The Securities and Exchange Commission (SEC) is continuing to provide guidance to accommodate companies in light of the challenges posed by the COVID-19 virus. As discussed in our recent Viewpoints advisory, the SEC has granted conditional relief to certain issuers to extend the time for filing disclosure reports that would otherwise have been due between March 1, 2020 and April 30, 2020. On Friday, the SEC’s Division of Corporation Finance (the “staff”) published guidance to help public companies manage their upcoming annual meeting processes in light of the challenges presented by COVID-19. Restrictions instituted by national, state and local governments will necessarily limit the ability of many shareholders to attend annual meetings in person. The new guidance provides companies with regulatory flexibility to make changes to the date, time, location and format of their meetings to respond to the evolving pandemic.
Under the new guidance, public companies affected by COVID-19 that have already mailed and filed their definitive proxy materials may change the date, time, location or format of their annual meetings, including changing from in-person to virtual or “hybrid” (i.e., an in-person meeting that allows shareholder participation through electronic means), if allowed under state law and the company's organizational documents, without mailing additional proxy materials or solicitations. In order to qualify for this relief, a public company must issue a press release announcing any such changes, file the release as definitive additional soliciting material on EDGAR, and take all reasonable steps to inform other proxy intermediaries and market participants (such as the appropriate listing exchange) of the changes in a timely manner. The staff also expects companies to provide clear instructions on logistical details, including how shareholders can remotely access, participate in, and vote at the meeting.
The guidance also encourages companies, to the extent possible under state law, to give shareholder proponents the option of presenting their proposals by telephonic or other technology-assisted means. The staff will consider a shareholder proponent’s inability to present its proposals in person at an annual meeting due to COVID-19 to be “good cause” under Rule 14a-8(h) if a company were to assert Rule 14a-8(h)(3) to exclude the shareholder proponent’s proposal for a meeting held during the next two calendar years.
In addition to the required instructions on logistical details, a company holding a virtual or hybrid meeting should consider providing the following additional information to shareholders:
- Instructions for shareholders to submit questions in advance of and during the meeting.
- Toll-free telephone number for help with technical difficulties during the meeting.
- Information for accessing a link to a recording of the annual meeting or a transcript on the investor relations section of its website.
- Reference to the location of the log-in and related details on its website.
The SEC is continuing to monitor the impact of COVID-19 on this year’s annual meeting process and may provide further guidance to the investment community as events develop. Companies should take note of the practical issue that assistance with virtual meetings may be limited in the near term as a result of increased demand and the limited capacity of virtual meeting service providers.