Covid-19 And Holding Board Meetings Remotely
Directors of companies have a continuing duty to carry out their management responsibilities no matter what is happening in the wider world. The frequency by which Board meetings are held to enable directors to discharge these duties will be dictated by circumstances, and the current pandemic may require meetings to be held more often than usual.
As the current lockdown is preventing Board meetings being held in person, many companies are having to use alternative means of communication to hold Board meetings, whether by Microsoft Teams, Zoom, Skype or even good ‘old-fashioned’ telephone. However, we are being asked by clients whether these alternatives are allowed and whether decisions made at such meetings are valid and binding.
The first port of call is to check the company’s Articles of Association. The Articles are a document which, along with the Memorandum of Association (in cases where the Memorandum exists), form the company's constitution. Amongst other things, the Articles contain the rules and procedures by which the directors shall meet as a Board. The Articles should be reviewed to ensure that meetings can be held by alternative means rather than in person. In modern Articles, it is usual to find provisions allowing Board meetings to be held by electronic means. Companies incorporated before 2006, however, do not typically have such a provisions in their Articles.
Where the Articles are silent on whether Board meetings can be held otherwise than in person, there is conflicting legal opinion as to whether such meetings can be held remotely. However, where there is no explicit prohibition in the Articles preventing Board meetings being held by electronic means, it is likely that a Court will take a lenient approach provided that all participating directors are able to hear and communicate ‘live’ in the discussions and decisions made at the meeting.
The commonly held view now is that where directors unanimously decide to hold meetings other than in person then, unless the Articles contain a prohibition preventing such meetings or are silent on the issue but the directors are unable to actively participate in the meeting, Board meetings can be held remotely by electronic means and decisions made at such meetings will be valid. It is, however, important to bear in mind that the rules and procedures for meetings which are set out in the Articles will apply to remote Board meetings. The directors will therefore need to ensure that a quorum is present at any remote Board meeting, and ensure compliance with rules relating to such things as notices, voting, conflicts of interest and when meetings can be called and held.
As ever, good corporate governance practice should include ensuring all directors are given due notice of a meeting which is to held remotely with an agenda setting out a description of the matters to be discussed and circulating any relevant documents. Each director should be asked to confirm that they consent to the meeting being held by electronic means (Zoom, telephone, etc) and the director chairing the meeting should ensure that everyone present can hear and participate throughout the meeting. A minute of the meeting should be made to record the proceedings and decisions made at the meeting, and a copy of that minute should be distributed to all directors (whether they attended the meeting or not) afterwards.
As a further alternative to holding a Board meeting remotely the Articles may permit decisions of the directors to be made in writing. If the Articles do allow decisions to be made in this way then, so long as the directors indicate their consent to a matter in writing unanimously, it is valid and binding.
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