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Corporate Alert: Alternatives to In-Person Meetings in the Wake of COVID-19

By Hanne-Lore M. Gambrell & Elizabeth Schultz-Horbus on March 30, 2020

As a result of the recommended social distancing that many state and local governments have asked businesses and public entities to observe, many organizations have taken advantage of the opportunity to hold meetings by teleconferences or to host virtual meetings in lieu of in-person meetings, using various types of commercially-available software.

In the past, many organizations have only used alternatives to in-person meetings as a supplement to in-person meetings. However, recent trends show that the number of companies holding virtual-only meetings is growing rapidly.

In this article, we will address various trending topics surrounding alternatives to in-person meetings for the public and the private sectors, including pros and cons of hosting virtual meetings, laws affecting these meetings for public entities, limited liability companies and corporations, actions by written consent, as well as best practices for holding these meetings in light of COVID-19.

Ohio Law Affecting Virtual Meetings for Public Entities

Ohio’s Open Meetings Act (R.C. § 122.21) requires that members of public bodies be physically present to deliberate on matters before them. This task has become difficult to perform under the various orders from the Ohio Department of Health limiting the number of people allowed to gather together in one place. The Ohio General Assembly addressed this concern with emergency legislation that allows public bodies that are otherwise subject to the Open Meetings Act (OMA) to hold virtual meetings during this pandemic.

As of March 9, 2020 (and until the emergency declaration has been lifted or December 1), members of a public body may hold and attend meetings and may conduct and attend hearings via teleconference, video conference, or any other similar electronic technology. If they are going to do so, then the temporary law requires them to let the public know in advance of the technology that is going to be used. The technology chosen must allow the public to observe and hear the discussions and deliberations of all the members of the public body, whether the member is participating in person or electronically. The law specifically identifies the generally-available technology that a public body could use to comply: live-streaming by means of the internet, local radio, television, cable, or public access channels, call-in information for a teleconference, or by means of any other similar electronic technology.

In light of this new legislation, it is anticipated that many public meetings will be available for viewing by the public online. However, it will be interesting to see how public comments and questions will be taken with various types of technology.

Pros and Cons of Hosting a Virtual Meeting for the Private Sector

Listed below is information pertaining to alternatives to in-person meetings relevant to limited liability companies and corporations.

Pros

         

Cons

  • Virtual meetings are easy to coordinate.  By using a virtual meeting website, participants are provided log-in information to access the meeting from the comfort of their office or home. 
  • Virtual meetings tend to increase the number of participants in attendance as travel is unnecessary, which is often otherwise difficult to squeeze into a person’s already busy schedule.
  • Virtual meetings can save a company money by eliminating expenses such as the cost of renting physical space for a meeting site, costs to print materials, provide meals, and to secure hotel rooms.
  • Virtual meetings allow companies to take different approaches to handling shareholder questions.  Some companies request that shareholders provide questions in advance of the meeting in order to preview and prioritize important questions and prepare more comprehensive responses.
  • Sometimes participants who would not otherwise speak up in front of a large group of investors feel freer to express their opinions and ask questions in a virtual setting.
  • A company may maintain an audio or webcast copy of the meeting, creating a record for later review, and improving accountability for the statements made by a company’s owners, board and management.
 
  • Shareholders and members may be resistant to changes in format of annual meetings and prefer an atmosphere in which participants can discuss issues and ask questions face-to-face.
  • A concern exists that if companies require questions be provided in advance, management could manipulate the questions to refrain from giving any negative responses or refuse to answer certain difficult questions altogether.
  • Technical difficulties may impair a person’s ability to hear or see others participating in the meeting.























 
Laws Affecting Meeting Locations

Corporations:

Shareholder meeting format and locations are mostly dictated by state law. The corporate laws of at least 30 states, including Ohio, permit companies to hold virtual meetings, whereas 42 states allow hybrid meetings (meetings with both in-person and online attendance options).

For example, Section 1701.40 of the Ohio General Corporate Law allows a company’s board of directors to determine whether to hold a virtual meeting. R.C. §1701.40(C) mandates that if a company holds a virtual meeting it must:
 
  1. Ensure that a shareholder or proxyholder has an opportunity to participate in the meeting and to vote on matters submitted to the shareholders;
  2. Give shareholders an opportunity to read or hear the proceedings of the meeting and to speak or otherwise participate in the proceedings contemporaneously with those physically present; and
  3. Count any shareholder using “communications equipment,” meaning software or tools, to hold teleconferences or virtual meetings, present in-person at the meeting, whether the meeting is to be held at a designated place or solely by means of communications equipment.
Under Ohio law, a company’s directors may also adopt guidelines and procedures for the use of communications equipment in connection with a meeting of shareholders to permit the corporation to verify that a person is a shareholder or proxyholder and to maintain a record of any vote or other action.

Limited Liability Companies:

LLCs are not legally required to hold annual meetings in Ohio, but many do. Frequently, the members and founders of an LLC will make annual meetings a requirement in their organizational documents.

An LLC’s operating agreement should provide the method for conducting meetings. Because the Ohio Revised Code does not expressly address virtual meetings, if a company chooses to utilize virtual meetings, it should expressly reserve this right in its operating agreement. Further the language should: (a) require reasonable advance notice be given to all members or managers, specifically stating the method being used for the virtual meeting (e.g., web platform, conference call, etc.), (b) confirm all members or managers have the remote technology available to participate in the meeting, and (c) if possible, record the meeting to appropriately maintain a record of votes or actions taken during the meeting.

Written Actions In Lieu Of an Organizational Meeting

Another alternative to an in-person shareholder/member meeting is to utilize actions by written consent in lieu of a meeting. A written action (also known as a consent resolution) is a written statement signed by a company’s shareholders or members that documents and validates a course of action taken by the shareholder/member without holding a formal in-person meeting. These are helpful because they eliminate the need to hold a meeting altogether. Usually, written actions are covered in the company’s bylaws or articles of organization and require unanimous consent by all members of an LLC, all members of the board of directors, or all members of a board of directors and shareholders. Below are the laws that govern use of written actions in lieu of organizational meetings:

Corporations:

Under the General Corporation Law of the Ohio Revised Code (R.C. 1701.54), unless the articles of incorporation, initial regulations adopted by the directors, or other shareholder-adopted regulations prohibit action by written consent without a meeting, a corporation’s shareholders or directors may take action by unanimous written consent without a meeting.

Limited Liability Companies:

Ohio Revised Code §1705.081 provides that an operating agreement governs relations among members and between members, any managers, and the limited liability company. In addition, Ohio Revised Code §1705.27 permits members or managers of an LLC to adopt bylaws that are not inconsistent with their articles of organization or operating agreement and that are for the regulation of the members, managers, or any other matter affecting the management of the company, including, but not limited to….meetings. As such, the company may authorize written actions in lieu of a meeting, but the statute does not explicitly provide for the number of votes required to effectuate the consent resolution. If a limited liability company deems it important to allow for actions by written consent, it should explicitly state the number of votes required in order to take an action in its operating agreement.

Best Practices for Holding a Virtual-Only Meeting

Finally, with all the information listed above, it is anticipated that many companies will elect to use virtual only meetings for the foreseeable future. With that being said, the following are recommendations for best practices when holding virtual-only meetings:

  1. Ensure the company has adequate technology to allow all shareholders/members to participate. If possible, companies should integrate new technologies and procedures to best incorporate shareholders/members into the meeting.
  2. In the event of a hybrid meeting, create a plan to give equal participation opportunity for those attending in-person and those participating online. If holding a completely virtual meeting, protect the rights of shareholders/members to present proposals on a virtual basis, and ensure the ability of shareholders/members to participate in a Q&A session.
  3. When determining to hold a virtual-only meeting, organizations should consider the format for conducting a formal online vote for those items requiring a vote during the virtual meeting.
  4. Companies should create formal rules of conduct that promote both the reality and perception of fairness during any voting and/or Q&A periods and promote transparency. The rules of conduct should be available before the meeting begins, and should be available to in-person and virtual attendees before and during the meeting. Within the formal rules, companies should establish reasonable time periods for any proposal presentations and Q&A.
  5. Companies should make sure that members/shareholders have access to discuss various topics with directors. It is vital for virtual participants to have the opportunity to see, hear, and ask questions of members of the board or managers.
  6. Companies should establish a technical support line and ensure that participants have access to it for the duration of the meeting.
  7. Companies should provide shareholders access to recorded copies of all virtual shareholder meetings for future viewing.
How Brouse McDowell Can Help

The attorneys at Brouse McDowell are committed to business owners. We will continue to monitor developments related to COVID-19 and how businesses may be impacted now and in the future, and provide updates as additional information and resources become available. If you have any questions about COVID-19 and the health of your business, the attorneys at Brouse McDowell are here to help.



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