The Government's social distancing measures put in place in response to the coronavirus outbreak have meant that it is not currently possible to hold board meetings in person. Instead, directors will need to hold their board meetings electronically, by telephone conference call or using a virtual meeting application, such as Skype, Zoom or Google Hangouts. This article highlights some of the legal and practical issues for virtual board meetings.
Commonly, a company's articles of association make explicit provision for board meetings to be held electronically (as in the model articles for private companies limited by shares at article 10 and the model articles for public companies at article 9). However, not all articles of association include such provisions, particularly older articles, such as those based on Table A.
Whether a board can hold its meeting electronically without explicit authority to do so in its articles of association has been a matter of some debate and there is still no English authority specifically on the matter. However, it is now increasingly recognised that directors' meetings may be conducted electronically, if the company's articles do not prohibit it and certain precautionary steps are taken. What is of utmost importance is that all directors can participate in the meeting and can communicate with one another.
On 28 March 2020, the Chartered Governance Institute published guidance on good practice for virtual board and committee meetings which summarises some of the practical issues for virtual board and committee meetings.
The guidance includes factors to consider before, during and after the meeting. It also provides some useful tips such as: (1) issuing clear joining instructions for the meeting; (2) taking account of the different time zones of participants in the meeting; (3) offering freephone dial in numbers; (4) using audio-only calls for large meetings; and (5) having IT support on standby.
In addition, the guidance sets out possible alternatives to meetings (whether physical or virtual), including:
- Written resolutions – A written resolution of the board can be used if the company's articles of association permit it (and both the model articles and Table A allow decisions to be made this way). The articles of association will also prescribe whether a decision taken by written resolution must be taken unanimously or by a particular majority of the board. A written resolution is likely to be appropriate where the matter is relatively straightforward and directors are likely to agree to the proposed resolution. The exact wording of the resolution can be circulated by email and the directors can confirm their agreement by email or by signing the written resolution and returning it.
- Email “meetings” – Different from a written resolution, an email meeting involves a proposal being circulated by email and directors communicating their opinions on the proposal by email, with an indication as to whether or not they support it. This alternative is likely to be used where there is need for some discussion of the proposal so a written resolution cannot be proposed immediately. Holding an email meeting is not a perfect solution as the directors cannot communicate to everyone else at the same time and there may be delays between the messages which could make the ultimate decision uncertain. To resolve this uncertainty, one option would be to debate the matter in an email meeting and then to circulate a written resolution of the final decision for formal agreement, as described above.
Whichever alternative is used, the decision should be recorded in the company's minute book, together with any signed written resolutions and/or relevant email correspondence.
The Chartered Governance Institute's guidance also includes a series of appendices setting out notes for the chairperson of the meeting, the company secretary and any presenters, suggested ground rules for participants in virtual meetings and a useful comparison of some of the key features of five virtual meeting room providers, including Skype, Zoom and Google Hangouts.
The coronavirus crisis has prompted us all to re-think how we communicate and keep in touch with one another. It has also encouraged people to use technologies which they might not otherwise have considered using before. While the coronavirus has forced boards to hold their board meetings virtually, it is likely that they will give serious thought to continuing to do so once life returns to normal.
How we can help
If you are unsure about how to hold your board meetings virtually, please get in touch with a member of our Corporate Team.
We can advise on the relevant provisions in your company's articles relating to, for example, virtual meetings and written resolutions.
If your company's articles of association do not specifically provide for electronic meetings, we would recommend they are amended to make such provision and to deal with the conduct of virtual meetings, such as matters relating to quorum requirements and the conduct of voting. We can also assist you with any such amendments.
These notes have been prepared for the purpose of an article only. They should not be regarded as a substitute for taking legal advice.