Governor Kemp Issues Executive Order Permitting Virtual Shareholder Meetings for Georgia Corporations
The Situation: In light of the public health and safety concerns associated with the spread of the novel coronavirus disease ("COVID-19"), public companies across the country are taking steps to hold virtual meetings or allow remote participation in their upcoming annual meeting in order to protect shareholders and the companies’ employees. Companies incorporated in Georgia currently are not expressly permitted by statute to do so.
The Result: Governor Kemp issued an executive order on March 20, 2020 ("Order"), that specifically permits Georgia corporations to hold annual or special meetings of shareholders by means of remote communication ("virtual shareholder meetings"), provided that a company’s Board of Directors establishes procedures and meeting mechanics to enable shareholders and proxyholders to participate and vote at the meeting through remote communications. The Order applies to shareholder meetings scheduled between March 20, 2020, and the conclusion of the Public Health State of Emergency, including any extensions ("Emergency Period").
Looking Ahead: Georgia corporations should carefully consider whether an annual or special shareholder meeting scheduled during the Emergency Period should be changed to "virtual-only" or to a hybrid meeting that supports remote communication in order to avoid public health and safety concerns and comply with fast-evolving federal, state, and local directives on assemblies of people. Georgia corporations should review their organizational documents and the requirements of the Order to confirm the Board of Directors and the company can establish the appropriate procedures to make use of the Order if necessary.
What the Order Means for Georgia Corporations
On March 20, 2020, under authority derived from the Public Health State of Emergency declared in Georgia on March 14, the Governor of Georgia issued Executive Order 03.20.20.02 that includes provisions to specifically permit Georgia corporations to hold annual and special shareholder meetings during the Emergency Period by means of remote communication. (O.C.G.A Section 14-2-720, relates to the availability of shareholder lists during a meeting and includes a reference to meetings held by means of remote communication but there is no direct authority in Sections 14-2-701 or 14-2-702 that specifically allows virtual or hybrid meetings. Consequently, those sections have generally been construed as requiring that annual or special meetings of shareholders be held at a physical location.)
Read the full text of Executive Order 03.20.20.02, Reducing Regulations to Assist the State’s Response to the Spread of COVID-19, with the relevant portion beginning on page three.
The Executive Order
The operative provisions of the Order, which are similar to provisions already established by law in the State of Delaware that allow meetings to be held by remote communications, are:
- A Georgia corporation is permitted to conduct annual or special meetings of shareholders that are held during the Emergency Period by means of remote communications in lieu of holding a physical meeting; provided that the Board of Directors establishes procedures to enable verified shareholders and proxyholders not physically present at a meeting with a reasonable opportunity to participate, be deemed present in person at the meeting, and be permitted to vote on matters submitted at the meeting;
- For purposes of O.C.G.A. Section 14-2-705, the place of meeting required to be specified in the notice of meeting shall be deemed to include the method of remote communication by which shareholders may participate in a meeting held by means of remote communication; and
- The provisions of O.C.G.A. 14-2-720(b)(1), which require that a corporation that is holding a meeting solely by means of remote communication make available a list of shareholders who are entitled to notice of such meeting on a reasonably accessible electronic network and provide the information necessary to gain access to such list in the notice of shareholder meeting, are suspended provided that such information is made available to all shareholders reasonably in advance of the meeting.
The Order will remain in effect during the Emergency Period, which currently runs through April 13, 2020, and may be renewed and extended pursuant to Georgia law.
Implementing the Executive Order
Organizational Documents. Companies should review their articles of incorporation and bylaws to confirm that they do not prohibit the use of virtual or hybrid shareholder meetings. If the company's bylaws prohibit or inhibit the use of virtual or hybrid shareholders meetings, the Board of Directors may be able to amend the bylaws to provide for meetings held solely or partially through remote communications.
Requirements of the Order. If the Board of Directors determines that a virtual shareholder meeting is in the company’s best interests, the decision should be memorialized by a formal resolution that sets forth any necessary guidelines and procedures for hosting and holding the meeting by remote communications. There are numerous service providers that offer the technology necessary to host virtual or hybrid meetings of shareholders and comply with the necessary procedures.
The company should apply reasonable verification measures to ensure that individuals accessing the virtual meeting are actual shareholders or proxyholders. Companies should contact their inspector of elections, proxy solicitor, and legal counsel to discuss verification measures and any additional information that should be added to the company’s proxy materials. If the company has already mailed proxy materials, such verification measures may require a supplemental mailing or communication. Companies must also ensure the shareholder list is made available in accordance with O.C.G.A. Section 14-2-720(b), as modified by the Order.
Companies should also ensure that virtual meeting participants can participate and vote "substantially concurrently" with the meeting’s proceedings and that a record of any vote is maintained by the company. Companies must determine what level of participation will be offered in the virtual meeting. Options vary from company to company but can include a discussion of pre-submitted questions or live responses to questions submitted electronically or by telephone. Participation and voting will require coordination with the service provider hired to host the meeting by remote communications, as well as the company’s inspector of elections and proxy solicitor.
Federal Securities Law Proxy Requirements. Companies should also confirm that their planned virtual shareholder meeting conforms to the recent guidance from the Securities and Exchange Commission on shareholder meetings in light of COVID-19. This Jones Day Commentary provides more information.
Jones Day was proud to partner with Georgia Governor Brian Kemp and Representative Barry Fleming in working to implement this action to benefit all Georgia corporations.
Three Key Takeaways
- The Order is intended to provide flexibility for Georgia corporations to hold annual or special meetings of shareholders solely or partially through remote communications, in light of the growing public health concerns posed by COVID-19.
- Georgia corporations contemplating changing to a shareholder meeting conducted by remote communications, whether entirely virtual or a hybrid physical meeting that allows remote participation, should ensure the proposed procedures comply with the Order, as well as other provisions of the Georgia Business Corporation Code and their articles of incorporation and bylaws.
- Upon making the decision to switch to a virtual or hybrid meeting, Georgia corporations should act promptly to implement the necessary procedures to preserve shareholder access and engagement for such a meeting, to engage a meeting host service provider, to notify their shareholders, inspector of elections and proxy solicitor, and to disclose logistical details of the meeting, including providing the required information for accessing electronically-posted shareholder lists.
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