This is an updated version of our prior post to address Governor Cuomo’s most recent Executive Orders.
In response to the COVID-19 pandemic, Governor Cuomo declared a disaster emergency and ceased operation of all non-essential businesses in New York state with the March 7 Executive Order 202 and its successor Executive Orders. In particular, the March 20th Executive Order 202.8 provided temporary suspension of several state law regulatory requirements, including with respect to shareholder meetings of New York corporations.
As we have described in our prior blogposts on this topic “Coronavirus & Virtual Annual Meetings” and “Coronavirus & Postponing/Adjourning Annual Meetings,” absent this relief, New York state still requires an in-person shareholder meeting be held, although following an October 2019 rule change it also permits a virtual component (subject to certain conditions).
Executive Order 202.8 temporarily suspended Section 602(a) and Sections 605(a) and (b) of New York’s Business Corporation Law, “to the extent they require meetings of shareholders to be noticed and held at a physical location.”[1] Section 602(a) requires meetings of shareholders to occur at a place (i.e., physically),[2] and Sections 605(a) and (b) require prior notice of annual meetings and certain adjournments,[3] as we have mentioned in our prior blogposts. According to the executive order, the suspension was effective immediately.
On April 16th, Governor Cuomo issued Executive Order 202.18, extending the directives of Executive Order 202 and its successor Executive Orders, including Executive Order 202.8, to May 15th.[4] Although the New York state of emergency can only be extended by one month at a time, one can reasonably expect that Executive Order 202 and its successors will be extended continuously until the COVID-19 pandemic subsides.
Since it is uncertain when extensions of Executive Order 202 will cease, for a New York corporation that has not yet filed its proxy statement and will hold its annual meeting after May 15th, it would be prudent to plan for, and notice, a hybrid meeting (with both physical and virtual components) and either include in the notice (and other parts of the proxy statement) the possibility of a virtual-only meeting if the executive order is extended or plan to change to a virtual-only meeting in that event.
With the inclusion of the notice provisions in the relief, changing to a virtual-only meeting should also be easier. If a New York corporation has already provided notice of an in-person or hybrid meeting, and the meeting is scheduled to occur prior to May 15th, it can now switch to a virtual meeting. Notice must still be given (but without any minimum notice period, unless otherwise required by the corporation’s bylaws).
New York corporations should keep in mind that when the executive order expires, the minimum ten (10) day notice period for shareholder meetings under New York’s Business Corporation Law will again be in effect, so noticing a virtual-only meeting now for a date well beyond May 15th may not be the most prudent approach, given that there may not be any grace period for transitioning after expiration of the executive order.
New York’s Executive Order 202.8 is an example of the kind of flexibility various state governments and courts are adopting in an effort to address the needs of companies in this challenging environment.[5]
Unlike New York, Delaware Law allows completely virtual shareholder meetings.[6] Moreover, in the April 6th Tenth Modification of a Declaration of a State of Emergency, Governor Carney further facilitated virtual shareholder meetings by easing certain notice requirements. According to the Tenth Modification, a Delaware corporation that is a SEC registered public company, wishing to change from a physical to virtual shareholder meeting (whether adjourning to a later date or not) “may notify stockholders of the change solely by a document publicly filed by the corporation with the Securities and Exchange Commission pursuant to § 13, § 14 or § 15(d)” of the Securities Exchange Act of 1934, which the company must then promptly post on its website.[7] Unlike New York’s monthly extension, Delaware’s Declaration of a State of Emergency, including its Modifications, “shall remain in effect until further notice.”[8]
Companies considering a virtual or hybrid meeting should also keep in mind the practical considerations that we highlighted in our prior blogpost “Coronavirus & Virtual Annual Meetings.”
[1] https://www.governor.ny.gov/news/no-2028-continuing-temporary-suspension-and-modification-laws-relating-disaster-emergency
[2] Section 602(b) permits a virtual component to be included alongside the physical meeting.
[3] Specifically, Section 605(b) requires notice for adjournments that reset the record date.
[4] https://www.governor.ny.gov/news/no-20218-continuing-temporary-suspension-and-modification-laws-relating-disaster-emergency
[5] Similar to New York, the Governor of Connecticut issued on March 21, 2020 an executive order modifying the provision of the Connecticut General Statutes that requires a physical annual meeting to allow a virtual-only meeting (subject to certain conditions). https://portal.ct.gov/-/media/Office-of-the-Governor/Executive-Orders/Lamont-Executive-Orders/Executive-Order-No-7I.pdf?la=en
[6] https://delcode.delaware.gov/title8/c001/sc07/
[7] https://governor.delaware.gov/health-soe/tenth-state-of-emergency/
[8] https://governor.delaware.gov/health-soe/tenth-state-of-emergency/