Over the past week, several measures have been implemented to assist public companies impacted by the COVID-19 pandemic in meeting their disclosure and governance obligations. These measures include, among others:
SEC – Updated Guidance on Shareholder Meetings
On March 13, the Division issued guidance to assist companies, shareholders, and other market participants affected by COVID-19 in meeting their obligations under the federal proxy rules for upcoming annual shareholder meetings. For more information on this guidance, please see our prior Alert. On April 7, the Division updated this guidance as follows:
The Division stated that "[t]he primary goal of the proxy process is [to] 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." Moreover, the guidance encouraged companies "to use all reasonable efforts to achieve this goal without putting the health or safety of anyone involved at risk[,]" which "may mean delaying a meeting in accordance with state law requirements" and other relevant guidance. Notwithstanding the foregoing, the Division provides that "[i]n 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 [in the guidance] for announcing a change in the meeting date, time, or location." In addition, the Division stated that affected companies and intermediaries should "use their best efforts to send paper copies of proxy materials and annual reports to requesting shareholders, even if such deliveries would be delayed."
Therefore, companies that are experiencing difficulties in printing and mailing "full sets" of proxy materials due to the impact of COVID-19 and that would like to change to the "notice-only" delivery option within 40 calendar days of their annual meeting, should, at a minimum: 1) carefully review any applicable state law requirements for delivery of meeting materials and 2) follow the same steps laid out in the SEC guidance for changing the date, time, or location of the meeting, including (a) issuing a press release announcing the change, (b) filing the announcement as definitive additional soliciting material on EDGAR, and (c) taking all reasonable steps necessary to inform other intermediaries in the proxy process and other relevant market participants of such change.
Delaware – Temporary Relief from Stockholder Notice Requirements for Annual Meetings
On April 6, Delaware Governor John Carney executed a new modification to Delaware's state of emergency orders providing, among other things, temporary relief for public companies that have already filed and mailed their definitive proxy materials contemplating solely an in-person annual meeting but that now desire to transition to a virtual-only annual meeting.
The modified order applies solely to public companies incorporated in Delaware and provides that if, as a result of the COVID-19 pandemic, the board of directors wishes to change a currently noticed in-person meeting to a virtual-only meeting, then the company may notify its stockholders of the change solely by 1) making a filing with the SEC pursuant to Section 13, 14, or 15(d) of the Exchange Act and 2) issuing a press release, which must be promptly posted on the company's website after release.
In effect, this temporary relief means that these companies will not be required to send out new notices via mail or electronic mail (if permitted) as may otherwise be required under Delaware law, and aligns the Delaware state law requirements with the recent guidance from the SEC, discussed above.
Companies that have not yet provided notice of their annual meeting may not rely on the modified order. In the event such companies give notice of an in-person meeting and later switch to a virtual-only annual meeting, they may need to send out a new notice of meeting unless Delaware provides further relief, although they should discuss various related considerations with counsel. Companies may also consider giving notice of both an in-person and virtual-only meeting, such as: "The annual meeting will be held at [location], or in the event that the board determines that it will not be possible to hold the meeting at this location and circulates a press release to that effect prior to the meeting, then the meeting will instead be held in a virtual meeting format only at [website of virtual meeting]." This may prove a tipping point for more companies to choose to hold a virtual meeting this year and provide notice of a virtual meeting in their initial notice to stockholders.
SEC – New C&DIs Relating to Conditional Relief from SEC Filing Requirements
Following the issuance of the SEC's initial Order granting conditional relief from certain requirements to file or furnish materials with the SEC on March 4, and its amended Order on March 25 (as amended, the Order), the Division issued a series of C&DIs clarifying certain matters relating to the Order. The Order provides, among other things, temporary relief in the form of a 45-day extended deadline, for certain SEC filings that are due on or before July 1, 2020, subject to the satisfaction of the conditions set forth in the Order. The C&DIs, summarized below, relate to this temporary relief.
For more information on the Order, including a summary of the conditions for eligibility to use the exemptions, please see our Alert on the initial Order and our Alert on the amended Order.
NYSE – Temporary Relief from Shareholder Approval Requirements
The SEC approved the immediate effectiveness of the proposal filed by the NYSE on April 3 to waive the application of certain of the shareholder approval requirements set forth in Section 312.03 of the NYSE Listed Company Manual, subject to certain conditions.
In its proposal, the NYSE stated that it "believes that it is likely that many listed companies will have urgent liquidity needs in the coming months due to lost revenues and maturing debt obligations[,]" and that these companies "will need to access additional capital that may not be available in the public equity or credit markets."
In addition, the NYSE likened current conditions to those conditions that existed after the financial crisis of 2008-2009, noting that following that crisis it "observed that many companies sought capital by selling significant amounts of equity in private placement transactions to a single investor or small group of investors, in many cases limited to or including existing major shareholders in the company." However, in seeking to raise capital in that manner, the NYSE also noted that these companies "were often limited by the NYSE's shareholder approval requirements with respect to the size and structure of the transactions they were able to undertake."
Thus, in an effort to provide flexibility to companies that may experience urgent liquidity needs, the NYSE has provided the following temporary relief:
In addition and consistent with the shareholder approval requirements in Nasdaq Marketplace Rule 5635(a), the waiver is not applicable "to any transaction involving the stock or assets of another company where any director, officer or substantial security holder of the company has a 5% or greater interest (or such persons collectively have a 10% or greater interest), directly or indirectly, in the company or assets to be acquired or in the consideration to be paid in the transaction or series of related transactions and the present or potential issuance of common stock, or securities convertible into or exercisable for common stock, could result in an increase in outstanding common shares or voting power of 5% or more…."
Nasdaq – Memorandum Regarding Impact of COVID-19
On March 26, Nasdaq released a memorandum entitled Information for Nasdaq Listed Companies About the Impact of Coronavirus (COVID-19), providing information on resources that may be helpful for Nasdaq listed companies impacted by the COVID-19 pandemic. Some of the key takeaways from this memorandum include the following:
ISS – Policy Guidance for the Impacts of the COVID-19 Pandemic
On April 8, ISS issued its ISS Policy Guidance – Impacts of the COVID-19 Pandemic, providing guidance on several of its voting policies that may be impacted by the COVID-19 pandemic. ISS notes that it will update this guidance, as needed, throughout the 2020 proxy season. Some of the key takeaways from this guidance include the following:
In addition to the matters discussed above, ISS's policy guidance updates also covered meeting postponements, director attendance, dividends, and capital raising (including share issuances and private placements).
 The definition of “minimum price” is set forth in Section 312.04(i) of the NYSE Listed Company Manual.
 The definition of “bona fide private financing” is set forth in Section 312.04(g) of the NYSE Listed Company Manual.