On April 9, 2021, the Securities and Exchange Commission (SEC) Staff reaffirmed its existing guidance concerning shareholder meetings conducted during COVID-19. The Staff guidance on select shareholder meeting topics had previously been issued during the 2020 annual meeting season. The most recent update reaffirms that guidance for meetings held in 2021.
The guidance updates the Staff’s interpretation of shareholder proposal presentation rules in the context of COVID-19 for 2021 annual meetings. Other aspects of the Staff’s guidance, concerning shareholder participation in virtual meetings, delays in printing or mailing proxy materials and logistical changes to shareholder meetings, remain unchanged. Below we discuss the updated shareholder proposal interpretation and also summarize the existing Staff guidance on other shareholder meeting matters.
Presentation of Shareholder Proposals
To the extent feasible under state law, a company conducting a virtual-only meeting in 2021 will want to make sure that it provides shareholder proponents, or their representatives, instructions on how to present their proposals at the meeting.
If a shareholder proponent, or its representative, is precluded from attending or presenting a proposal at an annual meeting due to COVID-19 complications, the SEC will consider this to be “good cause” under Rule 14a-8(h). This Staff view means that the company would not likely be able to exclude a future proposal submitted by that same proponent at a meeting held in the next two years on the grounds that the proponent did not properly present a previous shareholder proposal under Rule 14a-8(h)(3).
Shareholder Participation in Virtual-Only or Hybrid Meetings
The Staff guidance reminds companies that virtual-only or hybrid shareholder meetings should permit shareholder participation through electronic means. Proxy statement disclosures about the logistical details of the virtual or hybrid meeting should clearly indicate to shareholders how they can remotely access, participate in and vote at the meeting.
Delays in Printing and Mailing
If a company finds that it is unable to have its proxy materials printed and delivered in a timely manner due to COVID-19, the existing guidance provides an accommodation from the SEC’s proxy delivery rules should the company switch to fully electronic delivery of proxy materials. The SEC’s guidance states that the Staff will not object to a company utilizing the “notice-only” delivery option for proxy materials in a manner that, while not satisfying all applicable notice and timing requirements outlined in the proxy rules, would provide shareholders with proxy materials sufficiently in advance of the meeting to review the materials and make an informed decision.
Changing the Date, Time or Location of a Shareholder Meeting
The Staff guidance continues to provide an accommodation from certain provisions of the SEC’s proxy rules if a company needs to change the date, time or location of a shareholder meeting due to COVID-19-related difficulties. If a company makes such a change and has already mailed its proxy materials to shareholders, it need not amend and resend those materials to shareholders, pursuant to the requirements of the SEC’s proxy rules, if it undertakes the following:
- issues a press release announcing the change in date, time or location;
- files the press release with the SEC as additional proxy soliciting material; and
- informs other relevant parties, such as the proxy service provider and the exchange on which the company’s securities are listed, of any change.
Companies that have not yet filed 2021 annual meeting proxy materials with the SEC should also consider including disclosure in their proxy materials regarding the possibility that the date, time or location of a meeting may change due to COVID-19-related circumstances.