In recent days, both Delaware Governor John C. Carney and the SEC’s Division of Corporation Finance (Corp Fin) have provided additional relief for public companies working to hold their annual meetings during the coronavirus (COVID-19) pandemic.
Delaware Order. On April 6, 2020, Governor Carney issued a Tenth Modification to his State of Emergency Order for the State of Delaware. The order addresses the concerns of public companies incorporated in Delaware regarding how the company must notify stockholders of a change in meeting location from a physical location to a meeting conducted solely by remote communication after the company’s initial notice of the meeting was sent. As discussed in our client update on Annual Meeting Considerations During COVID-19, full compliance with many state law notice delivery requirements would typically require that the updated information be mailed to stockholders.
The order provides that a company that has already sent notice of its annual meeting with a physical location may notify stockholders of the change solely through an SEC filing and press release. It also provides for an alternative process of adjourning a meeting at a physical location to another date or time to be held by remote communication by providing notice to stockholders through the same process of an SEC filing and press release. This order provides significant relief to Delaware-incorporated public companies.
SEC Updates Guidance. As discussed in our client update on virtual meeting considerations during the COVID-19 pandemic, Corp Fin issued guidance on March 13, 2020 regarding conducting shareholder meetings. On April 7, 2020, Corp Fin updated that guidance in two key ways:
- Corp Fin updated its guidance on changing the date, time, and location of a shareholder meeting to clarify that it applies to special meetings in addition to annual meetings.
- Corp Fin acknowledged that companies are encountering delays in printing and mailing their proxy materials due to the impact of COVID-19 on service provider staffing and resources. Exchange Act Rule 14a-16 (Rule 14a-16) governs requirements for internet availability of proxy materials, including options for providing only notice of the internet availability of the materials or sending a full set of proxy materials to shareholders. Notice-only delivery of proxy materials requires compliance with several aspects of Rule 14a-16, including sending the notice of internet availability of materials at least 40 calendar days before the meeting and responding to shareholder requests for paper copies within three business days after receiving such a request.
The updated guidance provides that companies using notice-only delivery may do so even if they cannot fully comply with Rule 14a-16, so long as the company “provide[s] shareholders with all proxy materials sufficiently in advance of the meeting to review these materials and exercise their voting rights under state law in an informed manner.” If a company is switching its delivery method to notice-only, it must announce this change by issuing a press release, filing the announcement with the SEC, and taking reasonable steps to inform intermediaries and other market participants. The company and intermediaries must “use their best efforts to send paper copies of proxy materials and annual reports to requesting shareholders, even if such deliveries would be delayed.” Corp Fin also noted that, for some companies, a delay in the annual meeting may be necessary to provide proxy materials on a timely basis.