Executive Order Permits Virtual Shareholder Meetings for New York Corporations
IN SHORT
The Situation: In light of the public health and safety concerns associated with the spread of novel coronavirus (COVID-19), public companies across the country are taking steps to hold their upcoming annual meetings as virtual meetings or allow remote participation in order to protect both shareholders and the companies’ employees. Ordinarily, a company incorporated in New York may hold a hybrid meeting (i.e., a physical meeting that also allows, subject to certain conditions, for virtual participation), but New York’s Business Corporation Law ("Business Corporation Law") does not permit a shareholder meeting to be held solely by means of remote communication ("virtual shareholder meeting").
The Result: New York’s Governor, Andrew Cuomo, issued an executive order on March 20, 2020 ("Order), that temporarily suspends the requirement for annual or special shareholder meetings to be held at a physical location. Thus, New York corporations can choose to hold a virtual shareholder meeting. Currently, the Order applies to shareholder meetings scheduled between March 20, 2020, and April 19, 2020.
Looking Ahead: New York corporations should carefully consider whether an annual or special shareholder meeting scheduled through April 19, 2020, should be changed to "virtual-only" or to a hybrid meeting that supports remote communication in order to avoid public health and safety concerns and comply with fast-evolving federal, state, and local restrictions on assemblies of people.
What the Order Means for New York Corporations
The Business Corporation Law requires that meetings of shareholders be held at such place fixed by a New York corporation's bylaws. Although the Business Corporation Law permits shareholders not physically present at the meeting to participate by means of electronic communications (provided that procedures are in place to enable verified shareholders not physically present to participate and vote in accordance with New York Business Corporation Law § 602(b)), the statute does not expressly authorize virtual-only meetings and has generally been construed as requiring a physical location for all such meetings. On March 20, 2020, under authority vested in the Governor as a result of the declaration on March 7, 2020, of a state disaster emergency for the entire State of New York, Governor Cuomo issued Executive Order No. 202.8, which includes provisions permitting New York corporations to hold annual and special shareholder meetings solely by means of remote communication through April 19, 2020.
Read the full text of Executive Order No. 202.8, Continuing Temporary Suspension and Modification of Laws Relating to the Disaster Emergency, with the relevant portion on page one.
New York corporations considering a virtual shareholder meeting in light of the Order should review their articles of incorporation and bylaws to confirm that the Board of Directors is not prohibited from holding virtual-only or hybrid meetings. If necessary, the Board of Directors may be able to amend the bylaws to provide for shareholder meetings to be held solely or partially through remote communications.
If permitted by the organizational documents and determined by the Board of Directors to be in the company's best interests, the decision to hold a virtual shareholder meeting should be memorialized by a formal resolution. A corporation planning a virtual shareholder meeting should discuss with counsel the necessary guidelines and procedures to preserve shareholder access and engagement for such a meeting and engage a seasoned third-party service provider of virtual meeting technology.
Federal Securities Law Proxy Requirements. Companies should also confirm that a planned virtual shareholder meeting conforms to the recent guidance from the U.S. Securities and Exchange Commission on shareholder meetings in light of COVID-19. This Jones Day Commentary provides more information.
Other State Law Changes. For information relating to similar changes under Georgia law, see the Jones Day Commentary "Governor Kemp Issues Executive Order Permitting Virtual Shareholder Meetings for Georgia Corporations."
Two Key Takeaways
- By Executive Order, New York Governor Cuomo has permitted New York corporations to hold annual and special shareholder meetings solely by means of remote communication through April 19, 2020.
- New York corporations should carefully consider whether an annual or special shareholder meeting scheduled through April 19, 2020, should be changed to "virtual-only" or to a hybrid meeting.
