuer plans to conduct a virtual shareholder meeting, the staff expects that it notifies market participants of its plans in a timely manner and clearly discloses pertinent logistical details, including how to remotely access, participate in, and vote at the meeting.
For companies that have not yet filed and delivered their definitive proxy materials, these disclosures should be included in the definitive proxy statement and other soliciting materials. Companies that have already filed and mailed their definitive proxy materials do not need to mail additional soliciting materials if they plan to switch to or offer a virtual meeting if they follow the steps described above for announcing a change in the meeting date, time, or location.
Presentation of shareholder proposals
Rule 14a-8(h) requires shareholders to attend the shareholder meeting to present proposals. If the shareholder fails to appear and present the proposal without good cause, the company is permitted to exclude all of that proposal for any meetings held in the following two calendar years. The staff, however, considers the challenges posed by COVID-19 to meet the definition of “good cause.” As a result, the staff has encouraged companies to provide shareholders with the ability to present proposals remotely.