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Top Considerations When Planning Virtual Shareholder Meetings

    
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Shareholder meetings are a once-a-year opportunity for investors to engage with a company’s leadership and hold them accountable for the previous year’s performance. But with much of the workplace moving online in the past few months, can shareholder meetings make the leap as well?

The answer is yes: many businesses have successfully migrated their stockholder meetings to cyberspace. Not only is this more convenient and safer for many shareholders, it also opens the meeting up to a much wider live audience.

Even before 2020, more and more companies were moving their shareholder meetings online: according to PricewaterhouseCoopers, 248 companies held virtual shareholder meetings in 2019, up from 212 in the previous year. What’s more, many organizations may choose to keep these meetings virtual-only if the leadership sees them as a success.

With more annual shareholder meetings going virtual than ever before, we’ve written this guide to help you run your own virtual shareholder meeting.

Regulations and Guidelines for Virtual Shareholder Meetings

Every U.S. state has laws on the books that require the corporations headquartered in that state to hold annual stockholder meetings. However, not all of them legally allow businesses to host these meetings online.

Financial solutions provider Broadridge has published the guide “Principles and Best Practices for Virtual Annual Shareholder Meetings.” This document lists the laws and regulations pertaining to virtual shareholder meetings for each of the 50 states and Washington D.C.

According to the Broadridge guide, the states that only allow in-person shareholder meetings are:

  • Alabama

  • Alaska

  • Arkansas

  • Georgia

  • Idaho

  • New Mexico

  • New York

  • South Carolina

  • South Dakota

The states that allow purely virtual shareholder meetings are:

  • Arizona

  • California

  • Colorado

  • Delaware

  • Florida

  • Hawaii

  • Indiana

  • Kansas

  • Kentucky

  • Maryland

  • Massachusetts

  • Michigan

  • Minnesota

  • Missouri

  • Nevada

  • North Dakota

  • Ohio

  • Oklahoma

  • Oregon

  • Pennsylvania

  • Rhode Island

  • Tennessee

  • Texas

  • Utah

  • Vermont

  • Virginia

  • Washington

  • West Virginia

  • Wisconsin

  • Wyoming

The states that do not allow purely virtual shareholder meetings, but do allow hybrid in-person and virtual shareholder meetings, are:

  • Connecticut

  • District of Columbia

  • Illinois

  • Iowa

  • Louisiana

  • Maine

  • Mississippi

  • Montana

  • Nebraska

  • New Hampshire

  • New Jersey

  • North Carolina

Each state has unique laws about virtual stockholder meetings, so be sure to do your own research into the legality of the practice in your own state of incorporation. In particular, make sure to check for the most up-to-date information, since several governors have recently taken executive actions that allow for certain changes to the annual meeting process.

Logistics for Virtual Shareholder Meetings

Depending on the laws of your state, you may be able to hold a totally virtual shareholder meeting, and/or a hybrid meeting that combines virtual and in-person participants.

Meetings that are entirely virtual can save on both hosting costs for the company and travel costs for the shareholders, allowing more people to “attend.” As another benefit, virtual meetings can be recorded for later consultation.

However, purely virtual shareholder meetings greatly limit the interactions that your investors can have with company leadership. In addition, the attendees of a virtual meeting may suspect that the company is “cherry-picking” questions to avoid tough issues, creating greater distrust.

By establishing the following ground rules, you can make your virtual or hybrid shareholder meeting a success:

  • Decide whether the meeting will be purely virtual or hybrid well in advance, and inform shareholders of your decision.

  • Outline formal rules of conduct for how shareholders should behave during the meeting, including rules for when a shareholder is out of order.

  • Set a reasonable limit on the length of responses to shareholder questions, in order to maximize the number of questions that you can answer. 

Technology for Virtual Shareholder Meetings

Whether your stockholder meeting is totally or partially virtual, you need the right technology to enable it. Your choice of technology will depend on the number of attendees you expect, the features you need access to, and whether you want to hold a video or audio-only meeting.

The meeting should be accessible from a wide range of devices, including desktop computers, laptops, smartphones, and tablets. Use a unique web address that will be valid for the duration of the meeting, and give each shareholder a unique ID allowing them to log in. Make sure to choose a teleconference solution that complies with industry-standard encryption and security protocols, reducing the risk from bad actors hijacking the meeting.

You should test your platform of choice well in advance of the meeting, so that you can predict and resolve any technical difficulties. If necessary, offer a technical support hotline for attendees who are having trouble joining the meeting.

Additionally, virtual data rooms, or VDRs, can simplify the process of sharing confidential company documents with your shareholders. VDRs provide various security measures to keep your sensitive information safe, and make it easy to give specific individuals access to only the particular folders and files relevant to them.

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