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.