Many not-for-profits (NFPs) and charities are looking to maximise member participation and minimise the time and cost involved in holding a members’ meeting. This has resulted in the use of technology— to run effective and efficient members’ meetings — becoming increasingly popular for NFPs and charities.
This article will discuss the legal and practical requirements for a company holding an electronic meeting.
What are the legal requirements?
Section 249S of the Corporations Act 2001 (Cth) (Act) provides that a company may hold a meeting of its members at two or more venues using any technology that gives the members, as a whole, a reasonable opportunity to participate. A company’s constitution does not need to contemplate electronic meetings for this provision to apply.
Practically, section 249S means a Company would still need to hold a physical meeting, but members could access this meeting using technology, such as Skype. Any form of technology could be used by the Company to convene an electronic meeting, provided that all members have a reasonable opportunity to participate in the meeting. A reasonable opportunity to participate means that each member is able to communicate with the chair and be heard by other members attending the meeting, including those at other venues.
What are some of the practical requirements?
The Explanatory Memorandum to the company Law Review Bill 1997 (Explanatory Memorandum) states that, if a company convenes an electronic meeting, it will need to take account of the following factors:
- the ability of the chairperson to conduct and control the proceedings;
- the number of persons attending the meeting;
- the nature of the business of the meeting, such as whether it involves a visual presentation;
- the voting processes available (for example, it will be necessary to have procedures in place to count members’ votes from all venues); and
- whether persons at the meeting can communicate with the chairman.
How does a company meet its quorum for an electronic meeting?
A quorum is the minimum number of persons required to be present at a meeting in order for the business of its meeting to be validly carried out. Where a company’s constitution does not set out quorum requirements, and the replaceable rules apply, two members present will constitute a quorum, and the members must be present at all times during the meeting. However, your constitution may provide for a different quorum.
The Explanatory Memorandum states that, where a meeting is being held at more than one venue using technology, persons present at each of those venues may be counted towards the quorum. This means that the members who participate in the meeting using technology will count towards the quorum. Proxies will also count towards the quorum for the meeting, provided that your constitution allows for proxies. Under the Act, if your organisation is a public company, but not a registered charity, a mandatory rule applies to your organisation allowing members to appoint a proxy.
How does voting work at an electronic meeting?
Counting members’ votes at an electronic meeting is a common problem. The Act provides that if the member is not physically present, then the member must complete a proxy form for their vote to be counted. So when holding a virtual meeting, we recommend that members who would like to vote on resolutions do so by proxy in accordance with the company’s constitution. This will also ensure that your NFP or charity does not encounter any technical difficulties when counting member votes via Skype or any other form of technology.
Alternatively, a NFP or charity could rely on direct voting at an electronic meeting. Direct voting is a method used by organisations to allow members to vote online prior to the meeting. To use direct voting at an electronic meeting, your constitution must contain a clause which explains how direct voting will occur at meetings.
What happens if the technology fails?
If the technology fails part way through the meeting, the meeting or that part of the meeting affected by the failure will be valid, unless:
- a member does not have a reasonable opportunity to participate (see discussion above), or
- a court declares the meeting invalid on the grounds that a substantial injustice has been, or may be, caused which cannot be remedied by another court order.
In summary, if your NFP or charity is governed by the Corporations Act 2001(Cth) then you can convene an electronic meeting provided that the members have a reasonable opportunity to participate. Before convening an electronic meeting, it is important to consider a number of practical considerations, such as the number of members, quorum requirements, and voting requirements.