In today’s age, the vast majority of people and businesses communicate through email versus old fashion mail. However, when it comes to official shareholder communications, the California Corporations Code has specific requirements for the right to transmit information electronically.
Under California Corporations Code, Section 20, the Code permits the use of electronic transmissions for communications under or pursuant to the Corporations Code only if:
- The recipient has provided an unrevoked consent to use those means of transmission for such communications; and
- The transmission creates a record that is capable of retention, retrieval, and review, and that may thereafter be rendered into clearly legible tangible form.
Additionally, if the transmission is to a shareholder who is a natural person, the consent to the transmission must be preceded by or include “a clear written statement to the recipient as to (a) any right of the recipient to have the record provided or made available on paper or in nonelectronic form, (b) whether the consent applies only to that transmission, to specified categories of communications, or to all communications from the corporation, and (c) the procedures the recipient must use to withdraw consent.”
Several sections of the Corporations Code clearly allow communications (including notices of shareholder meetings, notices disclosing actions taken by written consent of shareholders, and the delivery of annual financial reports) to be made by electronic transmission, but only if they are compliant with Section 20.
While remote, a non-compliant transmission may give disgruntled shareholders a basis for a valid objection, which may invalidate the notice and the subsequent meeting and at a minimum be disruptive to business.
Given the stringent requirements of Section 20, sending notices through regular mail may be the most reliable and efficient way to comply with the law. If you have questions regarding any of the shareholder meetings or need assistance with any corporate governance issue, the attorneys at Navigato & Battin are here to help.