How Do We Have a Board of Directors Meeting During COVID-19?

Still, there are some important meetings that cannot be canceled or delayed until it is safe to return to normal operations, particularly for businesses that are organized as either a corporation or non-profit corporation. Chief among these are meetings of a corporation’s board of directors, the individuals vested with a corporation’s ultimate authority.
 
So, with the current public health situation making it unsafe to hold in-person board meetings, how can directors govern the affairs of a business from afar? South Carolina law provides two avenues - the holding of remote meetings and the mechanism of a unanimous written consent in lieu of a meeting.
 
Remote Meeting
 
Section 33-8-200 of the corporate code contemplates a remote meeting of a corporation’s board of directors:
 
“The board of directors may permit any or all directors to participate in a regular or special meeting by, or conduct the meeting through the use of, any means of communication by which all directors participating may simultaneously hear each other during the meeting. A director participating in a meeting by this means is considered to be present in person at the meeting.”
 
This provision is mirrored for non-profit corporations in Section 33-31-820 of the South Carolina Nonprofit Corporation Act.
 
So, in the eyes of the law, there is no difference between a board sitting around a conference table and a board meeting from their respective homes via video chat, conference call or any other software that permits all board members to hear each other.
 
It is important to note that a remote meeting conducted according to the provisions of Section 33-8-200 is still required to have all of the formalities of an in-person meeting. These include proper notice of the meeting under the corporation’s bylaws, the presence of a quorum as set forth in the bylaws, and the taking of minutes. Further, the meeting should be conducted as if in person. Roll should be taken and the minutes from the most recent meeting should be approved. Voting rules and procedures will be in effect as usual.
 
Unanimous Written Consent
 
Section 33-8-210 of the corporate code provides that a board of directors may take action (for example, approving the purchase of real estate) without a meeting by unanimous written consent, unless barred by the bylaws or articles of incorporation:
 
“Unless the articles of incorporation or bylaws provide otherwise, action required or permitted by Chapters 1 through 20 of this Title to be taken at a board of directors' meeting may be taken without a meeting if the action is assented to by all members of the board.”
 
This provision is mirrored for non-profit corporations in Section 33-31-821 of the South Carolina Nonprofit Corporation Act.
 
The action taken must be described in a written statement, usually a resolution, signed by each director. The easiest way to accomplish this is to addend a signature page for all directors to the resolution describing the action and then circulate to each director for signature, which may be done via email. The consent then must be either included in the corporate minutes or filed in the corporate records.
 
The key takeaway for this method of remote action is that it must be truly unanimous. If one director is unavailable to sign the document, then action cannot be taken without either an in-person or remote meeting. Further, if one director cannot participate in the action because of a conflict of interest, then action cannot be taken without a meeting. It only takes the absence of one person for a unanimous consent to fail.
 
Because of these limitations (especially if the board has many directors), if there is sufficient time for proper notice, it is often advisable to hold a remote meeting instead of taking action by unanimous written consent.
 
By either holding a remote meeting or taking action by unanimous written consent, a board of directors can continue to efficiently govern a corporation even when circumstances prevent a traditional meeting.

If you have questions about this topic, please contact Mac McLean, Phillips Workman or your HSB attorney.

For additional resources on COVID-19, please access HSB's resource page.