March 14, 2020, the staff (the “Staff”) of the Division of Corporation Finance of the Securities and Exchange Commission (“SEC” or the “Commission”) provided helpful guidance to issuers, shareholders and other market participants impacted by COVID-19 in their efforts to meet their obligations under the federal proxy rules while facing an unprecedented situation.1 While the Commission recognized that the measures provided in the guidance may not be sufficient for all of the parties impacted by COVID-19, it reminded all market participants involved in the proxy voting process—including broker-dealers, transfer agents and proxy service providers—to work collaboratively with one another in order to provide the much needed flexibility to enable issuers to hold their annual meetings in compliance with the proxy rules, as well as to allow shareholders to exercise their voting rights under state law.
Annual Meeting—Changing the Date, Time, or Location of the Meeting
Recognizing the difficulties that COVID-19 has created domestically and internationally, the Staff is taking the position that if an issuer is contemplating possible changes in the date, time or location of its annual meeting (including a change to a virtual meeting) and has already mailed and filed its definitive proxy materials, the issuer can notify shareholders of such a change without mailing additional soliciting materials or amending its proxy materials if it:
- issues a press release announcing such change;
- files the announcement as definitive additional soliciting material on EDGAR; and
- takes all reasonable steps necessary to inform other intermediaries in the proxy process (such as any proxy service provider) and other relevant market participants (such as the appropriate national securities exchanges) of such change.
The Staff expects these actions to be taken promptly after making a decision to change the date, time, or location of the meeting and sufficiently in advance of the meeting so the market is alerted to the change in a timely manner. If the definitive proxy materials have not yet been mailed and filed with the SEC, Staff suggest that those issuers should consider whether to include disclosures regarding the possibility of a change due to COVID-19.
“Virtual” Shareholder Meetings
For issuers contemplating a “virtual” shareholder meeting through the internet or other electronic means in lieu of an in-person meeting, or a “hybrid” meeting (i.e., an in-person meeting that also permits shareholder participation through electronic means), the Staff reminds issuers:
- To abide by the state laws governing “virtual” meetings, and the issuer’s governing documents;
- To provide robust disclosures that facilitate informed shareholder voting at a “virtual” meeting or “hybrid” meeting; and
- To notify its shareholders, intermediaries in the proxy process, and other market participants of the “virtual” or “hybrid” meeting plans in a timely manner and to disclose clear directions as to the logistical details of such meeting, including how shareholders can remotely access, participate in, and vote at such meeting.
Issuers that have already filed and mailed their definitive proxy materials would not need to mail additional soliciting materials (including new proxy cards) solely for the purpose of switching to a “virtual” or “hybrid” meeting if they follow the steps described above for announcing a change in the meeting date, time, or location. Otherwise, such disclosures should be included in the definitive proxy materials when they are filed.
Presentation of Shareholder Proposals
In the guidance, the Staff encourages issuers, to the extent feasible under state law, to provide shareholder proponents or their representatives with the ability to present their proposals through alternative means, such as by phone, during the 2020 proxy season.
Moreover, if a shareholder proponent or representative is not able to present a proposal due to a COVID-19 related hardship, the Staff would consider this to be “good cause” for failing to appear and present the proposal, as required by Rule 14a-8(h), and could therefore limit issuers’ ability to use Rule 14a-8(h)(3) to exclude the proponent’s proposals from proxy materials for future meetings.
1 The guidance is available here and the accompanying press release is available here.
Find out more about business response to the Coronavirus outbreak:
Coronavirus: Managing business impact and legal risks