Nevada Corporations And Virtual Stockholder Meetings
Companies typically cite cost savings and ease of access as the motivation for holding virtual stockholder meetings. Andy D. Bryant, Chairman of the Board of Intel Corporation, for example, provided the following rationale in the company’s 2016 proxy materials:
Intel has for years been a leader in the use of technology to improve and broaden stockholder communications. This has made it possible for more people to have direct access to information sooner, while saving the company and investors time and money. As physical attendance at meetings has dwindled, web participation has grown significantly, and has proven to be substantially more popular than physical attendance. With the technology well established, this year we are pleased to be able to provide a completely virtual Annual Stockholders’ Meeting.
Critics of the virtual meeting, on the other hand, argue that it is important to confront the board and management in person and that current technology is inadequate.
The wrangling over the pros and cons of virtual meetings is purely academic unless they are legally permissible. Nevada amended NRS 78.320 in 1991 to provide that unless otherwise restricted by the certificate of incorporation or bylaws, stockholders could participate in a meeting of stockholders by means of a telephone conference or similar method of communication by which all persons participating in the meeting can hear each other. 1991 Nev. Stat. Ch. 442 § 108. This statute remained nearly unchanged until 2011 when the legislature amended the statute to require that all stockholders be able to “communicate simultaneously or sequentially” rather than “hear each other”. 2011 Nev. Ch. 168 § 3. This change didn’t last very long, for the legislature in 2013 jettisoned the requirement in favor of a requirement that the corporation implement “reasonable measures” to: (1) Verify the identity of each person participating through such means as a stockholder; and (2) provide the stockholders a reasonable opportunity to participate in the meeting and to vote on matters submitted to the stockholders, including an opportunity to communicate, and to read or hear the proceedings of the meetings in a substantially concurrent manner with such proceedings. 2013 Nev. Stat. Ch. 281 § 4.
Despite these reworkings of NRS 78.320, the statute did not clearly state that stockholder meetings could be held solely by remote communications. In 2015, the legislature amended the statute again to state plainly that a meeting of stockholders may be held solely by remote communication. NRS 78.320(5). However, authorization of virtual only meetings is not automatic. As explained by the bill’s sponsor:
Due to the benefits of having such meetings, but to avoid any potential issues and concerns over the same, the amendments proposed by the Executive Committee permit virtual-only stockholders meetings only if provided for in the corporation’s articles of incorporation and bylaws.
Memorandum from the Executive Committee of the Business Law Section, State Bar of Nevada to Senate Judiciary Committee, April 3, 2015.
The result is that no special provision need be made in either the articles of incorporation or bylaws for a Nevada corporation to hold a virtual stockholder meeting, but the meeting may not be solely virtual unless the articles of incorporation or bylaws so permit.
For an example of a publicly traded Nevada corporation holding a virtual only annual meeting, see the 2016 proxy statement of Computer Sciences Corporation. Below is the bylaw authorizing virtual only meetings:
Section 1. Place of Annual Meetings. Annual meetings of the stockholders shall be held at such place as shall be designated by the Board of Directors. In lieu of holding a meeting of stockholders at a designated place, the Board of Directors, may, in its sole discretion, determine that any meeting of stockholders may be held solely by means of remote communication. For the purpose of this Section 1, “remote communication” shall mean electronic communications, videoconferencing, teleconferencing or other available technology where the Corporation has implemented reasonable measures to: (a) verify the identity of each person participating through such means as a stockholder; and (b) provide the stockholders a reasonable opportunity to participate in the meeting and to vote on matters submitted to the stockholders, including an opportunity to communicate, and to read or hear the proceedings of the meetings in a substantially concurrent manner with such proceedings.