Using Audio-Visual Technology for Corporate Shareholder and Directors’ Meetings

By John DiGiacomo

Even as the COVID-19 pandemic is receding and the economy is being reopened, there are many businesses that are continuing to abide by social distancing and the use of remote technologies as substitutes for face-to-face gatherings. This applies to meetings that are generally required for corporate governance purposes. In general, shareholder meetings and board of director meetings can be held with the use of audio-visual technology. But careful attention should be paid to avoid legal and practical pitfalls.

Following Bylaw/Article or Statutory Requirements

Most statutes that govern corporations permit some form of remote or telephonic attendance at corporate meetings. For example, section 450.1405 of the Michigan Business Corporations Act permits shareholder meetings to be conducted in this manner unless restricted by the articles of incorporation or bylaws and if the Board authorizes telephonic or remote attendance and if all participants are advised of the means of telephonic or remote communications. Three other conditions also must be met under the statute:

  • The corporation must implement “reasonable measures” to verify that the persons attending are, in fact shareholders or proxy holders
  • “Reasonable measures” must be implemented to ensure that each person has a “reasonable opportunity to participate” and
  • Any votes or actions taken must be duly recorded and maintained in the corporate records

Section MCL 450.2521 provides similar rules for directors’ meetings.

As a practical matter, there are a number of widely available software and online programs that can be used for virtual meetings. Indeed, in theory, shareholders, proxy holders, and directors could participate in corporate meetings if they had a smartphone and an app like FaceTime or a computer enabled with Skype. What is needed is a program that allows the parties to see and talk with each other. If the participants are personally known to each other, then the identification requirement is met.

Practical consideration should also be given to how documents are shared and exchanged. This might be done via email or by sending paper copies through the regular mail in advance of the meetings.

Online Cybersecurity Concerns

Generally, shareholder and director meetings are supposed to be confidential. This facilitates communications among the shareholders and directors that is open and frank. However, some software and applications that allow virtual meetings may be vulnerable to hacking or other spyware that can compromise the confidentiality of the meetings. Thus, corporate entities that are planning to engage in remote meetings should carefully examine software and third-party hosting options to ensure adequate cybersecurity.

Deleting Digital Copies of Virtual Meetings

By the nature of the technology, any virtual meeting creates a digital copy. Many mistakenly believe that all digital copies must be retained. However, corporations should carefully consider adopting a policy that deletes any and all copies of virtual corporate meetings. Again, corporate meetings should be designed and conducted in a manner that encourages full and frank discussions. Achieving that goal is more difficult if participants know that what they say is retained permanently in an electronic format. It is better to have the standard short written record that is kept in the Corporate Minute Book.

How to Proceed?

If your corporate bylaws or articles already permit remote attendance, then the only care that must be taken is to send proper notice of the meeting(s) that explains the process for attending remotely.

If, on the other hand, your corporation has not adopted bylaws allowing for remote participation, then matters are a bit more complicated. Under the Michigan statute, the articles or bylaws will have to be amended to allow for remote participation. That might be accomplished via unanimous written authorization or might have to be accomplished via one final face-to-face meeting.

Other Types of Corporate Entities

In general, other types of corporate entities are permitted to have meetings with remote participation. The rules are similar, but there are slight variations. Experienced Michigan business attorneys can provide assistance in enacting the proper corporate policies and procedures to allow for remote participation.

If you need legal guidance with remote participation in corporate meetings or with any other corporate governance question, contact the business lawyers at Revision Legal at 231-714-0100.

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