Options for Holding Shareholder Meetings During the COVID-19 Pandemic
Patrick Neuman | 03.19.20
It’s the time of year where many Wisconsin bank holding companies are holding their annual shareholder meetings. The novel coronavirus pandemic and the various government mandates and orders requiring social distancing has created unique challenges for companies with upcoming annual meetings. Many of our clients have reached out to us to understand the options for delaying the annual meeting or holding the meeting by telephone, a virtual environment, or other remote communication.
If you are considering delaying your annual meeting, the first step is to check your company’s bylaws. Sometimes the bylaws include language that grant the company’s board of directors specific authority to set the annual meeting date. In that case, the board may choose to delay the annual meeting for a date later in the year. This can be accomplished with a simple board resolution. Often, however, the bylaws will state a specific month, or even date, on which the annual meeting of the shareholders is held. In that case the board may need to amend its bylaws to provide the board with flexibility to set the date of the annual meeting. In most instances, the bylaws may be amended by resolution of the board of directors. However, in certain instances shareholder approval may be required. Therefore, it’s best to check with legal counsel before amending the company’s bylaws.
Another option is to allow shareholders to participate in shareholder meetings by remote communication. Wisconsin Statutes section 180.0709 governs remote participation in shareholders’ meetings. Under the statute, the board of directors has authority in its sole discretion to allow shareholders and proxies of shareholders not physically present at a meeting of shareholders to participate in the meeting by means of remote communication. For such shareholders and proxies of shareholders to be deemed present in person and to vote at the meeting, all of the following must apply:
- The company has implemented reasonable measures to verify that each person deemed present and permitted to vote at the meeting by means of remote communication is a shareholder or proxy of a shareholder.
- The company has implemented reasonable measures to provide shareholders and proxies of shareholders a reasonable opportunity to participate in the meeting and to vote on matters submitted to the shareholders, including an opportunity to read or hear the proceedings of the meeting concurrently with the proceedings.
- The company maintains a record of voting or action by any shareholder or proxy of a shareholder that votes or takes other action at the meeting by means of remote communication.
If the board of directors desires to authorize shareholder participation by remote communication, the board will need to adopt policies or guidelines to comply with the foregoing conditions. For example, if the company is going to allow shareholders to participate in a meeting by phone, the company could include an access code or pin in the shareholder materials along with specific instructions requiring the shareholders to keep such code or pin confidential.
If authorized by the board, the shareholders may participate in shareholder meetings by remote communication whether the meeting is held at a designated place or solely by means of remote communication, with one caveat. Wisconsin Statutes Section 180.0701(2)(b) indicates that the company’s bylaws must authorize the board of directors to determine that the annual shareholders’ meeting will be held solely by means of remote communication (with no designated place) as authorized under Wisconsin Statutes section 180.0709. Therefore, companies that are considering holding their annual shareholders’ meeting solely by remote communication should review and will likely need to amend their bylaws to provide the board with specific authorization to make such determination. Again, we suggest consulting with your legal counsel before amending the company’s bylaws.
Regardless of whether you choose to delay the meeting or allow shareholder participation by remote communication, we suggest you encourage your shareholders to use proxies to cast their vote to the extent they are comfortable doing so, to minimize individual shareholder participants to the extent possible.
If all else fails and the company is unable to hold its annual meeting this year, the Wisconsin Statutes do provide some protection. Wisconsin Section 180.0701(3) states that failure to hold an annual meeting in one or more years does not affect the validity of any corporate action. However, the board of directors continues to have a fiduciary duty to its shareholders and in general should make best efforts to hold a shareholder meeting unless there is a compelling reason not to do so.
DISCLAIMER: The information provided is for general informational purposes only. This post is not updated to account for changes in the law and should not be considered tax or legal advice. This article is not intended to create an attorney-client relationship. You should consult with legal and/or financial advisors for legal and tax advice tailored to your specific circumstances.