Last year, the California legislature enacted AB 663 (Chen) in order to provide California corporations with greater flexibility to hold virtual-only meetings of shareholders. Among other things, AB 663 amended Corporations Code Section 600(e) to provide:
A corporation shall not conduct a meeting of shareholders solely by electronic transmission by and to the corporation, electronic video screen communication, conference telephone, or other means of remote communication unless either: (A) all of the shareholders consent; or (B) the board determines it is necessary or appropriate because of an emergency, as defined in paragraph (5) of subdivision (i) of Section 207.
The problem with this change was the reference to an "emergency" as defined in Section 207(i)(5). Under that statute, an "emergency" only lasts for as long as a quorum of the corporation's board cannot be readily convened for action. To address this issue, Governor Newsom issued Executive Order N-23-21, which, among other things, provides:
This was of no help to California corporations wishing to hold virtual-only meetings of shareholders after March 31, 2022.To the extent that Corporations Code section 207(i)(5) requires that a quorum of a corporation's board of directors cannot be readily convened in order for there to exist an emergency as defined therein, that requirement is waived, from the date of this Order until March 31, 2022, as to any corporation conducting shareholder meetings using remote technology pursuant to Corporations Code section 600(e), as amended by Assembly Bill 663, in-reliance on the proclaimed State of Emergency related to the COVID-19 pandemic.
Last week, the California legislature stepped in and passed AB 769 (Grayson), Cal. Stats. 2022, ch. 12. This bill, which took effect immediately as an urgency measure, adds, among other things, an alternative to Section 600(e): "or (C) the meeting is conducted on or before June 30, 2022". Consequently, a virtual-only shareholder meeting may be held without either unanimous shareholder consent or a board determination of an emergency (as defined in Section 207(i)(5)), provided the meeting occurs on or before June 30, 2022. AB 769 made similar changes to Corporations Code Sections 5510, 7510, 9411, and 12460.
