May 6, 2020
Member, Stoll Keenon Ogden PLLC
Thomas E. Rutledge
Member, Stoll Keenon Ogden PLLC
Generally speaking, every corporation is required to hold annual meetings of the shareholders to elect directors, and the board of directors then needs to meet to elect officers. The date for these meetings is typically set in the corporation’s bylaws, with the board having the final say as to the date, time and location of the meeting of the shareholders. Usually, the board convenes for its annual meeting soon after that meeting. In ordinary times these meetings are formulaic.
We are not, however, currently in ordinary times. Rather, we are considering how to have “meetings” when we are directed to not be meeting.
Recently, John Carney, the Governor of Delaware, issued an order that addresses the annual shareholder meetings of publicly-traded companies that are incorporated in Delaware. Under that order:
• A board of directors may change an annual meeting of the shareholders for which notice has already been sent from a physical meeting to a virtual meeting by filing a notice with the Securities and Exchange Commission (the “SEC”) and issuing a press release that will be posted on the corporation’s website; and
• If a meeting has been noticed but cannot be convened due to the coronavirus pandemic, the meeting may be adjourned to another date and time to then be held virtually by posting on the SEC’s website and a press release, setting forth the date, time and means of remote communication through which the meeting will be held.
A note on a “virtual meeting.” Corporate law has long permitted both shareholders and directors to attend meetings by phone or other electronic means of communication, the requirements typically being that everyone has a reasonable opportunity to participate and can hear all of the participants in the meeting. Further, corporate law has treated those participating electronically to be counted as present for quorum and similar purposes. But in these instances, there was a physical meeting location for those desiring to be physically present. In a virtual meeting there is no meeting location; every participant participates by means of electronic communications.
Since 2002, Kentucky’s Business Corporation Act has permitted virtual meetings of the shareholders. That a meeting will be virtual is a determination made solely by the board of directors. While Kentucky’s Business Corporation Act does not expressly provide for virtual meetings of the board of directors, the statute contains sufficient flexibility for a virtual meeting to be valid.
If your corporation has an upcoming annual meeting of the shareholders, you have several options:
• Act by Written Consent. If there are only a few shareholders, and there is no contest as to whom is to be elected to the board, it may be possible to elect the board by unanimous written consent. Thereafter the newly elected board can likewise act by written consent to elect officers and effect other annual tasks;
• Delay the Annual Meeting. You may have the flexibility under your by-laws to delay the annual meeting until a time after the pandemic crisis. Absent atypical provisions in your articles of incorporation or by-laws, the current board of directors will remain in office (as will the officers) until such time as the crisis is behind us; or
• Meet Virtually. If you want to proceed on the usual schedule, notice your annual meeting of the shareholders to be held virtually. In the notice you will need to provide information as to how the shareholders may participate (e.g., a Zoom meeting invitation). After that meeting the board can as well meet virtually to address not only its annual tasks, but as well the impact of the current crisis on the corporation.
Any of these options will require action by the Board of Directors, and none should be undertaken until the particular articles of incorporation and by-laws of your corporation have been reviewed. Different issue and questions arise if you have an LLC that provides for an “annual meeting of the members,” and we will be happy to work with you on addressing those requirements.
Stoll Keenon Ogden understands that these are trying times for our clients and our country. Our firm operations have continued uninterrupted and our attorneys are equipped to serve as we always have – for more than 120 years.
Stoll Keenon Ogden’s Securities & Corporate Governance practice represents clients in industries, simple and complex, including financial services, consumer goods, energy, equine, healthcare, waste management, pharmaceutical and technology. Regardless of the issues our clients face, success is our mission, and we bring a wealth of experience and dedication to our work.
Please also be sure to check out the Stoll Keenon Ogden Coronavirus Resource webpage for additional articles and information related to the latest information on new laws and directives enacted by federal, state, and local governments in response to the Coronavirus pandemic.