Sep 22, 2021
Governor Murphy Signs Bill Permitting Remote Shareholder Meetings
By Dominic J. Leone, Esq.
Gov. Murphy signed into law Assembly Bill 4918 allowing corporations and certain other financial institutions the permissibility to conduct remote shareholder meetings post pandemic.
On March 9, 2020, as a result of the COVID-19 pandemic, New Jersey’s Governor Phil Murphy issued Executive Order 103 declaring a State of Emergency and a Public Health Emergency.
Daily life drastically changed and as a society, we began implementing and practicing safety measures to eradicate the virus. On March 20, 2020, as it relates to New Jersey corporations, one safety measure to avoid mass gatherings was the implementation of a bill (A-3861) that allowed New Jersey corporations to hold shareholder meetings in part or solely by means of remote communication during a state of emergency.
In anticipation of the State of Emergency being lifted, bill A-4918, sponsored by Assembly Majority leader Lou Greenwald and Assembly Speaker Pro Tempore Gordon Johnson, was introduced, and sought to make permanent, among other things, the virtual shareholder meeting option by amending the New Jersey Business Corporation Act. N.J.S.A. 14A:5-1.
Bill A-4918 was passed by the Senate and the House in May 2021 and has now been approved by Gov. Murphy on August 24, 2021, and thus, effectively allows shareholder meetings to be held solely or partially by means of remote communication in accordance with the corporation’s or certain financial institution’s adopted guidelines and procedures governing such meeting. P.L.2021, c.202. Directors of New Jersey corporations also have the ability to attend director meetings remotely provided that the companies comply with the statutory requirements.
Virtual shareholder meetings can often be less expensive for corporations and provide a more convenient manner for shareholders to participate and attend. However, virtual meetings may also induce additional cybersecurity costs to ensure authenticity and privacy of the meetings and may effectively impose technology requirements for shareholders that do not have technological access. The new law requires that a corporation or certain financial institution (i) verify that each person participating remotely is a shareholder or proxy of a shareholder, (ii) provide each shareholder participating remotely with a reasonable opportunity to participate in the meeting, and (iii) record and maintain a record of any shareholder votes or other actions taken by remote communication at the meeting. N.J.S.A 14A:5-1(3).
While holding a virtual shareholder meeting can provide benefits, it should be considered carefully in light of a corporation’s or certain financial institution’s individual facts and goals. For more information on this Legal Alert or related issues, please contact the corporate law attorneys at Schenck Price.
DISCLAIMER: This Alert is designed to keep you aware of recent developments in the law. It is not intended to be legal advice, which can only be given after the attorney understands the facts of a particular matter and the goals of the client.