Coronavirus: Impact on Corporate Annual Meetings in Arkansas

March 18, 2020

By: Robert T. Smith

With the coronavirus spreading rapidly and many state and local governments mandating restrictions on large gatherings, corporations are forced to consider the impact on their upcoming annual shareholder meetings. Most companies we work with tend to hold their annual meetings during the months of April or May, meaning that proxy statements and related documentation are either in the drafting stage or have already been mailed out.

What you need to know

  • State corporate laws dictate requirements for annual shareholder meetings.  The Arkansas Business Corporation Act, for example, provides that each corporation “shall hold a meeting of shareholders annually.”
  • Those laws also determine the parameters concerning notice, location and timing of meetings. Over thirty states have adopted amendments to their corporate statutes to allow “virtual” shareholder meetings that permit shareholders to remotely attend the meeting by teleconference or video. 
  • Arkansas law (like that of eight other states) does not allow virtual meetings, meaning that each shareholder must be present (either in person or by proxy) for quorum and voting purposes.
  • A corporation’s bylaws typically also outline requirements to be followed in calling, holding and adjourning meetings. These should be carefully reviewed (although a bylaw provision authorizing a virtual meeting would not be consistent with the statute).

What are your options?

  • Whether or not you have mailed out notice and proxy information to your shareholders, you may consider postponing your annual meeting to a date later in the year. This would come under the authority of the corporation’s Board of Directors. The bylaws should be reviewed to ensure that the Board has this flexibility and, if not, the Board should consider whether it can unilaterally adopt an amendment to that effect. Depending on the timing, you may also have to consider sending a “new” notice of the postponed meeting. With this approach, a corporation’s current slate of directors should continue in office until the delayed meeting is completed.
  • Some corporations have indicated that they will be holding their annual meeting as planned, but provide flexibility in the notice to postpone the meeting for health and safety concerns in the event that more than the permissible number of persons actually attend in person. If too large a number show up, or those that attend exhibit health problems, the meeting would be postponed. This could create a number of difficulties if, for example, any shareholder proposals are to be acted on at the meeting. 
  • Lastly, a cumbersome option would be to circulate a written consent of shareholders. Most corporate governing documents permit shareholders to act without a meeting by written consent if the requisite number of shares consent to the action (typically a simple majority).  If feasible, this may be an option simply to reelect directors with the intention of holding an informational meeting to review financials later in the year.

 Recent SEC Guidance

  • The SEC recently issued guidance for public companies that plan to change the date, time and/or location of their annual meeting.
  • Under that guidance, a company that has already mailed and filed its proxy materials can notify shareholders of the change simply by issuing a press release and taking other reasonable steps to notify other intermediaries in the proxy process.  A company that has not yet filed its definitive proxy materials is instructed to consider including disclosures regarding a possible change in the date, time and location of a meeting, including switching to a virtual meeting

We are hopeful that things will return to normal soon.  For the time being, however, please contact our office if we can assist with any issues concerning your corporate governance matters during this challenging period.

Robert T. Smith heads the Finance and Commercial Transactions Practice Group and serves on the firm’s Management Committee. His diverse corporate practice focuses on representing companies and financial institutions in general business, transactional, securities and regulatory matters. He has handled transactions in a variety of areas including the banking, healthcare, real estate and technology industries.

Disclaimer: The information included here is provided for general informational purposes only and should not be a substitute for legal advice nor is it intended to be a substitute for legal counsel. For more information or if you have further questions, please contact one of our Attorneys.