Massachusetts Executive Order Permitting Massachusetts Public Companies to Hold Virtual-Only Shareholder Meetings to Expire
Massachusetts Governor Charles Baker’s COVID executive order permitting public companies incorporated in Massachusetts to hold virtual-only shareholder meetings is set to expire on August 14, 60 days after the June 15 lifting of the COVID-19 state of emergency in Massachusetts. Governor Baker had issued the executive order in March 2020 soon after the imposition of measures to limit the spread of the coronavirus, which included office shut-downs and prohibitions on public assembly. The executive order provided much needed relief for companies that had sent out notices to shareholders of in-person meetings that would no longer be possible under the state-imposed pandemic restrictions. The order permitted companies that had sent written notice to shareholders of the location of an annual meeting to change the format to a virtual one by taking reasonable steps to notify shareholders of the change in meeting format rather than by mailing additional written notice. The order was criticized on two counts. First, it failed to specify what steps would qualify as reasonable, although most companies ended up relying on press releases that followed the SEC’s Division of Corporation Finance’s guidance for public companies considering a virtual meeting in light of COVID-19. The order was also criticized because it provided no relief from ordinary written notice requirements for companies that sent out initial notices of an in-person or hybrid meeting after the close of the specified period (April 9th), even though there was great uncertainty at the time about how long the pandemic-related restrictions would last.
Following termination of the emergency order, Section 7.08 of the Massachusetts Business Corporation Act, which prohibits public companies incorporated in Massachusetts from holding annual or special shareholder meetings solely by means of remote communication, will again be in effect. Section 7.08 allows Massachusetts public companies to hold hybrid shareholder meetings provided that (i) remote participants are able to fully participate in such meetings (including being able to vote and read or hear the proceedings of the meeting on a substantially contemporaneous basis), (ii) companies take reasonable measures to verify the identities of remote participants and maintain a record of voting or other actions taken at the meetings, and (ii) shareholders are permitted to attend in person rather than virtually.
Massachusetts public companies planning an upcoming annual or special meeting of their shareholders will need to plan ahead to arrange for appropriate meeting space for an in-person or hybrid meeting as well as confirm that hybrid arrangements are permitted under their charter documents. Public companies electing to hold a hybrid meeting will need to ensure that their notices to shareholders clearly explain the logistics for communications and voting during the hybrid meeting.