United States: US SEC Staff Publishes Guidance On Annual Shareholder Meetings Related To COVID-19

On March 13, 2020, the staff of the US Securities and Exchange Commission ("SEC") published guidance to assist investment companies and others affected by COVID-19 with their upcoming annual shareholder meetings. Certain investment companies are required to hold annual shareholder meetings and under the federal securities laws are required to deliver proxy materials for those meetings to their shareholders. The SEC recognized that, in light of the COVID-19 situation, holding these in-person meetings has become difficult. Accordingly, the guidance addresses changing the logistics of an annual meeting, holding virtual meetings, and addressing shareholder proposals. It is worth noting that the staff began its guidance by setting out a clear expectation of cooperation among market participants on these matters:

Changing the Date, Time, or Location of an Annual Meeting

The staff stated that an issuer that has already mailed and filed its definitive proxy materials can notify shareholders of a change in the date, time, or location of its annual meeting without mailing additional soliciting materials or amending its proxy materials if it:

• issues a press release announcing the change;
• files the announcement as definitive additional soliciting material on EDGAR; and
• takes "all reasonable steps necessary" to inform other intermediaries in the proxy process (e.g., a proxy service provider) and other affected market participants (e.g., the relevant securities exchanges) about the change.

The staff expects issuers to take these actions "promptly" after making a decision to change the date, time, or location of the meeting and further expects issuers to do so "sufficiently in advance of the meeting so the market is alerted to the change in a timely manner."

If an issuer has not yet mailed and filed their definitive proxy materials, the staff wants the issuer to consider whether to include disclosures regarding the possibility that the date, time, or location of the annual meeting could change due to COVID-19. The staff indicated that this determination should be made based on the particular facts and circumstances at hand, including the likelihood of these changes.

"Virtual" Shareholder Meetings

The staff has come to understand that some issuers are contemplating holding "virtual" shareholder meetings (i.e., via the Internet or other electronic means) in lieu of in-person meetings. The staff stated that the ability to conduct a "virtual" meeting is governed by state law and the issuer's governing documents and reminded issuers that:

If an issuer plans to conduct a virtual or hybrid shareholder meeting, the staff expects the issuer to:

• notify its shareholders, proxy process intermediaries and other market participants of its plans in a timely manner and
• disclose clear directions regarding the "logistical details" of the virtual or hybrid meeting, including how shareholders can remotely access, participate in, and vote at the meeting.

If the issuer has not yet filed and delivered its definitive proxy materials, the staff wants the above disclosures to be included in the definitive proxy statement and other soliciting materials.

If the issuer has already filed and mailed its definitive proxy materials, the issuer would not need to mail additional soliciting materials (including new proxy cards) solely for the purpose of switching to a virtual or hybrid meeting, provided that the issuer follows the steps described above for announcing a change in the meeting date, time, or location.

Presentation of Shareholder Proposals

Exchange Act Rule 14a-8(h) requires shareholder proponents, or their representatives, to appear and present their proposals at the annual meeting. Given that it now may be difficult for shareholder proponents to do so, the staff wants issuers, if feasible under state law, to provide shareholder proponents (or their representatives) with the ability to present proposals through other means, e.g., by phone, during this proxy season.

In addition, if a shareholder proponent (or representative) is unable to attend the annual meeting and present the proposal due to hardships related to COVID-19, the staff considers this to be "good cause" under Rule 14a-8(h) should issuers assert Rule 14a-8(h)(3) as a basis to exclude a proposal submitted by the shareholder proponent for any meetings held in the following two calendar years.

SEC Contact Information

In the press release announcing the guidance, the SEC encouraged investment companies, shareholders, and other market participants to contact the SEC staff with questions or concerns, and provided the following contact information for that purpose:

Conclusion

The SEC has stated that it will continue to closely monitor the impact of COVID-19 on investors and the capital markets. If you have any questions about this SEC staff guidance, or about the SEC's and its staffs' responses to COVID-19 more generally, please contact Leslie Cruz or Adam Kanter. We are here to help with any questions of interpretation of or assistance with compliance with or reliance on the relief, including contacting the SEC staff if needed. In addition, we will continue to keep funds updated on any future significant SEC or staff announcements regarding COVID-19.

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