Developments in Securities Regulation, Corporate Governance, Capital Markets, M&A and Other Topics of Interest. MORE

As a result of the COVID-19 pandemic, SEC staff provided guidance on changing the date time and place of an annual meeting, switching to a virtual shareholder meeting and certain matters related to shareholder proposals.  The SEC has now expanded on that guidance, focusing primarily on problems associated with issuers who mail a full set of proxy materials rather than using the notice-only delivery model.

In the guidance, the SEC staff notes that some issuers may be encountering delays in the printing and physical mailing of the “full set” of their proxy materials for their upcoming shareholder meetings due to the impact of COVID-19 on the facilities and staffing of their proxy service providers or transfer agents.  In particular the SEC has apparently been receiving inquiries from some issuers that would like to furnish their proxy materials through the “notice-only” delivery option permitted by Exchange Act Rule 14a-16, but have concerns about their ability to comply with certain provisions of the rule. For example, due to unexpected delays caused by COVID-19, an issuer may not be able to send the notice of the electronic availability of the proxy materials at least 40 calendar days before the meeting, provide intermediaries (such as a broker, dealer, or bank) with the information needed so the intermediaries can send the notice to beneficial owners within the 40 calendar days timeframe required by Exchange Act Rule 14b-1 or 14b-2, or respond to a shareholder’s request for paper copies of proxy materials in a timely manner.

In the guidance the SEC staff encourages issuers affected by printing and mailing delays caused by COVID-19 to use all reasonable efforts to provide timely information to shareholders without putting the health or safety of anyone involved at risk. In some cases, this may mean delaying a meeting in accordance with state law requirements and the procedures provided in the previous guidance, if necessary, in order to provide materials on a timely basis.

However the staff advised that in circumstances where delays are unavoidable due to COVID-19 related difficulties, the staff would not object to an issuer using the “notice-only” delivery option in a manner that, while not meeting all aspects of the notice and timing requirements of Rule 14a-16, will nonetheless provide shareholders with proxy materials sufficiently in advance of the meeting to review these materials and exercise their voting rights under state law in an informed manner and so long as the issuer announces the change in the delivery method by following the steps described in the previous guidance for announcing a change in the meeting date, time, or location. Affected issuers and intermediaries also should continue to use their best efforts to send paper copies of proxy materials and annual reports to requesting shareholders, even if such deliveries would be delayed.

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