In response to the continuing COVID-19 outbreak in New York State, Gov. Andrew Cuomo has signed executive orders that temporarily permit New York corporations to hold annual meetings of shareholders on a purely virtual basis.
Executive Order 202.8, as amended by Executive Order 202.14, temporarily suspends portions of the Business Corporation Law (BCL) “to the extent they require meetings of shareholders to be noticed and held at a physical location.” This relief allows New York corporations to hold virtual-only meetings presumably through May 7, 2020, unless the temporary suspension is further continued.
However, portions of earlier Executive Orders, including Executive Order 202.8, as amended, “which closed or otherwise restricted public or private businesses or places of public accommodation, and which required postponement or cancellation of all non-essential gatherings of individuals of any size for any reason” expire earlier – on April 29, 2020. While we believe the earlier expiration is not intended to apply to the temporary suspension of the requirement to notice and hold annual shareholders’ meetings at a physical location, the Executive Orders are not entirely clear. Companies with annual shareholders’ meetings on the horizon should consult with legal counsel and closely monitor future executive orders to navigate the evolving landscape.
The COVID-19 pandemic gained momentum in New York State just as calendar year corporations were finalizing plans and beginning to send notices for their annual shareholders’ meetings. Though many states, including Delaware, have permitted virtual-only shareholders’ meetings for a number of years, New York only recently amended the Business Corporation Law (BCL) in October 2019 to permit a virtual component in annual shareholders’ meetings. Even then, amended Section 602 of the BCL only allows for what is known as a “hybrid annual meeting”, which permits virtual attendance as long as the corporation also provides a physical meeting location. In light of the current restrictions on physical gatherings related to the COVID‑19 pandemic, Executive Order 202.8 waives the requirements that meetings of shareholders be noticed and held at a physical location. As a result, as long as Executive Order 202.8 remains in effect, corporations formed under New York law will be able to hold an annual shareholders’ meeting via a completely virtual platform.
New York corporations seeking to hold a virtual-only annual meeting or change a previously-noticed, physical annual meeting location to a virtual-only meeting will need to consider other aspects of the BCL, including certain notice requirements and the requirement to provide a stockholder list at the meeting. Most corporations will want to engage an experienced third party to host a virtual annual meeting platform to meet procedural requirements and to maintain the privacy and security of the corporation and shareholders attending the virtual meeting.
In addition, corporations will need to confirm whether their certificates of incorporation and bylaws are compatible with the concept of a virtual annual meeting, and if not, whether the board of directors can amend any inconsistent provisions in time to accommodate the new format. Finally, companies switching to a virtual-only (or hybrid) meeting format for the first time should ensure that the rules of conduct for the meeting and the annual meeting script are updated to reflect the nature of the meeting. New York corporations that file reports with the Securities and Exchange Commission (SEC) will find that the SEC has provided relief and guidance with respect to the filing and mailing of annual meeting proxy statements and required disclosure regarding changes to the annual meeting locations and formats caused by the COVID-19 outbreak.
This alert does not purport to be a substitute for advice of counsel on specific matters.
Harris Beach has offices throughout New York State, including Albany, Buffalo, Ithaca, Long Island, New York City, Rochester, Saratoga Springs, Syracuse and White Plains, as well as New Haven, Connecticut and Newark, New Jersey.