Remote Only Shareholder Meetings Now Permitted During a State of Emergency Under the Amended New Jersey Business Corporation Act
On March 20, 2020, Phil Murphy, the Governor of New Jersey, signed into law an amendment to the New Jersey Business Corporation Act to permit corporations organized in New Jersey to conduct shareholder meetings solely by means of remote communication. This change assists corporations planning to hold shareholder meetings during COVID-19 as the prior version of Section 14A:5-1 only permitted remote meetings so long as a location for shareholders to attend the meeting in-person was also designated. All such remote only shareholder meetings may only be held during a state of emergency declared by the Governor provided, that the board of directors authorizes and adopts guidelines and procedures governing the remote only shareholder meeting.
Prior to holding a remote shareholder meeting, whether or not the Governor has declared a state of emergency, a New Jersey corporation must review its certificate of incorporation and by-laws to confirm that remote participation by shareholders is not restricted or prohibited. If remote shareholder meetings are restricted, consideration should be given as to whether amendments to such documents are necessary prior to proceeding with the remote meeting.
Additionally, Section 14A:5-1 requires that the corporation implement reasonable measures to:
(a) verify that each person participating remotely is a shareholder or a proxy of a shareholder;
(b) provide each shareholder participating remotely with a reasonable opportunity to participate in the meeting, including an opportunity to vote and to read or hear the proceedings substantially simultaneously with those proceedings; and
(c) record and maintain a record of any shareholder votes or other actions taken by remote communication at the meeting.
It is important to note that remote shareholder meetings are only permitted during a state of emergency in New Jersey. As such, a New Jersey corporation is not permitted to hold remote only shareholder meetings due to the existence of a state of emergency in any other state even if the shareholder meeting is held in a state other than New Jersey.
Given the requirement that New Jersey be in a state of emergency during the time of the shareholder meeting for remote only meetings to be permissible, in the event the state of emergency is lifted prior to, or on the day of the meeting, a physical location for the shareholder meeting is required. As such, New Jersey corporations should have a contingency plan should the state of emergency be lifted prior to the time of the shareholder meeting.
As a result of COVID-19, the Securities and Exchange Commission (the SEC) prepared guidance for public corporations conducting shareholder meetings during the pandemic (click here to view SEC’s guidance). According to the SEC, shareholders, intermediaries in the proxy process, and other market participants must be notified of plans to conduct remote only meetings in a timely manner and disclose clear logistical directions relating to the meeting, including, how to access, participate in, and vote at the meeting. Any corporation that has already mailed and filed its definitive proxy materials can change the form of shareholder meeting from in-person to remote only without mailing additional soliciting materials or amending its proxy materials if it issues and files an 8-K announcing the change and takes all reasonable steps to inform other intermediaries in the proxy process and other relevant market participants of such change.