Responding to the needs of publicly traded corporations navigating the COVID-19 epidemic, Delaware Gov. John C. Carney issued a modified State of Emergency Order (the Order) authorizing public companies to conduct stockholder meetings solely by remote communication.
The Order, issued on April 6, 2020, applies during the state of emergency and authorizes boards of directors of corporations subject to the reporting requirements of § 13(a) or § 15(d) of the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder, to change a stockholder meeting currently noticed for a physical location to a meeting that will be conducted solely by remote communication and to adjourn any such meeting to another date or time, to be held by remote communication.
The Order further provides that a public company may give notice to stockholders of such change solely by a document publicly filed with the Securities and Exchange Commission and posted on the corporation’s website promptly thereafter.
Section 211(a) of the Delaware General Corporation Law (DGCL) authorizes Delaware corporations to conduct virtual meetings of stockholders, subject to requirements of the corporation’s certificate of incorporation and bylaws. Where a corporation conducts a stockholder meeting by “remote communications,” the corporation must take reasonable measures to ensure that stockholders can participate “substantially concurrently” with the proceedings.
Similarly, Section 222(c) of the DGCL allows for adjournment of a meeting of stockholders of a Delaware corporation, but does not prescribe a specific method to give notice of an adjournment of the meeting. Section 233 of the DGCL states that notices of stockholder meetings may be provided by mail, by courier or by electronic mail, subject to applicable provisions of the corporation’s certificate of incorporation, but also provides that such notice methods are authorized “[w]ithout limiting the manner by which notice otherwise may be given.”
In sum, the Order clarifies statutory requirements related to stockholder meetings for public corporations notwithstanding any arguable limitation imposed by Section 222(c) or Section 233 of the DGCL, and recognizes the practical issues facing public corporations and their boards by providing flexibility in convening, and providing notice of, stockholder meetings during the emergency.
As the number of cases around the world grows, Faegre Drinker’s Coronavirus Resource Center is available to help you understand and assess the legal, regulatory and commercial implications of COVID-19.