Fourth in a series of updates on how the pandemic is implicating basic elements of governance.
General counsel should be alert to emergency actions that states are taking to provide temporary relief for certain board procedural functions, and corporate filings and reports that are otherwise required by state business and/or not-for-profit corporation law. These emergency actions have the potential to significantly ease the manner by which key governance actions and ministerial corporate functions are adopted, despite the practical burdens imposed by COVID-19.
A leading example for not-for-profit corporations is the emergency legislation adopted on April 3 by the governor of Massachusetts which (among several other relevant governance measures) limits notice requirements to “only those directors it is practicable to reach” and “in any practicable manner.”
Another example is the April 9 announcement by the Charities Bureau of the New York State Attorney General that it has granted a time extension for charities to file their annual financial reports as a means of assisting them during this COVID-19 crisis.
Still another example for business corporations is the April 6 action by the governor of Delaware to provide the ability for Delaware public corporations to adjourn previously noticed annual stockholder meetings from physical locations and to proceed with the meeting on a virtual basis. This is in recognition of the obvious COVID-19 impracticalities associated with convening in-person meetings. The governor’s order includes important details on how these virtual meetings may proceed and how stockholders are notified.
It is interesting to note that while some states are including nonprofit corporations in emergency orders such as the ones referenced, many states have focused only on business corporations. Notably, much of this legislation is already on its second or third cycle of amendments since original adoption. So, while not-for-profit corporations may not currently share the same level of relief extended to for-profit corporations, it is possible that such relief is forthcoming.
Individually and collectively, these actions reflect an awareness on behalf of state officials of the unique administrative burdens imposed on corporations and their boards by the COVID-19 crisis, and a good faith effort to mitigate those burdens. Nevertheless, corporations are well advised to consult closely with their general counsel on the extent of such emergency relief available in their state of incorporation and the terms, conditions and limitations of such relief.
Click here to access the first article in this series, Corporate Authority for Extraordinary Delivery of Care Decisions.
Click here to access the second article in the series, The Executive Committee in Times of Crisis.
Click here to access the third article in the series, Virtual Board Meetings in Times of Crisis.
Click here to access the fifth article in the series, Assuring Appropriate Information Flow to the Risk and Compliance Committees.
Click here to access the sixth article in the series, Revisiting Executive and Board Succession Planning in Response to the Pandemic.
Click here to access the seventh article in the series, Board Financial Oversight Responsibilities During Pandemic-Driven Distress.