Governor Carney’s Tenth Modification addresses the practical difficulties faced by these corporations in attempting to comply with the requirement of the DGCL in light of the COVID-19 pandemic and the travel-bans in place in several states. It is not prospective as it applies only to annual meetings already noticed, and it does not alter the requirements of 8 Del. C. § 211 for holding a remote annual meeting.Under 8 Del. C. § 211, Delaware corporations generally are authorized to hold an annual meeting via remote means, so long as the corporation’s organizational documents grant the board of directors the discretion to decide where to hold an annual meeting of stockholders.
at *3.[7] 8 Del. C. § 223(a).[8] Donald J. Wolfe & Michael A. Pittenger, Corporate and Commercial Practice in the Delaware Court of Chancery, §8.07, at 8-168 (2012) (citing 8 Del. C. §§ 211(d) and 228).[9]Id. at 8-169.
The Court therefore held that under the language of the charter, the term “annual” in this context meant “occurring once a year,” and that the term “year” could be construed to allow Airgas’s annual meeting cycle to run on a calendar year basis, rather than only on a fiscal year, as Airgas contended.Finally, the Court concluded that the bylaw amendment was not inconsistent with Delaware law. Airgas contended that the bylaw amendment violated Sections 141(d) and 141(k)(1) of the DGCL because it would require Airgas to hold an annual meeting that is not really “annual” (i.e., it would take place only four months after the previous “annual” meeting as opposed to approximately one year later), and therefore it would defeat the purpose of classified boards by shortening the length of the directors’ terms in office by seven months without properly removing them for cause. In support of that argument, Airgas relied upon 8 Del. C. 211(b) and (c), asserting that the “policy thrust” of 211 is that corporations should hold annual meetings of stockholders. Looking to both the plain language and the policy behind Section 211, the Court held that Section 211 simply requires that annual meetings be held once a year, every year, but contains no requirement that consecutive annual meetings be held any length of time apart, other than providing that the time between meetings should not exceed thirteen months.
Thus, in the event that a quorum of the Board cannot be assembled due to COVID-19 (for example), implementing statutorily authorized emergency powers may be considered.----------------------------------------------1 Del. Code tit. 6, § 18-302(d),404(d).2 Del. Code tit. 8, § 211(a)(2).3Governor John C. Carney, Tenth Modification of the Declaration of a State of Emergency for the State of Delaware Due to a Public Health Threat, GOVERNOR.DELAWARE.GOV (April 6, 2020), https://governor.delaware.gov/health-soe/tenth-state-of-emergency/4Del.
In this memorandum opinion, the Delaware Court of Chancery denied a corporation’s request for a partial final judgment or certification for interlocutory appeal of the Court’s prior ruling that the corporation must hold its annual meeting despite a potential conflict with SEC proxy rules. The underlying dispute involved an action filed in July 2010 by a stockholder of Fuqi International, Inc. (“Fuqi” or the “Company”) to compel a meeting of stockholders pursuant to 8 Del. C. § 211(c). Fuqi had delayed holding its annual meeting pending release of corrected financial statements for fiscal year 2009 after certain accounting errors had been discovered in March 2010.
Ch. Nov. 5, 2012) (Glasscock, V.C.)November 5, 2012In this memorandum opinion, the Delaware Court of Chancery denied a corporation’s request for a partial final judgment or certification for interlocutory appeal of the Court’s prior ruling that the corporation must hold its annual meeting despite a potential conflict with SEC proxy rules. The underlying dispute involved an action filed in July 2010 by a stockholder of Fuqi International, Inc. (“Fuqi” or the “Company”) to compel a meeting of stockholders pursuant to 8 Del. C. § 211(c). Fuqi had delayed holding its annual meeting pending release of corrected financial statements for fiscal year 2009 after certain accounting errors had been discovered in March 2010.
This article does not address the potential impacts of the numerous other local, state and federal orders that have been issued in response to the COVID-19 pandemic. 8 Del. C. § 211.
Please contact your Sheppard Mullin attorney contact for additional information.*[1] 8 Del. C. § 211.
For example, Delaware law expressly permits shareholder meetings that are conducted by means of remote communication. Del. Code Ann. tit. 8, § 211. Other states permit a seemingly hybrid version of virtual shareholder meetings, which are regular in-person shareholder meetings with the option for shareholders to participate by means of electronic communication. See N.Y. Bus. Corp. Law § 602.
cal annual shareholder meeting.Review the company’s organizational documents and the applicable corporate law in its state of incorporation to confirm that virtual annual shareholder meetings are permissible.Update the proxy statement by filing a notice of the change with the SEC, stating the date and time of the virtual annual shareholder meeting, indicating the reason for the change, and providing a detailed description of how shareholders can attend, vote and otherwise participate in the virtual meeting.Pepper Hamilton is closely following the developing coronavirus (COVID-19) situation and its impact on our clients. Visit the Insight Center on pepperlaw.com for our latest resources on the topic or see below for recent articles and events:Coronavirus (COVID-19) Disruptions Prompt Relief From Certain Public Company Reporting DeadlinesEmployer Planning Is Key to Managing Coronavirus DiseaseEmployer Planning for Coronavirus (webinar recording to be available March 12, 2020)EndnotesSee 8 Del. C. § 211(a)(2).See Pa. Bus. Corp. L. §§ 1704, 1708.See S.D. Codified Law § 47-1A-701.