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ONLINE MEETINGS FOR CHURCHES AND NONPROFITS FAQs

Simms_Virtual

By Robert Showers, Esq. and William Thetford, Esq.

Consider the following common scenarios for churches and nonprofits in this online stay at home world:  

1) A member organization (church or nonprofit with members) requires a membership meeting by a certain date each year to pass the annual budget and elect new leaders. The date is fast approaching, but a pandemic and the governor’s orders prevent the members from meeting in person to conduct the annual (or other) meeting to approve the budget, elect leadership, or take other necessary action. What options are available to the organization in this apparent catch-22 without violating either its own governing documents or the governor’s order?

2) A board of directors is meeting to approve an important and time sensitive matter. The governing documents require a quorum of five directors in order to take valid action, but only four people are physically present? The action is clearly justified and taking immediate action is paramount. What can the Board do? What if some of the directors cannot even be reached telephonically due to some kind of emergency?

3) Approval of the church board and its membership are both needed under its bylaws to take a loan and purchase  a building but stay at home orders prevent such a meeting and limited technology makes the electronic meeting virtually impossible. How do they approve this time sensitive purchase and loan?

4)  A church or membership nonprofit needs to apply for a loan under the CARES Act. The governing documents require member approval for any loan, but stay at home orders and limited technology prevent such meeting consistent with governing documents and state law. However, time is of the essence and they need the money to pay staff and keep the church/nonprofit running.  What legal options are available?

5) What if these churches are unincorporated and need trustee and court approval for any of these transactions?

How can these organizations comply with their ordinary obligations to hold such meetings while also complying with their governor’s stay at home and social distancing orders to combat COVID-19? Even outside of this particular emergency, to what extent can a board of directors or a membership-based organization rely on electronic means to consider an individual “present” at a meeting? Are such meetings and votes permitted? If so, when and how?

Thankfully, many states do allow some forms of electronic meetings. This article uses the mid-Atlantic states as an example to examine the general requirements concerning (1) Board Meetings, (2) Emergency Powers, and (3) Members Meetings – as well as a practical look at navigating these waters.  

In viewing these questions, we find it helpful to consider the options in the following order:

1. Legality – Before undertaking a meeting, it is important to understand whether your state allows virtual meetings. State codes regulate procedures and powers of corporations, and these regulations often include instructions on virtual meetings for both board of directors and regular member meetings. Of course, when virtual meetings are allowed by state code, you must be sure to follow the regulations and protections included to keep your meeting valid and legally effective.

2. Governing Documents – Likewise, you will need to review your own governing documents (bylaws, constitution, articles of incorporation, operating agreement, and the like) to ensure the actions you consider are proper

3. Practicality – Finally, even if allowed, there are some practical considerations to make as well.

#1. Board Meetings

Generally, most states allow the board of directors to meet via conference call or video conference as if it was an in-person meeting as long as the directors can hear each other and participate simultaneously. This is true whether some or all of the board members join remotely by phone or video. With a board usually containing three to twelve members, participation by conference call or video conference will usually be a legal and practical way for the board to meet. Some states require that the meeting minutes reflect which board member appeared remotely and via what technology (conference call, video call software, etc.).

Importantly, online only decision making (such as by email, electronic voting, etc.) is usually invalid outside of a formal real-time meeting (whether in-person or electronically). However, most states have adopted a form of the Model Nonprofit Corporation Act which allows an action to be taken without a meeting if every director consents to the action in writing, signs the consent, and minutes are created describing the action taken and including the written consents (Unanimous written board consent action).[1] In other words, it is not sufficient in most states to simply get your board to approve a course of action by responding to an email or other written communication unless every director responds in writing and signs. In many states an electronic writing and electronic signature will suffice. However, a problem arises if your organization does not hear back from any one director; in that case you will not be able to proceed. If you take action via unanimous written consent you should provide a formal record of the decision by creating minutes for the decision and include copies of the writings indicating consent. Please note that even if your state law allows for these provisions, your bylaws or articles of incorporation may be more restrictive.

Examples of state specific language for electronic participation in board meetings is below.

Unless the bylaws provide otherwise, state Nonprofit Code permits VA MD NC WV DC
Board decisions by unanimous written consent Yes Yes Yes Yes Yes
Remote participation in board meeting if directors able to hear one another and actively participate Yes Yes Yes Yes Yes
Remote participation in a board meeting constitutes a Directors presence Yes Yes Yes Yes Yes

Virginia: In Virginia law, the board of directors of a corporation may direct, or participate in, a meeting via “any means of communication,” as long as all directors may hear each other at the same time during the meeting. Anyone participating via remote capabilities must be deemed present in the meeting.[2]

Maryland: Likewise, for board meetings under Maryland law, unless it is prevented by the bylaws, the board may meet via remote communications if: (a) everyone in the meeting can hear each other simultaneously and (b) participation in the meeting by remote communication constitutes presence. Beyond those rules Maryland law is quiet on the subject of virtual nonprofit board meetings.[3]

North Carolina: Under North Carolina law, board of director meetings may be held via “any means of communication,” as long as directors participating may hear each other during the meeting. Anyone participating in a remote fashion, by phone or other means, is deemed present in the meeting.[4]

West Virginia: West Virginia code states that the board of directors may meet via remote communication, as long as “all directors participating may simultaneously hear each other during the meeting,” and all directors must be deemed present if participating in this manner.[5]

District of Columbia: Likewise, unless the governing documents specify otherwise, a D.C. A nonprofit’s 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.” Any director participating in this fashion “shall be considered to be present in person at the meeting.”[6]

#2 Emergency Powers

Some organizations have asked whether certain challenges present an emergency that can allow them to bypass their ordinary procedures. The answer is “it depends.”

“Emergency” is defined by each of the five jurisdictions with emergency provisions as a moment when a quorum of directors “cannot readily be assembled because of some catastrophic event.” “Catastrophic event” is left undefined, by each jurisdiction, giving some flexibility and requiring discretion. In general, the four states and the District leave the majority of the power in the hands of the corporation’s board during emergency events.

The pandemic is not likely an “emergency” in and of itself, giving rise to these powers and duties, because most boards are still able to achieve a quorum of directors by meeting via conference call or video conference. Given the size of most boards (normally 3 to 12 people) it is relatively simple to have such a meeting. However, such a situation combined with the sickness, unavailability, or sudden passing of a handful of board members could lead to a situation where a quorum can no longer be assembled even electronically, in which case the following provisions would apply.

Unless the bylaws provide otherwise, state Nonprofit Code permits VA MD NC WV DC
Certain statutory emergency powers Yes No Yes Yes Yes
Creation of emergency bylaws may be created by board unless governing documents direct otherwise Yes No No Yes No

Virginia:

Virginia, like many other states, has five relevant clauses when it comes to emergency powers. Two clauses outline board powers during an emergency, and three encompass possible ramifications or questions that may arise from the board’s use of these powers.

  • The board may appoint new directors or officers (“modify lines of succession”) to accommodate any incapacity of a director or an officer
  • The board may “relocate the principal office, designate alternative principal offices or regional offices, or authorize the officers to do so”
  • Furthermore, notice of a meeting of the board only needs sent to those who can practicably be reached, and officers may be deemed directors for the duration of the meeting if it is “necessary to achieve a quorum”
  • Any good-faith action taken by the board is considered binding on the corporation
  • Any good-faith action may not be used to impose liability on the corporation leadership.[7]

Emergency bylaws may be enacted by the board (not requiring member participation), unless the articles of incorporation provide otherwise. These bylaws may adjust the procedures for calling a meeting of the board, the quorum requirements, and may designate additional or substitute directors. They are binding if the actions were taken in good faith, may not be used to impose liability on leadership, and are active as long as the emergency exists.[8] The emergency bylaws will be subject to amendment or repeal by the members when they are able to meet again; though it is not legally necessary to consult the members in creating emergency bylaws if it is impractical such as during a pandemic, war or act of God where online participation is virtually impossible for large congregations.

Maryland:

Unlike Virginia, Maryland has no section on emergency powers for a board of directors for a corporation (whether or not a non-profit). Although the board manages affairs “whether or not in the ordinary course,” there is also no mention of emergency bylaws in the Maryland code, meaning it is best practice to provide for them in the articles of incorporation or bylaws if the corporation desires.

North Carolina:

North Carolina outlines emergency powers in a section that matches Virginia’s verbatim. See Virginia’s statutes on emergency powers above for more details.[9] North Carolina, however, does not expressly provide any section on emergency bylaws, which leaves their necessity entirely up to individual corporations.

West Virginia:

West Virginia has code sections outlining emergency powers[10] and emergency bylaws.[11] Both sections are identical to Virginia’s codes of the same. See above for Virginia’s statutes on emergency powers and emergency bylaws for more details.

District of Columbia:

The District has statutes on emergency powers, and they are identical to the statutes in the Virginia code.[12] See above Virginia section for the regulations on emergency powers in these three locales. Additionally, while there is no section on emergency bylaws in DC code, no section prohibits their use if the governing documents provide for them.

In summary, if you are a Virginia or West Virginia corporation, you may have broad emergency powers available to the board even if nothing is stated in the bylaws and the board may even create bylaws for use during that emergency. However, the best practice in any state is to provide reasonable guidance to your board in the face of an emergency if possible. This article can provide some examples of how a board may utilize emergency powers in times of extreme crisis like this pandemic if your state and governing documents permit, but you should consult a competent church lawyer to advise if you are in a situation necessitating their use. 

#3 Members Meetings

Many churches or nonprofits require members meetings in their constitution and bylaws. These are often set for specific times of the year. When churches or other member organizations cannot hold their designated meetings because of a disaster like COVID-19, not only is the entity in danger of running afoul of its governing documents, the primary (or perhaps only way) of remedying the issue ordinarily requires member approval – the very thing that cannot be achieved. For instance, if your bylaws require in-person annual meetings in the Month of April, you will not be able to hold the meeting without violating your governor’s order and likely, depending on your governing documents, you may not be able to utilize emergency powers to change your bylaws without holding a meeting for your members to approve the amendment.

These situations create difficult questions that must be reviewed on a case by case basis. Thankfully, we have seen small and medium size churches experience success with video meetings which provide for real time participation and voting, if needed, and you can verify who is on the call by passwords and visual identities.   However, we begin with whether your state allows member meetings to be done virtually and what special requirements apply to virtual member meetings. 

A. Legal Requirements:

To help jump over the first hurdle, we summarize as examples what five jurisdictions provide regarding online board or members meetings in Virginia, Maryland, West Virginia, the District of Columbia, and North Carolina. For most states, if the bylaws allow, an organization may conduct its meetings by using video or conference call technology if the members are able to communicate contemporaneously as well as participate and vote. A “meeting” cannot be held via a prerecorded video that members watch or even a real-time text or transcript-based system like a chat, instant messaging system, or email due to most state laws about real time participation.

We also note below that some states, but not others, allow action to be taken without a meeting upon the unanimous action of those entitled to vote or upon written ballots.

Unless the bylaws provide otherwise, state Nonprofit Code permits VA MD NC WV DC
Members meeting by conference or video if members able to hear and participate concurrently and vote Yes Likely not unless bylaws permit Likely not unless bylaws permit If bylaws permit If bylaws permit
Decision by unanimous written consent of all eligible members Yes Not discussed by code Yes Yes Yes
Decisions allowed by written ballot if certain procedures followed Only if authorized by governing docs. Not discussed by code Yes Only if authorized by bylaws Yes.

Virginia:

The Virginia code places clear guidelines around virtual meetings. Although the code defers to the bylaws on whether meetings can be held virtually, there are certain minimum requirements for such meetings. The board may authorize remote communication for “any meeting of members” – including annual, regular, and special meetings – if:

  1. The corporation can verify the identity of the member or member proxy (if the corporation’s bylaws allow for member proxies, many do not) utilizing remote communication;
  2. The corporation can provide the opportunity to its members voting and participation capabilities, including reading or hearing proceedings “substantially concurrently with such proceedings.”[13]

As with the board of directors, Virginia allows an action regularly required or permitted to be taken in a members meeting, may be taken upon the unanimous written consent of all members entitled to vote.[14] It may be difficult practically, however, as a number of members may simply not respond to your request for consent.

If provided for in the bylaws, the board of directors may authorize a vote to be conducted by written ballot (including by electronic transmission if verified to be authorized by the member).[15] Further, “[a] member who votes by a ballot submitted by electronic transmission is deemed present at the meeting of members.”[16] Of course,

the church will need a system to verify that only members vote and the vote cast is actually by the member (rather than someone else in their place).

If you believe your only recourse is to take necessary action despite potential violation of your governing documents, contacting legal counsel may help you find a way out of the jaws of the dilemma or at least limit the damage if you are forced to make such a decision.[17]

Maryland:

Maryland’s codes regulating nonprofit board of director meetings are minimal and there is no direct mention of remote members meetings. As such, your organization can likely conduct meetings electronically, but only if your bylaws allow. If the bylaws are silent and also the state laws are silent, you conduct such online members meeting at your own risk. Though not explicitly required (though a court may consider it an implied requirement based on good faith and reasonability), if you decide to hold an online member meeting, you will need to ensure members can hear each other simultaneously and participate in real time, as in other states.

North Carolina:

North Carolina code makes no explicit provision for remote members meetings, whether annual, regular, or special. This means that whether your organization can conduct members meetings remotely is a function of your own governing documents.

The code does, however, require that all meetings be held at the location according to the bylaws; if no place is stated, meetings must be held at the corporation’s principal office.[18] Thus, it will be important to specify in your governing documents if you want to allow the potential of online meetings. Notices of each meeting must be sent out between one and two months before the meeting, and for a special meeting, a description of the matters at hand must be included in the notice.[19] Like Virginia, North Carolina also spells out some of the consequences of corporate action taken inconsistently with the requirements in the organization’s governing documents concerning members meetings.[20]

North Carolina provides two other options to membership organizations.

  1. In North Carolina, action can be taken by members without a meeting in a way that mirrors the way boards can, that is, if all members entitled to vote on the action document their written consent (which the corporation can agree to receive electronically).[21]
  2. NC has a provision in its Nonprofit Corporation Act allowing action by written ballot (including electronically) without a meeting if the corporation (1) delivers a written ballot to every member entitled to vote on the matter; (2) indicates the amount of time to vote and return the ballot; and (3) receives at least as many votes cast as the quorum required for a meeting and the vote is otherwise consistent with the bylaws. In general, voting, is expressly defined to include voting electronically.[22]

West Virginia:

Members meetings – annual and special – must be held at the time and place stated in the corporation’s bylaws. If the bylaws or articles allow the use of “electronic communication” for members meetings, the code of West Virginia requires only that: “all members may simultaneously hear each other during the meeting.”[23] If the bylaws do not state where meetings must be held, West Virginia code dictates they must be held in the corporation’s principal office.[24]

Meeting outside of the time and/or place required would be a violation of the corporation’s constitution and could lead to a successful legal challenge, though it may not necessarily make the action itself void.[25]

Similar to some of the other states, West Virginia also provides two options for remote approval without a meeting. (1) Member action can be taken by unanimous written consent of all members eligible to vote.[26] (2) “The elections may be conducted and actions voted upon by mail or electronic means” if the articles of incorporation or bylaws so authorize.[27]

District of Columbia (DC):

In the code of DC, any members meeting (annual, regular, or special) authorized by the board must be held at the principle office, but “a special meeting” (i.e., a meeting in an emergency) “does not need to be held at a geographic location.” It may be held via the Internet or another form of electronic communication, as long as members can “read or hear the proceedings substantially concurrently with their occurrence, vote on matters submitted to the members, pose questions, and make comments.” In these regulations, DC is similar to the Virginia rules on the same, though DC’s requirements are somewhat stricter, in that members must be able to pose questions and make comments. (Virginia requires “participation,” it is left to interpretation how far that must go; DC makes especially clear that members must have the ability to actively contribute, rather than simply listen.)[28]

DC Code allows for actions without a meeting with unanimous written consent of all members eligible to vote on an action. Unless the bylaws or articles of incorporation provide otherwise, DC Code affirmatively allows “any action that may be taken at any annual, regular, or special meeting of members” to be taken without a meeting if the action is voted upon after delivering a ballot to every member entitled to vote on the matter and the other procedural requirements of the Code section are satisfied.[29]

B. Bylaws of Corporations on Members meetings:

The four states and the District of Columbia generally defer to corporation bylaws and articles outside of a few easily met regulations. If the articles of incorporation or bylaws of your corporation do not forbid meeting via remote communications, virtual meetings are legal under any of these five locales’ codes. If your articles or bylaws do provide guidelines or regulations, both state-level codes (or DC codes) must be followed in addition to the rules in your governing documents. If your bylaws forbid remote meetings, the board must meet in person. If your bylaws forbid remote meetings but allow for emergency bylaws, then the board may be allowed to meet remotely, if the emergency bylaws make provisions for that. Each organization’s virtual meeting regulations will look different depending on the state you are in and the governing documents on your corporation/organization.

If you are allowed to meet electronically be sure that you comply with provisions in your bylaws for notice, quorum, and other general requirements, just as you would for in-person meetings.  

C. Practical Concerns:

In addition to satisfying the legal requirements a corporation must ask itself if it is practical to meet via remote communication. A board meeting may be conducted telephonically with relative ease. A members’ meeting of fifty, one hundred, or more people may be a different story.

If you do choose to go forward, a little bit of advance planning can do a lot to prevent chaos and uncertainty during your meeting. You will need to find a technology that will securely and reliably host your event and allow you to verify the members and allow participation as required by your state’s code sections and your own bylaws.

  • Even in an in-person meeting, though everyone can participate, reasonable guidelines are necessary to maintain order. Likewise, your virtual members meeting may need to establish protocols for muting microphones, calling on people who “raise a hand” or the like.
  • Calculate how many people are necessary for a quorum (usually a percentage of the total members) in advance so that you know if you have met it rather than trying to conduct the calculations during the meeting.
  • Decide how you will verify who is at the meeting and that all those voting are eligible. You cannot simply count the votes of those who have called in if you do not know if they are actually eligible members. You can call the roll[30] or use passwords or other technological features to help you identify your members, but some precautions will have to be implemented in advance.
  • How will you handle members who experience technical difficulties?
  • How will you recognize members to speak?
  • How will you take votes?

We have seen small to medium churches see success in these meetings via Zoom or similar technology. However, we warn you that you may actually have more people attend an online meeting than you typically do your typical meetings, due to the ease of convenience. So be prepared for a larger than usual crowd.

#4. Conclusion

For members’ meetings of small congregations, your state laws and bylaws may make online meetings (board and members) relatively easy but you still may want to review emergency powers of the board for essential actions to continue the running of the church to streamline the process.  Small and medium size churches have experienced success with Zoom type video meetings which provide for real time participation, voting if needed, and verification of who is on the call by passwords and visual identities.   For larger churches or nonprofit member organizations, emergency powers with later member ratification may be the only legal and practical way of conducting such members’ meetings for essential business.  If you are not incorporated, then even more confusion exists since state nonprofit corporation law generally may not apply. However, where state law and bylaws are silent, you proceed to use emergency powers at your own risk you will need competent church attorneys to advise. We are happy to discuss with you how to help you comply with your state law and bylaws in holding virtual meetings or dealing with questions as they arise, as we have helped many organizations already. Based on the challenges that you have already faced, we are happy to assist in drafting emergency bylaws now, create provisions in your governing documents to govern future emergencies, or otherwise help you to ensure that you will not violate your constitution or bylaws should this or a future emergency prevent you from meeting in person at your scheduled time.

Disclaimer: This memorandum is provided for general information purposes only and is not a substitute for legal advice particular to your situation. No recipients of this memo should act or refrain from acting solely on the basis of this memorandum without seeking professional legal counsel. Simms Showers LLP expressly disclaims all liability relating to actions taken or not taken based solely on the content of this memorandum. We thank our legal assistant, Josiah Aden, for his contributions to this article.  Please contact Robert Showers at hrs@simmsshowerslaw.com  or Will Thetford at wrt@simmsshowerslaw.com  or call at 703.771.4671 for legal advice that will meet your specific needs. For articles on COVID19 legislation and how to understand and apply the CARES Act and FFRCA please see  https://www.simmsshowerslaw.com/covid-19-update/

 

[1] See Richard Hammar, When Church Business Meetings Go Electronic, Church Law & Tax, February 26, 2014, https://www.churchlawandtax.com/cltr/2014/march-april/when-church-business-meetings-go-electronic.html

[2] Va. Code § 13.1-864(b).

[3] Md. Code Corporations and Associations Title 2, Subtitle 4 § 2-409.

[4] NC Gen Stat § 55A-8-20 (2019).

[5] W. Va. Code Chapter 31E West Virginia Nonprofit Corporation Act § 31E-8-820.

[6] DC Code § 29-406.20 (2019).

[7] Va. Code § 13.1-827.

[8] Va. Code § 13.1-824.

[9] NC Gen Stat § 55A-3-03 (2019).

[10] W. Va. Code Chapter 31E West Virginia Nonprofit Corporation Act § 31E-3-303.

[11] W. Va. Code Chapter 31E West Virginia Nonprofit Corporation Act § 31E-2-206.

[12] DC Code § 29-403.03 (2019).

[13] Va. Code § 13.1-844.2(b).

[14] Va. Code § 13.1-841.

[15] Va. Code § 13.1-847.1(E); § 13.1-846(B)

[16] Va. Code § 13.1-847.1(E).

[17] See Va. Code § 13.1-838.

[18] NC Gen Stat § 55A-7-01(c) (2019).

[19] NC Gen Stat § 55A-7-05(c)(1) (2019).

[20] NC Gen Stat § 55A-7-01(e) (2019).

[21] NC Gen Stat. § 55A-7-04.

[22] NC Gen Stat § 55A-1-40

[23] W. Va. Code § 31E-7-708(e).

[24] W. Va. Code § 31E-7-701.

[25] W. Va. Code § 31E-7-701(d).

[26] W. Va. Code § 31E-7-704(a).

[27] W. Va. Code § 31E-7-704(b).

[28] DC Code § 29-405.01 (2019).

[29] DC Code § 29-405.09 (2019).

[30] 5 Questions Churches Should Ask Before Holding a Virtual Business Meeting, March 30, 2020, https://www.churchlawandtax.com/web/2020/march/5-questions-churches-should-ask-before-holding-virtual-busi.html

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