The provision in the Transportation, Environment and Economic Development Article VII bill amends the Business Corporation Law to say, "except as provided in the by-laws, shareholders [of a NYS incorporated business] may participate in a [shareholder] meeting by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other." The legislation further provides that this change would be effective immediately upon passage, meaning that it would apply to shareholder meetings held at any time after adoption of the Executive Budget on or about April 1.
Setting aside broader policy questions regarding remote shareholder participation, we have several practical implementation concerns regarding this proposed language.
First, by saying that a shareholder "may participate" in shareholder meetings via electronic means, it is unclear whether this is intended to allow corporations to make this option available, or to grant a "right to participate" to the shareholder. If the former, we recommend that any remote participation methodology be an option to the corporation, and the legislation should provide a mechanism for the corporation to opt in, not – as presented in this bill – only an opportunity to opt out. On the other hand, we would oppose any such legislation that imposed a remote participation requirement on New York incorporated business.
Second, we are concerned that, since this amendment would become effective immediately upon its passage (i.e., on or before April 1), its impact on the 2013 shareholder meeting season is unclear, and therefore a significant compliance problem. Many publicly traded corporations are on a calendar year fiscal year, and their proxy material goes out in January or February for shareholder meetings in April or May. If this proposal were to pass with the budget by April 1, there is no way for corporations to respond to its provision for these upcoming shareholder meetings.
Note that this same subsection makes a similar amendment to the Not-For-Profit Corporation Law, and we expect this language to raise similar concerns among non-profits.
In the Limited Liability Company Law and Partnership Law, this section of the Article VII bill provides that an LLC or partnership agreement may include provisions regarding voting, and may allow for voting in person, by proxy or by electronic means. While this more straightforward, permissive amendment may be workable for LLCs and partnerships, we are still in the process of reaching out to our members, and we are not taking a position on the LLC or partnership provisions at this time.
However, for our publicly trade New York incorporated members, the proposed amendments create significant compliance uncertainty. We recommend this proposal not be included in a final budget agreement, to allow for the Administration and legislature to fully evaluate shareholder participation options.