Many nonprofits are now unable to hold board or membership meetings according to normal procedures, because of “shelter in place” orders or social distancing recommendations issued by state and local authorities. This advisory provides guidance to nonprofits organized as corporations about how they may manage their affairs under current conditions, while also complying with existing corporate laws in the states where they are incorporated and where they operate.
Most states allow nonprofit corporations to hold both board and membership meetings electronically, through any medium where all of the individuals participating may hear each other and participate in all matters before the board or membership, unless the corporation’s articles or bylaws provide otherwise. Acceptable media include telephone conference calls, videoconferencing systems such as Zoom and WebEx, and assistive technologies meant to facilitate participation by people with hearing loss. Meetings may not be held through a time-delayed medium, such as email. Most states also do not allow meetings to be held through live technologies that do not allow for simultaneous audio, like instant messaging or chat rooms.
As with in-person meetings, a quorum of the membership or board must be present at a telephone or videoconference meeting for action taken during the meeting to be legally valid. Most organizations’ bylaws include appropriate definitions of a quorum for meetings of the board and, if applicable, the membership. If a quorum is present and requirements of the articles or bylaws are otherwise followed, a board or membership meeting held by telephone or videoconference is a fully valid meeting, with the same legal effect as a meeting held in person.
Providing Appropriate Notice of Electronic Meetings
In order for action taken during a board or membership meeting to be legally valid, proper notice of the meeting should be provided to every person entitled to vote at the meeting. While notice requirements vary between states, they do not change simply because a meeting will be held by telephone or videoconference. Organizations moving meetings to a telephone or videoconference format should follow their normal notice procedures, whether those procedures involve printed notice, electronic notice, or both. Some states require directors or members to give specific written consent to electronic notices in advance. If the officers of an organization have any doubt about the correct process for notifying directors or members of meetings, then the organization should consult qualified legal counsel.
Voting and Meeting Procedures
Voting in electronic meetings should be conducted in a manner similar to in-person meetings. Votes of either the board or members may be taken live during a meeting. The person chairing the meeting may call for voice votes on matters expected to be noncontroversial. For controversial matters, the chair may take votes by roll call or other procedures established to tally votes individually. As with in-person meetings of the board, board members may not vote through proxies. For membership meetings, if organizations have provisions in their bylaws or articles generally allowing for voting by written ballot, the same procedures will remain available when membership meetings are being held electronically. In most states, a ballot transmitted by email to an address designated by the corporation will be a valid ballot.
In our experience, it is even more important than usual in electronic meetings for the person chairing the meeting actively to include all participants in the meeting, and to ensure that participants follow rules of order and give others time and space to speak. Presiding officers may want to think about whether historical meeting practices at their organizations have facilitated an inclusive discussion, and make special efforts to ensure that all perspectives are reflected in the discussion during electronic meetings. The electronic meeting format can make it more difficult for some participants to interact, and easier for those participants to “lurk” silently without giving the organization the benefit of their perspectives.
Minutes of telephone or videoconference meetings should be taken and retained in the same manner as minutes of regular meetings. Minutes should reflect all actions taken by the board or membership during a meeting, as well as general topics of discussion during the meeting; it is not necessary for minutes to reflect every specific facet of discussion. Most states require nonprofit corporations to retain minutes of board meetings permanently, and minutes of telephone or videoconference meetings are also subject to this requirement. Some electronic meeting technologies allow for simple recording of meetings. We discourage recording board meetings. If meetings are recorded, the recordings should be kept for no longer than the length of time required to prepare minutes, after which any recordings should be destroyed.
Action Without a Meeting
The board of directors may also take action without a meeting through unanimous written consent. In almost every state, consent to an action without a meeting must be truly unanimous, meaning that every single director in office affirmatively has approved the action. “Email votes” are not valid unless consent is unanimous. (Oregon, on the other hand, has recently adopted a provision allowing for non-unanimous email votes if all of the directors have notice of the vote and at least 48 hours to respond.) An email approving a proposed board action is generally sufficient to demonstrate a board member’s consent, unless the organization’s bylaws or articles provide otherwise. All such email votes should be retained together with the adopted resolution in the organization’s minute book. Actions of the membership may be taken in a similar manner, for those organizations that have a small enough membership to make obtaining unanimous consent practical.
The facts, laws, and regulations regarding COVID-19 are developing rapidly. Since the date of publication, there may be new or additional information not referenced in this advisory. Please consult with your legal counsel for guidance.
DWT will continue to provide up-to-date insights and virtual events regarding COVID-19 concerns. Our most recent insights, as well as information about recorded and upcoming virtual events, are available at www.dwt.com/COVID-19.