North Carolina Business Corporation Act Now Allows Fully Virtual Shareholder Meetings | Womble bond dickinson
Given the health concerns and logistical challenges of holding a physical meeting of shareholders during the COVID-19 pandemic, many North Carolina companies have relied on governor’s orders to organize all or part of these meetings by remote communication during the state of emergency.1 The newly enacted law allows annual and special meetings of shareholders to be held entirely by remote communication under the NCBCA.
Unless the articles or by-laws of a North Carolina corporation prohibit it, the board of directors of the corporation may, in its sole discretion, determine that a meeting of shareholders be held solely by means of remote communication, but only if the company implements procedures for:
- Check that each person participating remotely in this meeting is a shareholder; and
- Provide each remotely participating shareholder with a reasonable opportunity to participate in the meeting and to vote on matters submitted to shareholders (including the opportunity to communicate and read or hear the proceedings of the meeting, essentially at the same time than these deliberations).
The newly enacted legislation further provides that once a North Carolina listed company sends a notice to shareholders in accordance with the NCBCA, another notice to change the meeting from a physical meeting to a meeting. fully virtual is not required under state law if, generally:
- a government ordinance restricting group travel or gatherings applicable at the location of the shareholders’ meeting or at the registered office of the company is in effect (and the board of directors of the company in good faith anticipates that it will be in effect on the date and time indicated in the initial notification);
- the board of directors of the company determines that the meeting should instead be held only by means of remote communication; and
- the company promptly issues a press release regarding the change, files the press release with the Securities and Exchange Commission, and publishes the press release on its corporate website at the same time.
North Carolina listed companies should keep in mind that authorization under state law is only a consideration in determining whether to hold a virtual meeting of shareholders; The policies of major institutional shareholders and proxy advisory firms should also be assessed when making the decision.
It is important to note that remote shareholder meetings noted before the date of entry into force of this new legislation in accordance with previous executive decrees authorizing remote shareholder meetings during the state of emergency are deemed to comply with this new legislation.
1 Check out our previous Client Alert titled “Remote Shareholder Meetings Allowed and Encouraged for North Carolina Companies in the COVID-19 Environment” (April 3, 2020).