As proxy season rapidly approaches and concern over the Coronavirus Disease 2019 (COVID-19) increases, U.S. public companies have been weighing risks associated with holding in-person annual stockholder meetings. While the vast majority of U.S. public companies continue to hold annual stockholder meetings at a physical location, in light of the COVID-19 outbreak, many corporations are now considering whether to hold the meeting solely by means of remote communication or to hold a hybrid meeting whereby stockholders may choose to participate either in person or remotely. Notably, on March 3, 2020, Starbucks changed its annual meeting of stockholders from a meeting held at a physical location to a virtual-only meeting due to concerns over the COVID-19. Additionally, on March 4, 2020,The Bank of New York Mellon Corporation noted that as part of its precautions, it was planning for the possibility that its annual meeting may be held solely by means of remote communications.

If a corporation determines that it should hold its annual meeting either entirely by means of remote communication or both in person and remotely, management should carefully consider applicable state law establishing the procedural requirements for holding a virtual or hybrid meeting as well as the form and timing of the notice that must be sent to stockholders. Special consideration should be given where an annual meeting has already been noticed as a meeting to be held at a physical location and later moved to a virtual location. Considerations for Delaware corporations in connection with the holding of a virtual meeting as well as for corporations incorporated in other states are set forth below.

I. Virtual Meeting Considerations for Delaware Corporations

A. Procedural Requirements for Holding a Virtual Meeting under Delaware Law

If a corporation’s organizational documents do not require the annual meeting to be held at a physical location, a corporation’s annual meeting can be held online or telephonically.  However, Delaware law requires corporations to implement reasonable measures to ensure that stockholders may meaningfully participate in virtual stockholder meetings through a secure and verifiable process. These measures focus on meeting access and voting as well as access to the stockholder list.

Meeting Access and Voting.  In connection with a meeting held solely by means of remote communication, such as a webcast, a Delaware corporation must:

• Implement reasonable measures to verify that each person deemed present and permitted to vote at the virtual meeting is a stockholder or proxyholder; 
• Implement reasonable measures to provide stockholders and proxyholders a reasonable opportunity to participate in the virtual meeting and vote on matters, including an opportunity to read or hear the proceedings of the meeting substantially concurrently with such proceedings; and
• Maintain a record of a stockholder or proxyholder’s vote or other action taken at such meeting.

Stockholder List.  If an annual meeting of stockholders is held solely by means of remote communication, the list of stockholders entitled to vote at the meeting must be open for examination during the entire meeting on a reasonably accessible electronic network. The information required to access the electronic list of stockholders must be provided with the notice of the annual meeting, and the corporation must take reasonable steps to ensure that the list of stockholders entitled to vote at the meeting is available only to stockholders of the corporation.

Contents and Timing of Notice.  Under Delaware law, stockholders must be given between 10 and 60 days’ notice of an annual meeting of stockholders except for meetings held to vote on the adoption of a merger agreement, which require at least 20 days’ notice. Where the meeting is to be held virtually, the notice of meeting must include the date and time of the meeting, as well as:

• The means of remote communications by which stockholders and proxyholders may be deemed present in person and vote at such meeting; 
• Instructions on how to join the meeting, vote and verify that such participant is a stockholder or proxy holder; and
• Information required to access the list of stockholders entitled to vote at the meeting.

How it Works.  Stockholder services companies, such as Broadridge Financial Solutions, are able to assist in setting up virtual platforms to accommodate Delaware law requirements and ensure that:

• Stockholders receive meeting invitations and instructions for accessing the virtual meeting in their proxy mailings; 
• Using a control number, stockholders can conveniently sign into the virtual meeting from their home, office or mobile device; 
• A meeting page delivers streaming audio or video of the meeting, and also allows stockholders to access the list of stockholders, cast votes, enter questions and view messages; and 
• Meeting pages are also able to include welcome letters, video bios, call-in numbers or links to other stockholder materials. 

B. Changing from an In-Person Meeting to a Virtual or a Hybrid Meeting.

While some corporations may have determined prior to sending a notice of meeting and proxy statement to hold a virtual meeting of stockholders, others that decide to make change from an in-person meeting will be required to send an additional notice informing their stockholders of the change of location of the meeting and details on how to participate in a virtual meeting.

• If the corporation has already mailed the notice of meeting, and the corporation has sufficient time to give its stockholders 10 days’ notice of the virtual meeting, a new notice should be distributed to stockholders by a physical mailing or by e-mail. [1] The notice should contain the information required for a notice of a virtual meeting described in Part A above. 
• If the corporation has mailed the notice of the annual meeting and there are fewer than 10 days’ before the meeting, the meeting could be held but adjourned to another place (i.e., a virtual location). Ordinarily, notice of an adjourned meeting is not required so long as the date, time and place or means of remote communications by which stockholders and proxyholders may be deemed to be present in person and vote at such adjourned meeting are announced at the meeting at which the adjournment is taken and the adjournment is for no more than 30 days. However, given that Delaware law requires that a notice of a virtual meeting also contain instructions on how to access the list of stockholders, corporations should consider sending a new notice of meeting by a physical mailing or by e-mail.
• Where there is insufficient time to send out a new notice and/or it is impracticable to adjourn the meeting, another option for corporations is to simply hold the physical meeting as planned, but to stream the meeting over the internet so that stockholders have the opportunity to participate in the meeting remotely. Because the meeting is considered a meeting held at a physical place, stockholders, who do not come to the physical meeting but participate in the webcast, must submit their proxies in advance of the meeting according to the instructions set forth in the original proxy materials in order to have their votes count for quorum and voting purposes. 

Other Considerations.  In addition to concerns about notice, corporations should carefully consider when moving the location of a meeting for which proxy materials have already been mailed whether the original proxy cards sent to stockholders grant the proxyholders sufficient agency to vote the proxy at the corporation’s annual meeting irrespective of its location. Often proxy cards reference a physical location, but the proxyholder’s discretionary authority is broad enough to allow the proxies to vote at a virtual meeting.

II. Other States

Corporations organized in jurisdictions other than Delaware must review relevant state law to determine whether virtual or hybrid meetings are permissible. According to a 2018 white paper published by the Best Practices Committee for Shareowner Participation in Virtual Annual Meetings:

• Virtual-only meetings are allowed in 30 states, including Massachusetts, Minnesota, Ohio, Pennsylvania, Texas, Virginia and Washington (although certain states imposes conditions on virtual-only meetings that make them impractical or unrealistic);
• Forty-two states in total, including New Jersey, North Carolina and Connecticut, as well as the District of Columbia, permit remote participation in stockholder meetings (i.e., hybrid meetings); and 
• The remaining fewer than 10 states preclude virtual or hybrid stockholder meetings, and require in-person meetings.

While there is variance from state to state, most states that permit virtual stockholder meetings require that the corporation:

• Verify each person deemed present and permitted to vote at the virtual stockholder meeting is a stockholder or proxyholder;
• Maintain a record of the vote or other action taken at the stockholder meeting; and
• Implement reasonable measures to provide a stockholder participating virtually with the ability to:
  • Participate in the meeting and vote on matters submitted at the meeting;
  • Maintain a record of the vote or other action taken at the stockholder meeting; and
  • Communicate with the other participants of the meeting contemporaneously.

In addition, corporations that conduct virtual stockholder meetings in these other states generally must make their stockholders lists available for examination by stockholders during the meeting.

NOTES

1. Delaware generally permits the sending of notices by electronic mail. However, U.S. publicly-traded corporations will also need to comply with the rules of the Securities and Exchange Commission relating to the distribution of proxy materials.