Entirely Virtual Shareholder & Member Meetings Now Permitted in New York
On November 8, 2021, Governor Hochul signed legislation to permanently amend the New York Business Corporation Law and New York Not-for-Profit Corporation Law. Under the new law, for profit and not-for-profit corporations are permitted to hold their shareholder or member meetings solely through virtual means, unless such virtual meetings are prohibited by a corporation’s articles of organization or bylaws.
At the outset of the pandemic in April 2020, Governor Cuomo issued Executive Order 202.8 and Executive Order 202.18, effective during the state disaster emergency due to COVID-19, which suspended the requirements of the New York Business Corporation Law and Not-For Profit Corporation Law that required these meetings to occur in person. Prior to these Executive Orders, only for profit corporations in New York were allowed to incorporate a virtual component to their shareholder meetings to allow those not physically present the chance to participate. However, Section 602(b) of the Business Corporation Law still required shareholder meetings to be held in person.
As the pandemic continued, the need for virtual shareholder and member meetings remained evident, and in April 2021, A01025 was enacted. This law temporarily amended the Business Corporation Law and Not-for-Profit Corporation Law to allow the board of directors to hold their shareholder or member meetings solely through virtual means, and to choose the platform for the meeting. It also required the board of directors to implement measures that will verify that each participant is a shareholder/member or a shareholder/member’s proxy, allow shareholders/members a reasonable opportunity to participate in the meeting, and enable to recording of any votes or actions taken during the meeting. Though the provisions of this law were set to expire on December 31, 2021, Governor Hochul signed A01237 to permanently allow these corporations the option to hold their shareholder or member meetings through entirely virtual means, if not prohibited by a corporation’s articles of organization or bylaws.
Health Care Providers and Other Not-for-Profit Organizations Be Aware
The option for corporations – and specifically, not-for-profit corporations – to host entirely virtual shareholder or member meetings directly impacts New York’s health care industry. In New York, many of our health care organizations, including hospitals, nursing homes, and health maintenance organizations are not-for-profit corporations. As the New Year approaches, officers and boards of directors are beginning to prepare for their annual meetings. With A01237 in effect, these corporations may be considering a virtual shareholder or member meeting in 2022. That said, it is important for these corporations to annually review their bylaws to ensure that the bylaws reflect recent changes in the law, such as A01237, as well as reflect the current practices and desires of the corporations. These corporations should consider amending their bylaws to account for virtual shareholder or member meetings, which could add some much needed flexibility for busy shareholders and members.
Authors
Cody Keetch
Associate
