SEC updates staff guidance on shareholder meetings

By Jeff Drew

The SEC has updated its staff guidance for conducting shareholder meetings during the coronavirus pandemic.

Companies and others that issue publicly traded shares usually are required to hold annual shareholder meetings under state law. The SEC staff guidance updated Tuesday pertains to issuers with securities registered under Exchange Act Section 12 and their efforts to solicit proxy authority from their shareholders in connection with an annual meeting. In those situations, the SEC mandates compliance with federal proxy rules requiring that the issuers deliver proxy materials, such as definitive proxy statements and proxy cards, to shareholders.

In the updated guidance, SEC staff addresses four main issues, as follows:

Companies and other issues considering changes in the date, time, or location of their annual or special shareholder meetings due to difficulties related to COVID-19

The updated staff guidance says if an issuer has already mailed and filed its definitive proxy materials, it can notify shareholders of a change in the date, time, or location of its shareholder meeting without mailing additional soliciting materials or amending its proxy materials if it:

  • Issues a press release announcing the change and files the announcement as definitive additional soliciting material on EDGAR.
  • Takes all reasonable steps necessary to inform other intermediaries in the proxy process (such as any proxy service provider) and other relevant market participants (such as the appropriate national securities exchanges).

Virtual shareholder meetings

Some companies and other issuers of public shares are considering replacing their in-person meeting with a “virtual” shareholder meeting or hybrid meeting with a mix of in-person and virtual attendees. State law and the issuer’s governing documents determine if a virtual meeting is permitted and the rules under which it would operate.

SEC staff guidance calls on issuers to provide timely notification to its shareholders, intermediaries in the proxy process, and other market participants of any plans for a virtual or hybrid meeting. The notification should include logistical details such as how shareholders can remotely access, participate in, and vote at such a meeting.

Presentation of shareholder proposals

While Exchange Act Rule 14a-8(h) requires shareholder proponents, or their representatives, to appear and present their proposals at the annual meeting, the SEC acknowledges that COVID-19-related difficulties could make it impractical or impossible for shareholder proponents to present their proposals in person at an annual meeting.

In that light, the updated staff guidance 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 proxy season.

Delays in printing and mailing of full set of proxy materials

COVID-19-related travel restrictions creating associated logistical and staffing issues with proxy service providers or transfer agents could cause delays in the printing and physical mailing of the “full set” of proxy materials for upcoming shareholder meetings. The updated guidance encourages issuers facing printing and mailing delays caused by COVID-19 to use all reasonable efforts to provide shareholders with material information in a timely manner so they can make informed voting decisions. However, such efforts should not endanger the health or safety of anyone involved.

In circumstances where delays are unavoidable due to COVID-19, SEC staff would not object to an issuer using the “notice-only” delivery option permitted by Exchange Act Rule 14a-16, even if the issuer can’t meet all of the rule’s notice and timing requirements, as long as shareholders are provided with proper notification and receive the proxy materials with enough time before the meeting to review the materials and exercise their voting rights under state law in an informed manner.

Questions or concerns regarding this guidance can be directed to SEC staff in the Division of Corporation Finance at 202-551-3500 or sec.gov/forms/corp_fin_interpretive and the Division of Investment Management at IMOCC@sec.gov or 202-551-6825.

For more news and reporting on the coronavirus and how CPAs can handle challenges related to the pandemic, visit the JofA’s coronavirus resources page.

Jeff Drew (Jeff.Drew@aicpa-cima.com) is a JofA senior editor.

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