Legal Alert

Delaware Issues Modified Order Relating to Remote Meeting of Shareholders and Shareholder Notices

April 9, 2020
As companies continue to grapple with the impact of the COVID-19 outbreak on their ongoing operations, shareholder meetings have become an area of increasing concern for those companies subject to the reporting requirements under the Securities Exchange Act of 1934, as amended (Exchange Act). 42 states have issued state-wide shelter-in-place orders and limitations on public gatherings have raised questions of how companies can practice good pandemic citizenship while still conducting their annual shareholder meetings in compliance with state law requirements. Related questions regarding how companies can notify their investors of changes to, or cancellations of, annual meetings have also developed. In response to these growing concerns and as proxy season continues in full swing, Delaware enacted certain measures to address these issues.

On April 6, 2020, Delaware Governor John Carney issued his tenth modification to the Delaware State of Emergency Declaration, under which Section 4(a) of the order permits a company that is incorporated in Delaware and subject to Sections 13(a) or 15(d) of the Exchange Act—the sections pertaining to the filing of periodic documents, reports and information with the Securities and Exchange Commission (SEC)—to allow its board of directors to change a shareholder meeting currently noticed for a physical location to a meeting conducted solely by means of remote communication. Under the modified order, these companies can meet their notice obligations to shareholders without having to mail additional soliciting materials or amend their proxy materials. Instead, Delaware-incorporated companies may notify shareholders of the change solely by a document that has been publicly filed by the company with the SEC in accordance with Sections 13, 14 or 15(d) of the Exchange Act and a press release posted promptly to the company’s website after release.

Section 4(a) of the modified order also permits companies incorporated in Delaware who have notified their shareholders of the physical place and time of their annual meeting to adjourn the meeting to another date or time, to be held by remote communication, if it is impracticable to convene such a meeting at the physical location due to the public health threat caused by COVID-19. These companies can meet their shareholder notice obligations by providing notice of the adjournment with the date, time, and means for remote communication in a document filed by the company with the SEC in accordance with Sections 13, 14 or 15(d) of the Exchange Act and a press release published promptly to the company’s website after release.

For corporations incorporated in jurisdictions other than Delaware, the company should review the applicable provisions of the state corporation statute and the company’s governing documents with respect to the permissibility of remote shareholder meetings and shareholder notice requirements.

Copyright © 2020 by Ballard Spahr LLP.
(No claim to original U.S. government material.)

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This alert is a periodic publication of Ballard Spahr LLP and is intended to notify recipients of new developments in the law. It should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general informational purposes only, and you are urged to consult your own attorney concerning your situation and specific legal questions you have.

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