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New Law Permits Washington Nonprofit Corporations
to Use Electronic Communication
By Michele
C. Osborne
[June 2004]
New Washington state legislation (ESB 6188) effective June
10, 2004, permits corporations formed under Washington’s
Nonprofit Corporation Act (the “Act”) to use electronic
communication for notices, consents, waivers, and other corporate
acts. The provisions parallel recent amendments to Washington’s
Business Corporation Act. These amendments permit nonprofit
organizations to make cost-effective use of efficient email
and Internet technology.
To take advantage of these new tools, many nonprofit organizations
will need to amend their bylaws.
Highlights of what the new law permits
- Directors and members may now receive notices of meetings
by electronic transmission, if they consent to do so.
- Members may now receive notices of meetings by fax.
- Where permitted by an organization’s bylaws, members
may conduct elections by mail or by electronic transmission.
The corporation must set forth in a record accompanying the
meeting notice the name of each candidate and the text of
each proposal to be voted upon, and designate an address,
location or system to which the member may electronically
transmit the ballot.
- Corporations may give notice of a meeting by posting notice
on an electronic bulletin board or website if the corporation
delivers a separate record of the posting, with details on
how to access the posting, to the members or directors who
are invited to attend the meeting.
- For membership organizations that permit voting by proxy,
members may submit electronic proxies.
- Directors and members may use electronic transmissions to
execute written consents, rather than a manual signature,
provided that the transmission provides sufficient information
to determine the sender’s identity.
- Where the Secretary of State’s rules permit, the amendments
change filing requirements to accommodate electronic filing
of records with the Secretary of State.
Because technology advances at a rapid pace, the Act does
not refer to the “Internet,” “websites,”
or “email.” Instead, the amendments define “electronic
transmission” as a communication not directly involving
the physical transfer of a record in a tangible medium, in a
communication that may be retained, retrieved, and reviewed
by the sender and the recipient thereof, and that may be directly
reproduced in a tangible medium by a sender and recipient.
What the new law does not permit
The new law does not change underlying substantive principles
regarding board meetings and the need for directors to discuss
any issues where there is not unanimous agreement. Specifically:
- Directors may not vote by proxy.
- An “email” vote by directors that is not unanimous
is not a valid action of the board.
A quorum of directors must be present to hear one another’s
views at a meeting or telephone conference; or directors may
act by unanimous written consent, including unanimous consents
by email.
Prior consent to receive electronic transmissions and other
protections
The amendments incorporate a variety of protections regarding
the use of electronic communication. Organizations, directors
and members are not required to use electronic communications.
Members and directors must consent to receive electronically
transmitted notices and must provide direction on the address
to which such transmission should be sent and the format in
which it must be transmitted. Without such prior consent, electronic
notice is not effective. A member or director may revoke his
or her consent at any time. The consent is presumed revoked
if there is a failure to transmit two consecutive notices and
the person responsible for transmitting the notice is aware
of the failure. If the corporation inadvertently does not treat
such a failure as a revocation, however, the corporate action
is not invalidated.
The definition of “electronic transmission” has
safeguards as well. A record is not electronically transmitted
within the meaning of the Act unless both the sender and the
recipient can retain, retrieve, review and reproduce the communication.
Welcome news
The amendments were drafted by the Nonprofit Corporations
Committee of the Washington State Bar Association Business Law
Section with input from the Attorney General’s Office
and the Secretary of State’s Office. The Act’s amendments
will pave the way for the Secretary of State’s Office
to develop more efficient on-line filing systems. In general,
the Act’s amendments are a welcome validation to practices
that were already prevalent among many of our state’s
45,000 nonprofit organizations.
For more information, please contact:
LaVerne
Woods, Seattle, (206) 757-8173, lavernewoods@dwt.com
This TEO Advisory Bulletin is a
publication of the Tax-Exempt Organizations Practice Group of
Davis Wright Tremaine LLP, under the supervision of LaVerne
Woods, Editor. Our purpose in publishing this Advisory is to
inform our clients and friends of recent developments in tax-exempt
and nonprofit organizations law. It is not intended, nor should
it be used, as a substitute for specific legal advice as legal
counsel may be given only in response to inquiries regarding
particular situations.
Copyright © 2004, Davis Wright
Tremaine LLP.
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