United States: Cuomo Executive Order Gives New York Corporations Relief On Physical Annual Meetings

Although the main focus of Governor Cuomo's executive orders over the past few days has been to cease operation of all non-essential businesses in New York state, the March 20^th executive order provided temporary relief in a few additional respects, including with respect to shareholder meetings of New York corporations. This relief 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.¹

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).

Governor Cuomo's March 20^th executive order 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."² Section 602(a) requires meetings of shareholders to occur at a place (i.e., physically),³ and Sections 605(a) and (b) require prior notice of annual meetings and certain adjournments,⁴ as we have mentioned in our prior blogposts. According to the executive order, the suspension was effective immediately, and will continue through April 19, 2020.

Although this is important relief from the physical meeting requirement for annual shareholder meetings for New York corporations, the duration and effect is still somewhat uncertain. It seems to only apply to meetings actually held before April 19, 2020. For a New York corporation that has not yet filed its proxy statement and will hold its annual meeting after April 19, it would seem advisable 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 April 19^th (assuming no extension of the executive order), 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).

This executive order has the same duration as the other executive orders issued by Governor Cuomo in recent days. Unless the impact and trajectory of COVID-19 in New York state changes, the most likely scenario is that these executive orders will be extended. We also expect this aspect of the executive order to track closely the duration of other executive orders regarding group gatherings.

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 April 19^th may not be the most prudent approach, given that there may not be any grace period for transitioning after expiration of the executive order.

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."

Footnotes

1 Similarly, 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

2 https://www.governor.ny.gov/news/no-2028-continuing-temporary-suspension-and-modification-laws-relating-disaster-emergency

3 Section 602(b) permits a virtual component to be included alongside the physical meeting.

4 Specifically, Section 605(b) requires notice for adjournments that reset the record date.

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