According to the Complaint, Chembio Diagnostics, Inc. describes itself as “a leading provider of point-of-care diagnostic products for the detection and diagnosis of infectious diseases.”
Plaintiff brings this shareholder class action on behalf of himself and all other Chembio public stockholders against Defendants to remedy alleged misstatements of material information in the proxy statement disseminated by Chembio in advance of the Annual Meeting of Stockholders of Chembio Diagnostics, Inc. to be held on Tuesday, July 28, 2020 (the “Annual Meeting”).
On June 16, 2020, the Company filed a Schedule 14A Proxy Statement (the “Proxy”) with the SEC in which Defendants are soliciting stockholder approval of, inter alia, a proposal to change the Company’s state of incorporation from the State of Nevada to the State of Delaware (the “Reincorporation Proposal”). Under the Nevada Revised Statutes (“NRS”), a conversion such as the Reincorporation Proposal must be approved by a majority of the voting power of the stockholders.
Defendants, however, claim in the Proxy that approval of the Reincorporation Proposal requires only a majority of the votes entitled to be cast and present in person or represented by proxy at the Annual Meeting. This lesser standard excludes not only shares that are not present or represented by proxy, but also shares whose beneficial owners do not provide voting instructions. To this end, Defendants also erroneously disclose that these uninstructed shares, which will be recorded as broker non-votes, will have no effect on the outcome of the Reincorporation Proposal. The Complaint alleges that Chembio stockholders have been misinformed about not only the voting standard and effect of broker non-votes, but also the law that will apply to Chembio after the conversion.
Plaintiff therefore seeks to enjoin the vote on the Reincorporation Proposal scheduled to be held at the Annual Meeting until after Defendants correct the foregoing errors, each of which constitutes a discrete misrepresentation of material fact giving rise to a cognizable claim for violation of the federal security laws.