June 15, 2020
Authored by: Tyler Mark
Among the many previously hypothetical concerns for companies that became actualized, or threatened to become actualized, during the height of the COVID-19 pandemic was the prospect of multiple members of the board or senior management becoming incapacitated due to serious illness.
With an average age of S&P 500 directors hovering around 63 according to recent surveys, many public company directors fall within the higher risk age ranges for more severe COVID-19 complications. This heightens the concern that the board and/or its committees may not be able to comply with, among other things, the quorum requirements in the company’s bylaws or pursue action by unanimous written consent due to sustained periods where multiple directors are incapacitated.
Emergency Bylaws as Potential Remedy:
One potential way to address this concern is through the adoption of so-called “emergency bylaw” provisions. State law will, of course, govern whether and what types of emergency bylaw provisions may be available. Based on a recent review of S&P 500 company filings, approximately 22% of such companies have adopted emergency bylaw provisions in some form, and approximately 1% have adopted specific emergency bylaw provisions in the last 120 days, presumably in the context of the COVID-19 pandemic.
Delaware law, specifically Section 110 of the Delaware General Corporation Law (the “DGCL”), allows for such emergency-related bylaw provisions. Section 110(a) of the DGCL has a distinct Cold War flavor, appropriate to the time it was adopted. It provides that the board may adopt emergency bylaws, subject to repeal or change by