July 5, 2020

Volume X, Number 187

July 03, 2020

Subscribe to Latest Legal News and Analysis

Texas Community Bank Holding Companies may Conduct "Virtual" Shareholder Meetings

Texas community bank holding companies may want to reconsider plans for upcoming annual shareholder meetings in light of health, transportation and other logistical issues raised by the spread of coronavirus disease 2019 (COVID-19).  Although Texas corporations are required to hold an annual shareholder meeting, Texas state law permits companies to hold “virtual” shareholder meetings in lieu of in-person meetings, subject to the company’s bylaws and satisfying several requirements set forth in the Texas Business Organizations Code (the “TBOC”).

Preparing for a Virtual Shareholder Meeting

The TBOC permits a company to hold a shareholder meeting by using “a conference telephone or similar communications equipment, or another suitable electronic communications system, including videoconferencing technology or the Internet, or any combination,” subject to the company’s certificate of formation and bylaws. 

Companies considering a virtual shareholder meeting should carefully review their bylaws to determine whether a shareholder meeting held by remote communication is permitted or whether bylaw amendments may be necessary.  Many bylaws were initially adopted years ago and may not contemplate a shareholder meeting held by remote communication.  Rather, bylaws often provide that shareholder meetings will be held at the principal office of the company or at such other place within or without the State of Texas as shall be specified in the notice of the meeting.  Boards may decide to amend the bylaws to expressly permit virtual shareholder meetings, while some companies may take the view that their existing bylaws do not conflict with the authority provided in the TBOC and therefore virtual shareholder meetings are permitted without the need for an amendment.

A company holding a virtual shareholder meeting must ensure that whatever system used for the meeting permits each person participating in the meeting to communicate with all other persons participating in the meeting.  Reasonable measures also must be implemented to verify that every person voting at the meeting by means of remote communications is sufficiently identified and, as always, companies must keep a record of any vote or other action taken.

Notice Requirements

Companies should follow the usual written notice requirements set forth in the company’s governing documents and the TBOC.  In addition, notice of a virtual shareholder meeting must include:

  • the form of communications system to be used for the meeting;

  • the means of accessing the communications system; and

  • information on how to access the list of shareholders entitled to vote at the meeting.

Companies that have already mailed a notice for an in-person shareholder meeting may change to a virtual shareholder meeting.  However, companies that make such change should provide shareholders with a revised notice of meeting that complies with the requirements for a virtual shareholder meeting described above.  The revised notice should be provided in the manner and within the time periods required by a company’s bylaws and the TBOC.

Shareholder Lists

In a virtual meeting, the shareholder list must be open to inspection by shareholders during the meeting on a reasonably accessible electronic network.

Although an electronic shareholder list is required to be made available, a corporation is not required to include any electronic contact information of shareholders on the list. Furthermore, a corporation that makes the list available on an electronic data system must take reasonable measures to ensure the information is available only to shareholders of the corporation.

Resources

Several commercial providers have virtual shareholder meeting solutions that allow companies to authenticate attending shareholders and enable shareholders to submit questions, review a shareholder list and vote shares online at the meeting.

The Securities and Exchange Commission (“SEC”) regulates the filing and mailing of proxy solicitation materials for public companies.  On March 13, 2020, the SEC staff issued guidance for conducting annual meetings in light of COVID-19.  Public companies should refer to such guidance in addition to the Texas state law requirements discussed herein, which would also apply to a virtual meeting.

© 2020 Bracewell LLPNational Law Review, Volume X, Number 88

TRENDING LEGAL ANALYSIS


About this Author

William S. Anderson, Securities Attorney, Bracewell Law Firm
Partner

Will Anderson focuses on capital markets transactions, liability management, SEC compliance and disclosure matters and mergers and acquisitions.  He also regularly advises Boards of Directors and Special Committees on fiduciary duties, corporate governance and other matters.

Will has represented issuers and underwriters in well over 100 securities offerings that have collectively raised more than $30 billion.  His experience includes initial public offerings, follow-on equity offerings and high yield and investment grade debt offerings.  He...

713-221-1122
Joshua McNulty Corporate Attorney Bracewell
Partner

Josh McNulty is a corporate and regulatory banking attorney. Josh’s practice primarily focuses on regulatory compliance, mergers and acquisitions, and securities law matters for financial institutions. He counsels state and national banks, holding companies and other financial institutions on state and federal regulatory compliance issues, including all aspects of regulatory matters involving the FDIC, the Federal Reserve, the OCC, the TDB, and the CFPB.

Josh also advises financial institutions, corporate clients and boards of directors on corporate governance, stockholder matters, shareholder agreements, fiduciary obligations, and other corporate activities, such as holding company formations, and a broad range of public and private capital market transactions, including IPOs and private placements.

214.758.1046
Jason Jean Finance & Energy Attorney Bracewell
Partner

Jason Jean is experienced in advising public and private businesses, including private equity investors, in the financial services sector, upstream and midstream energy sector, and other sectors with respect to mergers and other business combinations, asset and stock purchases and sales, restructurings and joint ventures. Jason also advises businesses in private capital markets transactions, including Rule 144A private placements and PIPEs, and public capital market transactions listed on the New York Stock Exchange (NYSE), NASDAQ, Amex and London Stock Exchange. His capital markets...

713.221.1328
Troy L. Harder, Bracewell, SEC Representation Lawyer, Finance, Capital Markets Attorney
Partner

Troy Harder advises clients in all aspects of corporate and securities law, with an emphasis on corporate finance transactions. He has experience representing both issuers and investment banks in a wide range of capital markets transactions, including initial public offerings, public and private offerings of debt and equity securities, tender offers, consent solicitations and exchange offers. He also counsels clients in connection with SEC reporting and corporate governance and compliance matters, including insider reporting and compliance with the rules of the New York...

713-221-1456
Shannon Baldwin Securities Lawyer Bracewell
Associate

Shannon Baldwin represents privately owned and publicly traded companies in securities matters, capital markets, corporate governance, joint ventures, mergers and acquisitions, and master limited partnership (MLP) dropdown transactions. In addition, she represents companies in equity and debt offerings, including public and private issuances and private investment in public equity (PIPE) transactions.

1.713.221.1308