Virtual Shareholder and Board Meetings: Important Considerations for Massachusetts Companies
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 entities. This alert is intended to provide basic guidance to entities organized in Massachusetts 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 meetings in their organizational documents. In that regard, you should review your by-laws (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/operating agreement do not already provide for virtual meetings, Massachusetts Statutes will apply.
Limited Liability Companies
Massachusetts Statutes are silent on the ability for member and manager meetings of limited liability companies to be conducted remotely or via remote communication.1
While Massachusetts Statutes do not prohibit limited liability companies from conducting member or manager meetings remotely or via remote communication, they do not explicitly authorize them either as it has done for certain meetings of private for-profit corporations. To the extent the Massachusetts legislature’s silence can be regarded as tacit approval of these types of meetings, limited liability companies must authorize such meetings to be conducted remotely or via remote communication through their operating agreements to ensure the validity of their actions.
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, so long as the corporation is not a public corporation.2 Massachusetts public for-profit corporations cannot hold shareholder meetings via remote communication.
These steps include, without limitation, for the corporation (a) to implement reasonable measures to verify that each person present and permitted to vote is a shareholder (or proxy), (ii) to implement reasonable measures to provide shareholders and proxies a reasonable opportunity to participate in the meeting, and (iii) to maintain a record of voting or action by any shareholder or proxy that votes or takes other action by means of remote communication.3
Director Meetings
Director meetings of private for-profit corporations may be held by means of remote communication, but public for-profit corporations may not hold director meetings this way.4
Massachusetts 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.5
Unless the articles of organization or bylaws provide otherwise, regular meetings of the board of directors may be held without notice of the date, time, place or purpose of the meeting; however, special meetings of the board must be proceeded by at least two (2) days’ notice of the date, time and place of the meeting.6
Massachusetts Statutes also provide for emergency powers and allow for certain actions that may be taken in the event that a quorum of the Board of any for-profit corporation cannot readily be assembled because of a catastrophic event.7 Thus, in the event that a quorum of the Board of directors of a for-profit corporation cannot be assembled due to COVID-19 (for example), implementing statutorily authorized emergency powers may be considered.
In light of the 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 Massachusetts Statutes.
Corporations for Charitable and Certain Other Purposes
Members (if any)
Massachusetts Statutes are silent on holding member meetings of corporations for charitable and certain other purposes via remote communication. Therefore, such corporations should give careful consideration to the way in which remote meetings are held, if any, to ensure the validity of actions taken at such meetings.
Directors
Massachusetts Statutes are silent on the ability for meetings of the board of directors of corporations organized for charitable or certain other purposes to be conducted by remote communication.9 Therefore, such corporations should give careful consideration to the way in which remote meetings are held, if any, to ensure the validity of actions taken at such meetings.
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1 Mass. Ann. Laws ch. 156C, § 21(c); see also Mass. Ann. Laws ch. 156C, § 26(c) for identical provision related to “manager-managed” limited liability companies.
2 Mass. Ann. Laws ch. 156D, § 7.08.
3 Mass. Ann. Laws ch. 156D, § 7.08(1)-(2).
4 Mass. Ann. Laws ch. 156D, § 8.20.
5 Id.
6 Mass. Ann. Laws ch. 156D, § 8.22.
7 Mass. Ann. Laws ch. 156D, § 3.03.
8 Mass. Ann. Laws ch. 180, § 6A (which allows the corporation’s by-laws to determine “the manner of calling and conducting its meetings.”).
9 Mass. Ann. Laws ch. 180, § 10C; Mass. Ann. Laws ch. 156B, § 56.
