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Eric Morgan and Harlan Tufford Discus...

Eric Morgan and Harlan Tufford Discuss the Risks and Challenges of Virtual Shareholder Meetings

Partner Eric Morgan and Senior Governance Consultant Harlan Tufford were quoted in an article published by Canadian Lawyer Magazine on April 23, 2020 discussing the risks and challenges issuers face in conducting virtual shareholder meetings.

From the article:

“In-house counsel need to be aware of restrictions in their incorporating statutes and articles as well as the by-laws,” says Eric Morgan, partner and corporate governance expert at Hansell McLaughlin Advisory Group. “It’s a double question of legally can people hold virtual AGMs and are there limitations on technology?”

“What will be interesting to see as we go forward is what investors think about the AGMs that have been put together in a slapdash way in the face of the emergency,” says Harlan Tufford, senior governance consultant at Hansell McLaughlin. “I expect that next year, a few companies at least will want to keep going in this direction and there will probably be a dialogue between those companies and the institutions that hold them about what the institutions liked and didn’t like so as we iterate through this we will end up with a best practice check-list for a virtual AGM.”

Hansell McLaughlin has identified more than 14 platforms that companies are using for virtual meetings, ranging from a simple teleconference to more sophisticated platforms like Broadridge. In-house counsel should be aware that many statutes require that participants be able to communicate fully with one another so if technology does not support or enable sufficient interactions, there could be a challenge to whether the meeting was duly held, Morgan says. The majority of issuers are planning audio meetings to avoid complexities which could arise with video.

Hybrid meetings – consisting of a mix of in-person and online attendance – are another option for companies to consider. Where statues require a physical location, companies may set up a physical meeting while the majority of participants join online.

Some issuers in Ontario have turned to the courts to obtain an order which permits them to hold an annual meeting electronically where it is not permitted under the statute.

The government of Ontario has also issued a separate order easing certain restrictions.

“In our view issuers should be careful about relying on that order,” says Morgan. “It’s not clear that the government had the authority to issue the order so that’s a legal issue that in-house counsel should be aware of.”