United States: Delaware Stockholders Meetings Join The Electronic Age

Given recent developments in Delaware corporate law, even the stodgy arena of shareholder meetings is not immune to the sweeping changes in the electronic world. Acknowledging the power of the Internet, the state of incorporation for most public companies — Delaware— has liberalized its corporate statutes to allow corporations to have electronic shareholder meetings. As a result, meetings that once created logistical nightmares of gathering scores of people together from a variety of locales can now be conducted without a physical forum.

Provided certain basic procedures are adhered to, the possibilities are nearly endless. The Delaware amendments were crafted in recognition of potential new technologies on the horizon and are flexible enough to adapt to these imminent advancements. For the time being, as long as the company ensures that all shareholders can participate and that voting can be conducted accurately, meetings can now be held in a chat room or via video conferencing.

A logical corollary of electronic meetings is the ability to notify shareholders of meetings via electronic means. Delaware now allows for electronic notice of meetings, but shareholders must specifically consent in writing to both notice provided electronically and to a specific form to be used (i.e., via e-mail, facsimile or electronic posting). Delaware took a step in this direction several years ago when it authorized electronic delivery of shareholder proxies.

These exciting developments have implications for corporations formed throughout the United States, not just Delaware. Delaware corporate law is generally considered the benchmark against which all other states’ laws are measured, so the approach Delaware has taken to attack the electronic meetings issue likely forecasts what will be found in other states. Clearly, given the pace of change, it is only a matter of time until similar changes are made to Ohio law and other jurisdictions to provide for web-based meetings and e-mail notices.

Moreover, this statute highlights the importance of developing internal rules and procedures for the conduct of electronic shareholder meetings. In fact, unless appropriate measures are adopted, Delaware precludes holding meetings electronically. An attorney should play a large role in ensuring that the adopted procedures adequately address critical issues such as shareholder identification and verification, establishing quorums, parliamentary procedure in an electronic format and tabulating votes. Shareholder meetings can, obviously, have a major impact on the direction and success of a corporation. The importance of ensuring that meetings are properly conducted cannot be overstated. Even with the monumental changes in the electronic world, there is still no substitute for thoughtful planning and preparation for these coming legal changes.