South Carolina-chartered corporations1 may now hold virtual meetings of shareholders whereby shareholders and proxy holders not physically present at the annual or special meeting location may participate by means of remote communication if authorized by the corporation’s board of directors.2 The need for such flexibility was evidenced during the COVID-19 pandemic, and South Carolina-chartered corporations now join corporations chartered in almost every other U.S. state to allow for such meeting participation to conduct corporate business such as the election of directors and approval of extraordinary corporate actions. Virtual shareholder meetings can provide a variety of benefits to corporations such as substantial reduction in costs from hosting a large in-person meeting and a more flexible meeting format, negating the need for travel while increasing accessibility to shareholders.
For a shareholder to be deemed present in person and to vote at such virtual meeting:
- The corporation must implement reasonable measures:
- To verify that each person deemed present and permitted to vote at the meeting is a shareholder or proxy holder.
- Provide shareholders or proxy holders a reasonable opportunity to participate in the meeting and to vote on matters submitted to the shareholders including, without limitation, an opportunity to communicate and to read or hear the proceedings of the meeting substantially concurrently with such proceedings.
- The corporation must maintain a record of the vote if any shareholder or proxy holder votes at the meeting by means of remote communication.
The amended statute provides for these measures to ensure that the integrity and security of meetings are maintained but also provide flexibility for a corporation with differing shareholder bases to conduct these meetings via separate methods. While a Zoom call may be entirely reasonable for a family corporation with five related shareholders, such a format would be grossly inadequate for a SEC-registered public corporation with 2,000 shareholders. However, if a corporation intends to hold a virtual meeting of shareholders (or an in person/virtual hybrid meeting), the following are a few steps that management should always consider:
- Consider if shareholders will be allowed to attend the meeting in person in addition to virtually, making the meeting a so-called hybrid meeting.
- Consider if the virtual meeting will be either audio-only or include video.
- Ensure that the notice of the meeting provides all details on how to access the virtual meeting and how to vote.
- Conduct a dress rehearsal of the meeting to test the technology and/or the participant phone lines (i.e., those speaking at the meeting).
There are other practical considerations to consider in planning and preparing for the virtual meeting. If you would like to discuss holding a virtual or hybrid shareholder meeting in compliance with South Carolina state law, or the implications of the SEC’s guidance on virtual and hybrid shareholder meetings, please call either of the authors or your regular Nelson Mullins contact. Please refer to our previous Securities Alert regarding virtual shareholder meetings generally and SEC guidance regarding the same.
These materials have been prepared for informational purposes only and are not legal advice. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. Internet subscribers and online readers should not act upon this information without seeking professional counsel.
1 Although not the topic of this article, the South Carolina Legislature also amended the South Carolina Nonprofit Corporation Act of 1994 to allow for a virtual meeting of members of SC-chartered nonprofit corporations.
2 On May 19, 2023, Governor Henry McMaster signed South Carolina House Bill 4049, which was effective immediately. See 2023-2024 Bill 4049: Remote Annual Meetings (scstatehouse.gov).