Holding Board of Directors Meetings Remotely
State legislatures over the past several years have accounted for the fact that more and more corporations want and need to conduct Board of Directors meetings remotely. Boards need to be nimble and make decisions oftentimes without the benefit of time to gather in person. The days of in-person face to face Board meetings are by no means passé, but in times like these where the coronavirus has many shuttered in place, Boards can be forced to conduct business remotely. In fact, Board members must be especially diligent in communicating with each other during these extraordinary times to help ensure they are meeting the burden of satisfying their fiduciary duty of care.
Corporations should first review their corporate documents, including articles of incorporation and bylaws, to ensure they are complying with the requirements of conducting Board meetings. The requirements for proper notice, written consent (in lieu of meetings), and quorums should be spelled out clearly in the bylaws. Today, most state business corporation acts permit, under certain conditions, Boards of Directors to participate remotely, e.g., telephone, WebEx, Zoom, Skype, etc. For Michigan corporations, Section 521 of the Michigan Business Corporation Act states in part that, “Unless otherwise restricted by the articles of incorporation or bylaws, a member of the board or of a committee designated by the board may participate in a meeting by means of conference telephone or other means of remote communication through which all persons participating in the meeting can communicate with the other participants. Participation in a meeting pursuant to this subsection constitutes presence in person at the meeting.”
The Delaware legislation (DGCL Section 141(i)) has similar language, but requires that all directors participating must be able to “…hear each other….” Other states have implemented different requirements, some with a greater amount of detail. For instance, California expressly requires that the technology being used permit Board members to make proposals and interpose objections to proposed actions. In summary, it is important to understand what state legislation applies to your situation. Failure to meet the statutory requirements may mean your Board action is ultimately rendered unenforceable.
Meeting requirements for LLCs and corporations that have elected not to have Boards of Directors (for instance, in Michigan, a corporation that has made a Section 488 election permitting shareholders to make all decisions) are similar concerns and are governed by other state legislation. Be certain to understand what statute applies to your entity.