Illinois Legislature Authorizes Remote Shareholder Meetings
In response to the Covid-19 pandemic and the attendant difficulty in holding in-person meetings, the Illinois legislature recently amended the Illinois Business Corporation Act (“BCA”) to allow corporations to hold remote shareholder meetings.
On May 30, 2021, both houses of the Illinois legislature passed Senate Bill (SB) 116, which, among other things, amends Section 7.05 of the BCA to authorize fully remote as well as hybrid shareholder meetings. A hybrid shareholder meeting is one in which some shareholders are present in person and some participate remotely. Governor Pritzker signed SB 116 on August 6, 2021. The amendments take effect on January 1, 2022.
As amended, Section 7.05 now provides that, unless prohibited by the corporation’s articles of incorporation or by-laws, a corporation may allow shareholders to participate in and act at any shareholder meeting by means of remote communication that allow all persons participating in the meeting to communicate with each other.
The amendments further provide protections to ensure that persons participating remotely are actually shareholders and that those shareholders have an opportunity to meaningfully participate in the meeting. Towards those ends, amended Section 7.05 requires that, in order for a shareholder participating in a meeting remotely to be deemed present, the corporation must have implemented reasonable measures to verify that each person participating remotely is actually a shareholder. The corporation must also have implemented reasonable measures to provide shareholders participating remotely with an opportunity to participate by communicating with other shareholders, reading or hearing the proceedings, and voting.
In order to ensure that all shareholders are aware of the opportunity to participate remotely, SB 116 amends BCA Section 7.15 to provide that, if shareholders are to be provided with the opportunity to participate remotely, the notice of the meeting must state the means of remote communication through which shareholders can be deemed present and vote.
In order to further the goal of ensuring that shareholders who participate remotely have an opportunity to communicate with other shareholders, SB 116 amends BCA Section 7.30 to provide that, if the corporation elects to hold a meeting remotely, the list of shareholders entitled to vote at the meeting must be available to the shareholders through a reasonably accessible electronic network throughout the meeting.
Many corporations have already been holding remote shareholder meetings due to the challenges to holding in-person meetings brought about by the pandemic. The Illinois BCA now provides statutory authority for remote shareholder meetings provided that reasonable measures designed to protect the integrity of the meeting are implemented. As in many other areas of business and life, as remote communication has increased efficiency and accessibility, many corporations will likely continue to hold remote shareholder meetings even after the pandemic has subsided.
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