In response to the continuing COVID-19 outbreak in New York State, Governor Andrew Cuomo has signed executive orders allowing New York corporations to hold virtual-only annual shareholder meetings through June 6th, 2020, suspending the current requirements of Section 602(a) of the New York Business Corporation Law (NYBCL) that meetings be held at least in part at a physical location.

Unlike the corporate statutes of Delaware and several other U.S. states that already permit “virtual-only” meetings of shareholders, the NYBCL merely permits a virtual component. The NYBCL was only recently amended, in October 2019, to permit a “hybrid” annual meeting, whereby shareholders may remotely access an otherwise in-person meeting of shareholders held at a physical location. As a result of the Governor's executive order, New York corporations, like Delaware corporations, can now avail themselves (at least temporarily) of a “virtual-only” shareholders' meeting in order to avoid a gathering of management, the board of directors and shareholders at a physical location, and risk spreading the COVID-19 virus.

The Governor's executive order also provides temporary relief from Section 605(a) and (b) of the NYBCL (requiring prior notice of annual meetings and adjournments). 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 June 6th, then the corporation may now switch to a virtual meeting upon notice to the shareholders. Suspension of Section 605(a) allows companies to give last-minute notice of a change without complying with the specified minimum notice period (unless otherwise required by the corporation's by-laws). Companies are still encouraged to notify shareholders as soon as possible to provide ample time to attend the meeting, ask questions, or vote by any newly designated means.

For any New York corporation that has not yet filed its proxy statement and will hold its annual meeting after June 6th, it is advisable to plan for the possibility of hosting a virtual-only shareholders' meeting in case the executive order is extended beyond June 6th. Furthermore, the corporation should include proper disclosure of this possibility in the meeting notice (and other parts of the proxy statement).

Management and the board of directors of a New York corporation should consult with legal counsel as to the best approach for changing to a virtual-only meeting, as numerous issues arise when changing meeting formats. A corporation interested in adopting measures permitting the conduct of virtual-only shareholder meetings should also determine whether any amendments to their certificates of incorporation or by-laws are required, and take the requisite board action. In addition, corporations switching to a virtual shareholders' meeting for the first-time should consider:

  • Reviewing and tailoring (if necessary) the meeting script, agenda, and rules of conduct to better fit a virtual-only format;
  • Making all technological arrangements for hosting the virtual-only meeting well in advance and having contingency plans for technological failure;
  • For the Question and Answer portion of the meeting, addressing (1) the method for question submission, such as live or pre-submitted questions via telephone, text or an online chat, (2) how and which questions shall be chosen, (3) the method of company response, and (4) dealing with inappropriate or disruptive behavior; and
  • Establishing procedures for verifying shareholder status for participation and a method for recording any vote or action taken by remote communication.

New York corporations should keep in mind that when the Governor's executive order expires, the previous requirements of the NYBCL will again be in effect. At that time, New York corporations must again comply with Section 602(a) and hold at least a portion of their meetings at a physical location. Furthermore, notice of any change must again be provided a minimum of ten (10) days in advance of any meeting, in accordance with Section 605.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.