New Jersey corporations and businesses are required to hold yearly shareholder meetings. As per N.J.S.A. 14A:5-1, these yearly meetings can be held anywhere allowed by a corporation’s bylaws. If a corporation’s bylaws do not state where the shareholder meeting should be held, or the bylaws do not dictate how it should be decided where the shareholder meeting should be held, then that meeting shall be held at the corporation’s registered office.
But what if a shareholder cannot make it to the meeting? Must that shareholder either appoint a proxy or not participate at all? Thanks to the New Jersey Legislature and Governor Christie the answer is now no. New Jersey Assembly Bill A3050 and New Jersey State Senate Bill S2327 (substituted for A3050) amended NJSA 14A:5-1 Place of shareholders’ meetings, NJSA 14A:5-4 Notice of shareholder’ meetings, and NJSA 14A:11-1 Right of shareholder to dissent.
Changes to N.J.S.A. 14A:5-1. Place of shareholders’ meetings
As part of A3050 shareholders “may participate in a meeting of shareholders by any means of remote communication to the extent the board authorizes that participation.” (N.J.S.A. 14A:5-1(2)). If a shareholder wants to dial into the shareholder meeting and the bylaws allow for such an action, under the new law this is acceptable. Furthermore, for the sake of voting, a shareholder that calls in will be deemed present for the meeting and can vote provided that the board can verify the person participating remotely is a shareholder and allow for the person participating remotely the ability to participate in the meeting. (N.J.S.A. 14A:5-1(3)).
Changes to N.J.S.A. 14A:5-4. Notice of shareholder’ meetings
Not only did the legislature amend N.J.S.A. 14A:5-1, but it also amended N.J.S.A. 14A:5-4. Notice of shareholder’ meetings. The change provides protection to shareholders that are participating remotely in shareholder meetings. N.J.S.A. 14A:5-4 provides that a corporation must give notice 1) that a shareholder can participate remotely, and 2) what form of remote communication is permissible. (N.J.S.A. 14A:5-4(1)).
Changes to N.J.S.A. 14A:11-1. Right of shareholder to dissent
The final changes made when the New Jersey Legislature and Governor signed relating to N.J.S.A. 14A:11-1. Right of shareholder to dissent. Specifically these changes were made to N.J.S.A. 14A:11-1(5) which now allows for dissenter’s rights as the sole remedy for a dissatisfied shareholder with a corporation’s merger or acquisition.
What Does this Mean for New Jersey Shareholders?
Most of the changes made by Assembly Bill A3050 are beneficial to both corporations and its shareholders. Allowing shareholders the ability to participate by calling in remotely to shareholder meetings provides flexibility and could make it easier for corporations to have the quorum needed to hold its meetings and make decisions necessary for the corporation. These changes might also reduce the number of proxy votes at annual shareholder meetings of New Jersey businesses. However, in order to maximize the benefits of the new rules, corporations and business should speak with an attorney to make sure that that the bylaws of the corporation allow for remote participation or update their bylaws to include the ability to remotely participate in shareholder meetings.
While the other change under this legislation may seem like a blow to shareholders, as per the Statement included with this legislation the New Jersey State Assembly noted “[t]his exclusivity provision [N.J.S.A. 14A:11-1(5)] follows section 13.02 (d) [of] the American Bar Association’s Model Business Corporation Act and provisions enacted by several other states.” Only if a New Jersey business or New Jersey corporation acted “in fraudulent or material misrepresentation, or deceptive means, in obtaining approval of such transactions” will shareholders have alternative remedies. This protects a corporation’s Board of Directors by allowing for their business judgment, a theory long held to protect a Board of Director’s actions, to guide their decision making, and allowing shareholders to voice their displeasure with a corporation’s Board of Directors by dissenting when it comes time to vote on the Board of Directors actions.