October 25, 2021

Volume XI, Number 298


October 25, 2021

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North Carolina Business Corporation Act Now Permits Fully Virtual Shareholders' Meetings

On September 20, North Carolina Governor Roy Cooper signed House Bill 320 into law, permitting North Carolina corporations to hold shareholders’ meetings solely by means of remote communication under the North Carolina Business Corporation Act (NCBCA). 

Given the health concerns and logistical challenges around having a physical shareholders’ meeting during the COVID-19 pandemic, many North Carolina corporations relied on the Governor’s executive orders to conduct all or part of such meetings by remote communication during the state of emergency.1 The newly enacted legislation permits both annual and special meetings of shareholders to be held entirely by remote communication under the NCBCA. 

Unless prohibited by a North Carolina corporation’s articles of incorporation or bylaws, the corporation’s board of directors may, in its sole discretion, determine that a shareholders’ meeting be held solely by means of remote communication, but only if the corporation implements procedures to: 

  • Verify that each person participating remotely in such meeting is a shareholder; and 

  • Provide each shareholder participating remotely a reasonable opportunity to participate in the meeting and to vote on matters submitted to shareholders (including an opportunity to communicate and read or hear proceedings of the meeting, substantially concurrently with such proceedings). 

The newly enacted legislation further provides that once a publicly traded North Carolina corporation has sent a notice of meeting to shareholders in accordance with the NCBCA, further notice to change the meeting from a physical meeting to a fully virtual meeting is not required under state law if, generally: 

  • a governmental order restricting travel or group gatherings applicable to the place of the shareholders’ meeting or corporation’s principal office is in effect (and is anticipated in good faith by the corporation’s board of directors to be in effect at the date and time set forth in the initial notice);   

  • the corporation’s board of directors determines that the meeting is instead to be held solely by means of remote communication; and 

  • the corporation promptly issues a press release regarding the change, files the press release with the Securities and Exchange Commission and posts the press release to its corporate website at the same time. 

Publicly traded North Carolina corporations should also be mindful that authorization under state law is just one consideration in assessing whether to hold a virtual meeting of shareholders; policies of key institutional shareholders and proxy advisory firms on the topic should also be evaluated in making the decision. 

Importantly, remote shareholders’ meetings noticed before the effective date of this newly enacted legislation complying with prior executive orders authorizing remote shareholders’ meetings during the state of emergency are deemed in compliance with this newly enacted legislation.

Copyright © 2021 Womble Bond Dickinson (US) LLP All Rights Reserved.National Law Review, Volume XI, Number 266

About this Author

Sudhir Shenry Corporate Attorney Womble Bond

Sid’s clients operate across the cutting-edge industries that support and power U.S. commerce, including transportation, construction materials, manufacturing, semiconductors, and financial institutions. He is a partner in the Corporate & Securities Group and Co-Chair of the Public Company Advisors Team, and his leadership is part of why clients rely on Sid’s counsel. He focuses his practice on the representation of public companies in securities transactions, including offerings of debt and equity securities, tender offers, and exchange offers, as well as mergers...

Afzal Karim Corporate Attorney Womble Bond Dickinson Charlotte, NC

Afzal Karim represents clients in M&A transactions as well as general corporate matters.

His transactional experience includes representing companies in the logistics, telecom, construction, information technology, healthcare and senior living industries in complex business transactions. Afzal drafts and reviews asset purchase agreements, letters of intent, entity formation documents, franchise agreements and other documents required to complete these transactions.

In addition, Afzal guides companies in day-to-day corporate governance matters. He has experience drafting...