Online Board Meetings – What to Know When Social-Distancing Requires Your Meetings to Go Virtual

Business Insights

Online Board Meetings – What to Know When Social-Distancing Requires Your Meetings to Go Virtual

Apr 16, 2020 | Business Insights

Many corporations and LLCs that have traditionally held in-person shareholder and board meetings are looking for alternatives during the social distancing required for COVID-19. Fortunately, corporate and LLC governance statutes in most states, including Delaware, Virginia, Maryland and DC allow for meetings to be held remotely, if some special considerations are followed.

Corporations are required to hold meetings of their shareholders at least annually. The applicable corporate statute and the corporate bylaws will likely provide additional information on when the meeting should be scheduled (and there may be a set date), and how to provide the appropriate notice for such meeting. Typically, corporations will have annual shareholder meetings, and may also have “special” meetings of the shareholders with separate notice requirements. Either way, these meetings can be held remotely over the telephone or through an online meeting portal like Zoom.

Likewise, corporations can hold regular or special meetings of the board of directors remotely. A corporation may already have a standard procedure if a director is unable to join an in-person meeting, so holding board meetings remotely is not too unusual.

For LLCs, the state statutes will allow for remote meetings, but it is most important to review your Operating Agreement to see any requirements for a virtual meeting. It is possible the Operating Agreement is explicit that remote meetings are not allowed or that there is a very specific format for such a meeting. In this case, in order to get work completed, the Members may consider amending their Operating Agreement to allow for such meetings.

When a meeting is held remotely, or a participant is remote, that participant (a shareholder, director, member or manager) needs to be able to hear and be heard. Put more plainly, the meeting host cannot mute all the lines all the time. The shareholders or members need to be able to ask questions of management, and directors or managers need to discuss the topics at hand. For the board to make a decision, the duty of care requires a process of collaboration in the meeting. If one director cannot be heard that process is interrupted.

Note also that a telephonic or Zoom meeting is a meeting of the respective shareholders/board/members/managers. Minutes should be prepared of the meeting, with any resolutions passed noted prominently. Any meeting would need to have the proper notice provided and have a quorum present. This is not a discussion that leads to a written consent – although it could be if the body makes that decision. The distinction is important because at a properly noticed meeting where a quorum is present, the body typically acts by majority (or whatever requirements the organizational documents would provide), but unanimous consent is likely required for a written consent. When it may be difficult to locate all the members of a large board, making sure the numbers work is important.

Finally, remote meetings typically don’t have a secret, or blind ballot. However, if the technology works to provide comfort on voting, that can be continued. More likely than not, the Board or constituent body would vote orally with the secretary counting. State statutes allow for “electronic transmission” of voting, so a verbal Yes or No would work. In case the body was acting through unanimous consent, pdf signatures, email responses or a voting box on email all constitute electronic transmission. My personal preference is to only use these methods when you have no other option, and to follow up with written signatures for the minute book.

With a little bit of planning, corporate and LLC meetings can easily be held remotely. With corporations, make sure to review the relevant corporate statute and bylaws, and with LLCs, review the relevant LLC statute and Operating Agreement for any specific details.

This article is for informational purposes only and does not contain or convey legal advice. Consult a lawyer. Any views or opinions expressed herein are those of the authors, and are not necessarily the views of any client.

LinkedIn

Follow us on LinkedIn to view the latest blogs from our team.

About – Business Insights

Our business blog focuses on issues affecting Virginia, D.C. and Maryland business owners as well as those in other jurisdictions throughout the country. We provide timely insight and commentary on federal and state rules and how they affect you. If you are interested in having us cover a specific topic, please let us know.

About – Employment Law

As employment law constantly changes, the attorneys at Bean, Kinney & Korman stay up to date on the law as it develops. Our blog topics focus on those changes and what you need to know about them, ranging from severance agreements and the FLSA to social media in the workplace and recent court decisions. If you are interested in having us cover a specific topic, please let us know.

About- Real Estate

This blog focuses on real estate, land use and construction-related topics affecting Virginia and the Washington, D.C. metro area. With topics ranging from contract drafting and negotiation to local and regional land use project updates, the attorneys at Bean, Kinney & Korman provide timely insight and commentary on the issues affecting owners, builders, developers, contractors, subcontractors and other players in the industry. If you are interested in having us cover a specific topic, please let us know.

Financial and Tax Implications in a Business Divorce

In the complex landscape of business divorces, understanding the financial and tax implications is crucial. These considerations can significantly impact both the immediate settlement and the long-term financial health of the involved parties. This blog, the fourth in...

Some Things a Non-profit Should Never Do

Lawyers are quite good at putting the fear of God into their clients and friends. This tendency has even been reduced to the catchy term of laying out the “Parade of the Horribles.” In reality, for non-profits, there are some things you absolutely, positively should...

Negotiating the Exit in a Business Divorce

Negotiating an exit in a business divorce can be one of the most critical phases of the entire process. Somewhat like a conventional divorce, business divorces involve complex financial, operational, and personal considerations that can significantly impact the future...