Blog: Corp Fin staff updates guidance for “notice-only” delivery of proxy materials

Cooley LLP

Cooley LLP

The Corp Fin staff announced that it has updated its Guidance for Conducting Shareholder Meetings in Light of COVID-19 Concerns (see this PubCo post), originally published on March 13.  The updated guidance clarifies that the prior guidance regarding changes to the date, time and place of annual meetings of shareholders also applies to special meetings.  The update also provides some relief for companies that shift to the “notice-only” method of furnishing proxy materials as a result of COVID-19-related delays in printing and mailing of full sets of proxy materials.

Apparently, the impact of COVID-19 at some proxy service providers and transfer agents has caused delays with regard to printing and physical mailing of full sets of proxy materials for shareholder meetings, leading some companies to opt to furnish their proxy materials using the “notice-only” method. Under Rule 14a-16, the company is required to post its proxy materials on an internet website and send a notice to shareholders to inform them of the electronic availability of the proxy materials and annual report at least 40 calendar days before the meeting.  It must also send paper copies of proxy materials and annual reports within three business days after receiving a shareholder request and continue to send paper copies to requesting shareholders until the requests are revoked. However, due to unexpected delays caused by COVID-19, companies have had concerns about their ability to comply with the 40-day notice requirement, provide brokers or other intermediaries with the information to enable them to send out the notice to beneficial owners within 40 days or respond to shareholders’ requests for paper copies of proxy materials in a timely manner.

Below is the staff’s advice:

“The primary goal of the proxy process is allow shareholders to receive material information about the matters to be presented at a shareholder meeting in a timely manner so they can make informed voting decisions. The staff encourages issuers affected by printing and mailing delays caused by COVID-19 to use all reasonable efforts to achieve this goal without putting the health or safety of anyone involved at risk. In some cases, this may mean delaying a meeting in accordance with state law requirements and the procedures described above, if necessary, in order to provide materials on a timely basis. In circumstances where delays are unavoidable due to COVID-19 related difficulties, the staff would not object to an issuer using the ‘notice-only’ delivery option in a manner that, while not meeting all aspects of the notice and timing requirements of Rule 14a-16 will nonetheless provide shareholders with proxy materials sufficiently in advance of the meeting to review these materials and exercise their voting rights under state law in an informed manner and so long as the issuer announces the change in the delivery method by following the steps described above for announcing a change in the meeting date, time, or location. Affected issuers and intermediaries also should continue to use their best efforts to send paper copies of proxy materials and annual reports to requesting shareholders, even if such deliveries would be delayed.”

[View source.]

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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