Additional Guidance from President Denninger: Remote Meetings & Voting

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To: Members of the Southeastern District

From: President John R. Denninger

Additional Information includes guidance for Delaware

God’s grace and peace be yours in Christ Jesus!

During this time of the COVID-19 Pandemic, our congregations, schools, and missions find themselves needing to make decisions that are directed by procedures defined in their governing documents. In addition, our ministries are bound by their Constitutions and Bylaws to have regularly scheduled Congregation Meetings, as well as Council or Board Meetings. At the same time, the executive orders of our respective states, counties, and the District of Columbia may not allow us to meet together due to threat of the coronavirus.

How can congregations follow the executive orders of the state when those laws put them in conflict with their own organizational and legal documents? The following guidance has been researched and prepared by our Southeastern District Legal Counsel, Mr. Eric Heyer.

GUIDANCE

With many states and local jurisdictions issuing stay-at-home or similar orders restricting gatherings of people, the ability of corporations, organizations, and church congregations to hold regular or special meetings of directors and members has been severely curtailed. However, many states’ non-stock/non-profit corporation statutes permit or do not prohibit remote meetings through telephone conference or video conference using a service such as Zoom, Skype, or WebEx. Included in these states are Virginia, Maryland, and Pennsylvania, which specifically allow for remote meetings, as well as the District of Columbia, which, while requiring such meetings to be authorized by the organization’s bylaws, does not prohibit remote meetings and voting.

Unfortunately, not all jurisdictions, including North Carolina and South Carolina, allow for remote meetings and voting. In those jurisdictions, or where congregational leadership has already taken the action that would normally require member approval, a board or leadership can seek after-the-fact ratification of the particular action. As discussed below, the key points for ratification are advising the voting members that they are voting to ratify the earlier action and providing them with all material facts relevant to the transaction. Through the ratification process, a congregational leadership board or president can take action now, if necessary, and then subsequently seek approval from the members. Once ratified, the approval is effective as of the date of the original action at issue.

A summary of the relevant statutory provisions and law for each jurisdiction is set forth below.

REMOTE MEETINGS

Virginia

Virginia explicitly allows for “members to participate in any meeting of members by means of remote communication” to the extent authorized by the board of directors. Va. Code § 13.1-844.2. For such a meeting and any member vote to be valid, Virginia Code § 13.1-844.2 provides that:

B. Members participating in a members' meeting by means of remote communication shall be deemed present and may vote at such a meeting if the corporation has implemented reasonable measures to:

1. Verify that each person participating remotely is a member or a member's proxy; and

2. Provide such members a reasonable opportunity to participate in the meeting and to vote on matters submitted to the members, including an opportunity to read or hear the proceedings of the meeting, substantially concurrently with such proceedings.

These requirements would be satisfied by holding a congregational or member meeting through a telephone conference call or through a video conference, such as one held on Zoom, Skype, Microsoft Team, or WebEx. These means would allow for the members to be identified; hear any presentation of material and necessary information; participate by asking questions or otherwise speaking; and to vote on the transaction or issue presented.

Maryland

Maryland also allows for members of corporations to participate in meetings via remote means. Maryland’s relevant statute provides that:

(a) Authorized. -- Unless restricted by the charter or bylaws of the corporation, a corporation may allow stockholders to participate in a meeting by means of a conference telephone or other communications equipment if all persons participating in the meeting can hear each other at the same time.

(b) Constitutes presence in person. -- Participation in a meeting by the means authorized by subsection (a) of this section constitutes presence in person at the meeting.

Md. Code, Corporations & Associations § 2-502.1.

This allowance for remote meeting participation has been extended to nonstock corporations, such as churches. Md. Code, Corporations & Associations § 5-201. Therefore, congregational and member meetings can be conducted and votes validly held via telephone conference call or video conference.

Pennsylvania

Pennsylvania specifically allows for the members of nonprofit corporations and organizations to hold and participate in meetings by telephonic conference call or other electronic means. 15 Pa.C.S. § 5708 provides:

(a) Incorporators, directors and members of another body. — Except as otherwise provided in the bylaws, one or more persons may participate in a meeting of the incorporators, the board of directors or another body of a nonprofit corporation by means of conference telephone or other electronic technology by means of which all persons participating in the meeting can hear each other. Participation in a meeting pursuant to this section shall constitute presence in person at the meeting.

(b) Members. — Except as otherwise provided in the bylaws, the presence or participation, including voting and taking other action, at a meeting of members, or the expression of consent or dissent to corporate action, by a member by conference telephone or other electronic means, including, without limitation, the internet, shall constitute the presence of, or vote or action by, or consent or dissent of the member for the purposes of this subpart.

Accordingly, so long as the bylaws do not otherwise prohibit meetings by telephone or other electronic means such as Zoom or other videoconferencing, congregational and member meetings can be conducted and votes validly held via telephone conference call or video conference.

Delaware

Delaware allows for meetings of members by virtual or telephonic means so long as authorized by the board of directors and not otherwise prohibited by the certificate of incorporation or bylaws. 8 Del. Code § 211(a); 8 Del. Code § 215(a); 8 Del. Code § 141(i). Remote meetings are allowed, and any votes held at such meetings are valid, so long as the board implements reasonable measures to provide members the reasonable opportunity to participate and vote, including the ability to read or hear “the proceedings of the meeting substantially concurrently with such proceedings.” Id . If any vote is held by remote communication, the church must maintain a record of the vote or other action taken.

District of Columbia

The District of Columbia allows for annual and special meetings of members to be held via remote means contingent upon the bylaws or articles of incorporation authorizing such a meeting. D.C. Code §§ 29-405.01(e); 29-405.02(f). Specifically, D.C. law provides that:

(f) The articles of incorporation or bylaws may provide that a special meeting of members does not need to be held at a geographic location if the meeting is held by means of the Internet or other electronic communications technology in a fashion pursuant to which 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.

D.C. Code § 29-405.02(f).

Accordingly, while a member congregation may be able to hold a remote voter’s meeting, it will be necessary to ensure that the congregation’s bylaws already authorize remote meetings or amend and update the bylaws to allow for meetings to be held by telephone or video conferencing.

North Carolina & South Carolina

North Carolina and South Carolina law do not provide for remote meetings of members of not-for profit corporations. North Carolina allows for-profit corporations with shareholders to hold shareholder meetings by remote means so long as the participants can be verified as shareholders and have the opportunity to be heard. N.C. Gen. Stat. § 55-7-09. However, North Carolina does not specifically allow for nonprofit corporations to hold remote member meetings. Instead, North Carolina law provides that “Special meetings of members may be held in or out of this State at the place stated in or fixed in accordance with the bylaws. If no place is stated or fixed in accordance with the bylaws, special meetings shall be held at the corporation's principal office.” N.C. Gen. Stat. § 55A-7-02.

South Carolina likewise does not provide for virtual or remote meetings or voting, whether it is a for-profit or non-profit corporation. Instead, the same restrictive language applies to both types of corporations: “Special meetings of members may be held in or out of this State at the place stated in or fixed in accordance with the bylaws. If no place is stated or fixed in accordance with the bylaws, special meetings must be held at the corporation’s principal office.” S.C. Code §§ 33-31-702, 33-7-102.

RATIFICATION

A reasonable and realistic alternative for congregations that cannot or were not able to hold remote meetings and votes prior to any loan application or other transaction is ratification. It is well established that a corporation’s past actions can be ratified after the fact by its shareholders or members so long as the parties ratifying the conduct could have authorized the actions beforehand. 18B Am. Jur. 2d Corporations § 1384. Ratification can be either express or implied. Upon ratification, the organization’s conduct becomes binding on the members and the action is effective as if it had been originally performed with the required authorization. Tower Oaks Blvd., LLC v. Procida, 100 A.3d 1255, 1272-1273 (Md. App. 2014) ; Marcuse v. Broad-Grace Arcade Corp., 180 S.E. 327 (Va. 1935).

Generally, however, an action which requires shareholder or member ratification requires the action to be ratified in the same or similar manner as would have been required for members to have approved the action at the time it occurred. See, e.g ., N.C. Gen. Stat. § 55-1-62 (setting forth requirements for ratification of defective corporate actions of for-profit corporations). The ratifying party also must ratify the entire prior action or transaction and cannot only partially ratify the transaction. That is, the members cannot ratify the board applying for a loan, but not ratify the amount that was applied for in the loan.

The fundamental requirement for ratification is that the parties ratifying the prior corporate action must know what transaction they are ratifying and have full and complete knowledge of all material facts connected with the transaction for which ratification is sought. 18B Am. Jur. 2d Corporations § 1395; Walker v. Sloan , 529 S.E.2d 236 (N.C. 2000); Anthony v. Padmar, Inc. , 465 S.E.2d 745 (S.C. 1995). Essentially, the voting members must be provided the same type and level of information they would have been supplied had they been able to vote to authorize the transaction prior to its occurrence. Therefore, the congregation or voting members need to be fully informed of all material facts relating to any decision to apply for loans or funding. This includes, but is not limited to, the reason for applying, the amount sought, and the potential ramifications of applying for and obtaining the funding; for example, the amount of interest that may be incurred or other actions required to comply with the terms of the loan. One way to satisfy this requirement can be an email or other publication to the voting members of a congregation describing the terms of the transaction in real time, even if a formal vote cannot then be taken.

To best ensure the likelihood and validity of the ratification, the board or congregational leadership should only take actions that would be within their authority if they had the members’ prior approval; are intended to benefit the congregation; are objectively reasonable; and for which the leadership has a high degree of confidence that the members will subsequently ratify that action.

IN CLOSING

In addition to the above guidance, the SED Executive Staff is also expecting that congregations and other ministry entities may eventually consider making some changes to their Constitutions and Bylaws based on the experience we are now having with this national pandemic. Our SED Task Force for Constitutional Review will be considering potential changes that might be considered based on the respective state or jurisdiction in which your ministry is located.