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CALIFORNIA CORPORATE & SECURITIES LAW

California And Virtual Annual Meetings

Seventeen years ago, Delaware amended Section 211 of the Delaware General Corporation Law to permit corporations to hold electronic meetings of stockholders.  72 Del. Laws, c. 343, §§ 7, 8.  In the ensuing years, an increasing number of corporations have elected to conduct their meetings either entirely (a “virtual meeting”) or partially (a “hybrid meeting”) through electronic means.  Broadridge Financial Solutions, Inc., a purveyor of online meeting solution, reports that nearly 200 companies held electronic meetings of shareholders this year.

Electronic meetings offer a lot of advantages to society, shareholders and corporations.  From a societal perspective, they lessen traffic because shareholders do not need to travel to the meeting.  Consequently, they also reduce carbon emissions through reduced travel.  Shareholders also benefit in terms of terms of savings in cost of travel and time.  In theory, these savings should encourage, not discourage, shareholder participation. Corporations save money through reduced costs of meeting room rentals, security and management travel.

Despite these numerous and manifest benefits, some shareholders vehemently oppose online meetings, especially if they are virtual meetings.  The Council of Institutional Investors, for example, has adopted the following policy:

4.7   Electronic Meetings:  Companies should hold shareowner meetings by remote communication (so-called “virtual”meetings) only as a supplement to traditional in-person shareowner meetings, not as a substitute.

Companies incorporating virtual technology into their shareowner meeting should use it as a tool for broadening, not limiting, shareowner meeting participation. With this objective in mind, a virtual option, if used, should facilitate the opportunity for remote attendees to participate in the meeting to the same degree as in-person attendees.

California Corporations Code Section 600(e) explicitly authorizes meetings to be conducted, in whole or in part, by electronic transmission by and to the corporation or by electronic video screen communication.  However, widely held California corporations, as a practical matter, will not be able to conduct virtual meetings.  The reason is that the statute requires the corporation to hold a meeting at a physical location absent receipt of consent from all shareholders to the electronic meeting.

 

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