Staying safe during the Coronavirus pandemic is, and should be, everyone’s primary concern. As more and more physical facilities (offices, restaurants, meeting facilities) are being closed to enforce safe social distancing, and telecommuting is becoming more the norm, it is important to realize that this does not have to disrupt the ordinary corporate governance of your business. The laws of the state where you formed your entity will govern these issues.
Pennsylvania entities may, unless their bylaws or operating agreements require otherwise, hold virtual board and shareholder meetings. The Pennsylvania Business Corporation Law allows shareholder meetings to “be held by means of the Internet or other electronic communications technology” as long as “the shareholders have the opportunity to read or hear the proceedings substantially concurrently with their occurrence, vote on matters submitted to the shareholders, pose questions to the directors, make appropriate motions and comment on the business of the meeting” (15 Pa.C.S.A. 1704(a)). Shareholder participation and voting through such means “shall constitute the presence of…the shareholder” for such meeting (15 Pa.C.S.A. 1708(b)).
Directors may participate in any board meeting via conference call or other electronic technology, as long as everyone can hear each other. Director participation and voting through such means “shall constitute presence in person at the meeting” (15 Pa.C.S.A. 1708(a)).
Unless the articles or bylaws restrict it, shareholders may act by unanimous written consent in lieu of a meeting; further, if the bylaws permit it, shareholders may act by the partial written consent of shareholders having at least the minimum number of votes necessary to authorize an action (15 Pa.C.S.A. 1766). Unless the articles or bylaws restrict it, the board may also act by unanimous written consent in lieu of a meeting (15 Pa.C.S.A. 1727).
Delaware entities are generally permitted to hold virtual shareholder meetings, as long as certain conditions are met. If the certificate of incorporation or bylaws do not designate or provide for the place or manner of shareholder meetings, the board of directors may designate and provide for the manner of such meetings, including holding them solely through remote communication, as long as the shareholders are provided means to participate and vote remotely (8 Del.C. 211).
Unless restricted by the certificate of incorporation or bylaws, directors may participate in any board meeting “by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other.” Such participation “shall constitute presence in person at the meeting” (8 Del.C. 141(i)).
Unless the certificate of incorporation restricts it, shareholders may act by partial written consent in lieu of a meeting, as long as the consenting shareholders have the minimum number of votes necessary to authorize an action (8 Del.C. 228). Unless the certificate of incorporation or bylaws restrict it, the board may also act by unanimous written consent in lieu of a meeting (8 Del.C. 141).
With regard to California entities, shareholders are permitted to participate in meetings electronically as long as the bylaws do not prohibit such action and the entity has obtained such shareholders’ permission in advance (West’s Ann.Cal.Corp.Code T.1, D.1, Refs & Annos). Such shareholders shall be permitted to vote, and shall be deemed present in person, at such meeting (West’s Ann.Cal.Corp. Code sec. 600).
Directors may participate in any board meeting “through use of conference telephone, electronic video screen communication, or electronic transmission,” and as long as everyone can hear each other, such participation shall constitute “presence in person at that meeting” (West’s Ann.Cal.Corp. Code sec. 307).
Unless otherwise provided in the articles, shareholders may act by partial written consent, provided the consenting shareholders have at least the minimum number of votes that would be necessary to authorize or take that action at a meeting. (West’s Ann.Cal.Corp. Code sec. 603(a)). If it is impractical for the directors to meet, but board authorization is required to take some action, the directors may act by unanimous written consent without holding a meeting (West’s Ann.Cal.Corp. Code sec. 307(b)).
In response to the pandemic, some states that currently do not allow for virtual shareholder meetings are contemplating amending their stance. See, for example, Governor Cuomo’s March 20, 2020 executive order temporarily suspending specific provisions of the New York Business Corporation Law to the extent they require in-person shareholder meetings.