Virtual Shareholder and Board Meetings: Important Considerations for District of Columbia Companies

14 April 2020 Publication
Authors: Jacob N. Heller Jasmine M. Joseph Michael A. Okaty Christopher C. Cain Julie-Anne M. Lutfi

In these unprecedented times of “shelter in home” orders, remote working, and other strategies Americans are taking to mitigate the risks associated with COVID-19, we anticipate that many organizations will decide to transition to virtual meetings of shareholders, directors, members, and managers of corporate entities.  This alert is intended to provide basic guidance to entities organized in the District of Columbia considering virtual meetings. For additional considerations applicable to public companies, please see our prior client alert

General Considerations for Virtual Meetings

As our world has become increasingly technologically dependent, many organizations have already addressed the concept of remote, or virtual, meetings in their organizational documents.  In that regard, you should review your bylaws (if a corporation) or operating agreement (if a limited liability company (“LLC”)).  If your organizational documents provide for remote meetings, you should follow the procedures outlined in them. 

If your organizational documents do not already provide for virtual meetings, District of Columbia Statutes will apply. 

Limited Liability Companies

District of Columbia Statutes are silent regarding the use of conference calls or other communications equipment for member and manager meetings.  As such, it is our view that District of Columbia LLCs may hold virtual meetings so long as such meetings are not prohibited by their organizational documents.

For-Profit Corporations

Shareholder Meetings

Shareholder meetings may be held by means of remote communication if authorized by the corporation’s board of directors (the “Board”) and to the extent certain steps are taken by the corporation. 

These steps include, without limitation, for the corporation (i) to implement reasonable measures to verify that each person present and permitted to vote is a shareholder, and (ii) to implement reasonable measures to provide shareholders a reasonable opportunity to participate in the meeting.1 Reasonable measures for verification may include the provision of control numbers to stockholders that can be input when joining the virtual meeting; reasonable measures for participation may include time set aside for Q&A.

Director Meetings

Meetings of the Board of for-profit corporations may be held by means of remote communication

District of Columbia Statutes provide that unless the articles of incorporation or bylaws provide otherwise, the Board may permit a meeting to occur by means of remote communication as long as all participating directors may simultaneously hear each other during the meeting and each participating director is deemed to be present in person at the meeting.2

District of Columbia Statutes also provide for emergency powers and certain other actions that may be taken in the event that a quorum of the Board of a for-profit corporation cannot readily be assembled because of a catastrophic event.3  Thus, in the event that a quorum of the Board of directors of the for-profit corporation cannot be assembled due to COVID-19 (for example), implementing statutorily authorized emergency powers may be considered. 

In light of this recent development, the corporation’s policies and practices surrounding shareholder and director virtual meetings, and the corporation’s means of “remote communication” should be reviewed carefully to confirm compliance with District of Columbia Statutes.  

Not-for-Profit Corporations

Members (if any)  

Member meetings may be held by means of remote communication if (i) authorized by the not-for-profit corporation’s articles or bylaws and (ii) the members have the opportunity to read or hear the proceedings substantially concurrently with their occurrence, vote on matters submitted to the members, pose questions, and make comments.4

Directors  

Director meetings of not-for-profit corporations may be held by means of remote communications unless the articles of incorporation or bylaws provide otherwise.

District of Columbia Statutes provide that unless the articles of incorporation or bylaws provide otherwise, the Board may permit a meeting to occur by means of remote communication as long as all participating directors may simultaneously hear each other during the meeting and each participating director is deemed to be present in person at the meeting.5

If a meeting will be conducted remotely, all participating directors must be informed that a meeting is taking place at which official business may be transacted.  If requested by a director, minutes of the meeting shall be prepared and distributed to each director.6

District of Columbia Statutes also provide for emergency powers and certain other actions that may be taken in the event that a quorum of the Board of a not-for-profit cannot readily be assembled because of some catastrophic event.7 Thus, in the event that a quorum of the Board cannot be assembled due to COVID-19 (for example), implementing statutorily authorized emergency powers may be considered. 

Foley has created a multi-disciplinary and multi-jurisdictional team, which has prepared a wealth of topical client resources and is prepared to help our clients meet the legal and business challenges that the coronavirus outbreak is creating for stakeholders across a range of industries. Click here for Foley’s Coronavirus Resource Center to stay apprised of relevant developments, insights and resources to support your business during this challenging time. To receive this content directly in your inbox, click here and submit the form. 

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1 D.C. Code § 29-305.09(b).

2 D.C. Code § 29-306.20(b).

3 See generally D.C. Code § 29-303.03.

4 D.C. Code §§ 29-405.01(e), 405.02(f).

5 D.C. Code § 29-306.20(b).

6 D.C. Code § 29-406.20(b).

7 See generally D.C. Code § 29-403.03.

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