Must Shareholder Proponents "Stand And Deliver"?

Allen Matkins
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Allen Matkins

Lynn Jokela at TheCorporateCounsel.net blog took note yesterday of recently updated guidance from the SEC's Division of Corporation Finance concerning the conduct of shareholder meetings in light of the Covid-19 pandemic.  Among other things, the guidance observes:

"Exchange Act Rule 14a-8(h) requires shareholder proponents, or their representatives, to appear and present their proposals at the annual meeting.  In light of the possible difficulties for shareholder proponents to attend annual meetings in person to present their proposals, 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 and 2021 proxy seasons."

Whether it is feasible under state law to provide alternative means for shareholders to present their proposals begs the question of whether state law requires shareholder to appear and present their proposal at the meeting?  This is another instance in which the California General Corporation Law stands mute, providing no guidance on whether a shareholder must be present at the meeting and, if present, must actually move the proposal.  

Many publicly traded corporations have Bylaw provisions that require advance notice of shareholder nominations and proposals.  The Bylaws of Delta Air Lines, Inc., for example, declare invalid any  shareholder nomination or proposal if the shareholder or a qualified representative does not appear at the meeting to present the nomination or proposal even though the company has received proxies in respect of the nomination or proposal.

Although the phrase "stand and deliver" used in the title of today's post may call to mind the 1988 film about Jaime Escalante of that name, it was a command of English highwaymen meaning stop and hand over your goods.  See, e.g., W. Shakespeare, Two Gentlemen of Verona,  Act IV, Scene 1 ("Stand, sir, and throw us that you have about ye").   

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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