SEC Provides Guidance for Conducting Annual Meetings Amid COVID-19 Concerns | Practical Law

SEC Provides Guidance for Conducting Annual Meetings Amid COVID-19 Concerns | Practical Law

The SEC's Division of Corporation Finance and Division of Investment Management issued guidance to assist issuers, shareholders, and other market participants affected by 2019 novel coronavirus disease (COVID-19) to meet their obligations under federal proxy rules.

SEC Provides Guidance for Conducting Annual Meetings Amid COVID-19 Concerns

Practical Law Legal Update w-024-4949 (Approx. 4 pages)

SEC Provides Guidance for Conducting Annual Meetings Amid COVID-19 Concerns

by Practical Law Corporate and Securities
Published on 16 Mar 2020 • USA (National/Federal)
The SEC's Division of Corporation Finance and Division of Investment Management issued guidance to assist issuers, shareholders, and other market participants affected by 2019 novel coronavirus disease (COVID-19) to meet their obligations under federal proxy rules.
Update: On April 7, 2020, the SEC updated its guidance on shareholder meetings in light of COVID-19. Changes include:
  • Clarifying the guidance for changing the date, time, or location of a shareholder meeting also applies to:
    • special meetings; and
    • meetings held by investment companies in connection with a business combination or certain other transactions.
  • Permitting issuers experiencing unavoidable delays in printing and physical mailing proxy materials to use the notice-only delivery option under Exchange Act Rule 14a-16, even if they are unable to meet all requirements under the rule, including:
    • mailing the notice of electronic availability of proxy materials at least 40 days before the meeting; and
    • mailing paper copies of proxy materials and annual reports to requesting shareholders within three business days.
    Issuers must notify shareholders of the change in delivery method by following the steps in the staff's guidance for changing the meeting date, time, or location.
On March 13, 2020, the SEC's Division of Corporation Finance and Division of Investment Management issued guidance to assist issuers, shareholders, and other market participants to meet their obligations under federal proxy rules amid concerns over 2019 novel coronavirus disease (COVID-19). The guidance encourages all market participants involved in the proxy voting process to be flexible and cooperate with one another, and specifically addressed:
  • Changing the date, time, or location of an annual meeting.
  • Hosting "virtual" shareholder meetings.
  • The presentation of shareholder proposals.
Changing the Date, Time, or Location of an Annual Meeting
Issuers that have already mailed and filed their definitive proxy materials can notify shareholders of a change in date, time, or location of their annual meeting without mailing additional soliciting materials or amending their proxy materials if they:
  • Issue a press release announcing the change.
  • File the announcement as definitive additional soliciting material on EDGAR.
  • Take all reasonable steps to inform other intermediaries in the proxy process (such as a proxy service provider) and other relevant market participants (such as the approporiate national securities exchanges) of the change.
The SEC expects issuers to take these actions promptly after determining to change the date, time, or location of the meeting and sufficiently in advance of the meeting. Issuers who have not filed definitive proxy materials should consider whether to include language about the possibility of changes due to COVID-19.
"Virtual" Shareholder Meetings
Issuers who are able and planning to conduct "virtual" or "hybrid" shareholder meetings must notify shareholders, intermediaries in the proxy process, and other market participants of such plans in a timely manner and provide clear directions on how shareholders can remotely access, participate in, and vote at the virtual meeting.
For issuers who have not filed their definitive proxy materials, the virtual meeting disclosures must be included in their definitive proxy statement and soliciting materials. Issuers who have already filed their definitive proxy materials may follow the steps outlined above to notify shareholders and other participants without remailing additional soliciting materials.
For more information on virtual shareholder meetings, see Articles, Certain Considerations Relating to Virtual Shareholder Meetings and What's Market: Virtual-Only Shareholder Meetings.
Presentation of Shareholder Proposals
In the event shareholder proponents cannot attend annual meetings to present their proposals as required under Exchange Act rule 14a-8(h), issuers should, to the extent feasible under state law, allow shareholder proponents to present through alternative means, such as by phone.
In addition, if a shareholder proponent cannot present their proposal at an annual meeting due to travel restrictions or other hardships related to COVID-19, the SEC staff would consider it "good cause" under Rule 14a-8(h) if issuers assert Rule 14a-8(h)(3) as a basis to exclude proposals submitted by the shareholder proponent for any meetings in the following two calendar years.
For more information on proxy statements and annual meetings, see the Proxy Statement and Annual Meeting Toolkit.