We are providing this guidance to our clients and friends with respect to Section 11 of Governor Lamont's Executive Order No. 7I ("Order 7I") that was issued on Saturday, March 21, 2020. Order 7I temporarily suspends the statutory requirement for in-person shareholders' meetings for Connecticut business corporations. The Governor exercised his authority under Section 28-9(b)(1) of the Connecticut General Statutes to temporarily amend Section 33-703 of the Connecticut Business Corporation Act ("CBCA") to permit shareholders' meetings to be held solely by remote participation, so-called "virtual" meetings. Order 7I does not mandate virtual shareholders' meetings. It is merely an additional option for Connecticut business corporations during the current public health emergency. It also does not eliminate the possibility of using a "hybrid" meeting where there is a physical location for the meeting and attendance is restricted in accordance with existing governmental orders and guidelines. This "hybrid" meeting approach has been taken by Berkshire Hathaway, a company noted for its large shareholders' meetings, which it announced in a recent press release in which Warren Buffet announced that the company would hold its annual shareholders' meeting as scheduled but would not allow shareholders to physically attend the meeting.
Prior to Order 7I, the CBCA only permitted remote participation for a shareholders' meeting if the meeting was actually held at a physical location and the corporation implemented reasonable measures to verify that each person participating remotely was a shareholder and it provided shareholders with a reasonable opportunity to participate in the meeting and vote on matters submitted to the shareholders, including an opportunity to communicate and contemporaneously read or hear the proceedings. Order 7I amends the CBCA to permit remote-only meetings under the same general conditions as for remote participation with respect to meetings at a physical location and follows the comparable provision of the Model Business Corporation Act (2016 Revision).
In response to the COVID-19 crisis, the SEC staff issued guidance on March 13, 2020 providing regulatory flexibility to public companies seeking to change the date and location of shareholders' meetings and to use new technology for shareholders' meetings. The staff guidance allows registrants to announce changes in the meeting date or location or announce the use of "virtual" meetings in their SEC filings without incurring the cost of additional proxy mailings and encourages registrants to provide proponents of shareholder proposals with alternative means, such as by telephone, to present their proposals at the annual meeting.
The new availability of virtual shareholders' meetings to Connecticut corporations does not mean that a virtual meeting is the right solution to the COVID-19 crisis for every corporation. For example, management may not want to incur the time, expense and logistical challenges of setting up a virtual meeting on short notice or rely on the Governor's temporary emergency declaration. Shareholders, directors and employees can also be protected by postponing the meeting with proper notice or limiting attendance at the meeting in accordance with existing emergency orders and guidelines and by arranging for remote participation by video or audio streaming. In any case, it would be prudent for a company to include in its meeting notice a statement informing shareholders that they should monitor its press releases, SEC filings and website for important changes that might be made to the meeting location and format as a result of the COVID-19 pandemic.
It is noteworthy that Order 7I and the SEC Staff guidance do not relax the requirements of the CBCA and a corporation's bylaws with respect to notice of postponement or adjournment of a meeting or for a change in the date, time or place of the meeting. Thus, changing to a virtual meeting and the related disclosures, as well as postponing a meeting or changing the date, time or place of the meeting requires at least ten days' notice under the CBCA. Unless the bylaws require otherwise, if an annual or special shareholders' meeting is adjourned to a different date, time or place, notice to the shareholders need not be given if the new date, time or place is announced at the meeting before adjournment.
Emergency actions in other jurisdictions:
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