The COVID-19 inspired transition to a more virtual workforce brings with it new rules, including how to keep your governance meetings compliant during virtual meetings.
Here are some considerations to be aware of when conducting your entity’s governance meetings, i.e., meetings of the shareholders, directors, members, or manager (depending on your entity type).
First, review your Bylaws or Shareholders Agreement (if a corporation), your Operating Agreement (if a limited liability agreement), Partnership Agreement (if a partnership), and so on. If your applicable governance document allows for remote or virtual meetings (such as conference calls or video calls), then simply comply with your governance document.
If your company’s applicable governance document doesn’t provide for remote or virtual meetings, then you have two options…
1) Amend your governance documents to provide for remote or virtual meetings, and any associated procedures; or
2) follow the applicable Florida Statutes, if your governance documents don’t require in-person meetings; or
3) if your governance documents are silent on this issue.
Maybe you have other provisions you wish to amend or clean-up, or maybe you just want to add in a provision allowing those involved in your entity to host virtual meetings. Either way, contact our office, and we would be glad to assist you and the needs of your business.
Suppose your governance documents are silent as to certain provisions. In that case, the Florida Statues will determine how you are to proceed in those applicable situations.
For the purpose of this blog, we will discuss the provisions of the Florida Statutes as they apply to the most common entity types, and the hosting of a virtual meeting.
For-Profit Corporations: A for-profit corporation is an entity that is organized with the purpose of earning a profit through its operations and is concerned with its own interests. The owners of a for-profit corporation are called shareholders or stockholders.
Furthermore, the corporation’s most critical decisions are made by a Board of Directors, and the individuals chosen by the shareholders or stockholders to participate on the Board of Directors are called, well, directors, of course. Additionally, the Board of Directors may elect Officers (such as a president, vice-president, secretary, and treasurer) to handle the company’s day-to-day operations.
Shareholders/Stockholders: In accordance with Florida Statute § 607.0709, Shareholder meetings may be held utilizing any means of remote communication if authorized by the corporation’s Board of Directors (the “Board”) and to the extent specific steps are taken by the corporation.
Steps the corporation must take include, but are not limited to: (a) ensuring there is a method in place to verify that each person is present, their identity, and that they are permitted to vote as a shareholder, or as a proxy; (b) ensuring that the participates (whether shareholders or proxies) have a reasonable opportunity to participate in the meeting; and (c) ensuring there is a method in place to record and maintain a record of any voting or action taken by any shareholder or proxy.
Directors: In accordance with Florida Statute § 617.0721(3), meetings of the Board of Directors of for-profit corporations may be held by any means of communication. The Florida Statutes provide that unless the Articles of Incorporation, Bylaws, or Shareholders Agreement provide otherwise, the Board of Directors may permit a meeting to occur by means of any communication so long as all of the participants may simultaneously hear each other during the meeting. If a meeting is conducted remotely, all participating directors must be informed that a meeting is taking place at which official business may be transacted.
Florida Statutes also provide for emergency powers and provide for specific actions that may be taken if a quorum of the Board of a for-profit corporation cannot readily be assembled because of a catastrophic event. Thus, if a quorum of the Board of Directors cannot be assembled, implementing statutorily authorized emergency powers may be considered.
Not-for-Profit Corporations: A not-for-profit corporation is an entity that does not earn profits for its owners. All of the money earned by or donated to a not-for-profit organization is used to pursue the organization’s objectives and keep the company running. A not-for-profit corporation is structured similarly to a for-profit corporation, with one key exception – a not-for-profit corporation doesn’t have shareholders or stockholders. Although not required, not-for-profit corporations may have members.
Directors: In accordance with Florida Statute § 617.0303, director meetings of not-for-profit corporations may be held by any means of communication.
Florida Statutes provide that unless the Articles of Incorporation or the By-laws provide otherwise, the Board may conduct meetings through the use of any means of communication by where all participating directors simultaneously hear or read each other’s communications during the meeting. 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.
Florida Statutes also provide for emergency powers and provides for certain 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. 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.
Members (if any): In accordance with Florida Statute § 607.0709, Member meetings may be held by means of remote communication if authorized by the not-for-profit corporation’s Board and to the extent certain steps are taken by the not-for-profit corporation.
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), (b) to implement reasonable measures to provide members and proxies a reasonable opportunity to participate in the meeting, and (c) to maintain a record of voting or action by any members or proxy that votes or takes other action by means of remote communication.
Limited Liability Companies: A limited liability company is an entity that is organized with the purpose of earning a profit through its operations. The owners are called members. If the LLC is manager-managed, the critical decisions are made by a Board of Managers, and the individuals chosen by the members to participate on the Board of Managers are called managers. The managers typically handle the day-to-day operations of the company, unless the LLC is member-managed.
Members: Meetings of members and meetings of managers of LLCs may be held by remote communications if all persons participating in the meeting can hear each other. LLCs are not required to hold annual meetings. However, it’s recommended that LLCs have a meeting annually, at the least.
Managers: As mentioned above, meetings of members and meetings of managers of LLCs may be held by remote communications if all persons participating in the meeting can hear each other. Virtual meetings for LLCs may not be an issue since they are not required to hold annual meetings under Florida Statutes.
Partnerships: A partnership is a formal arrangement by two or more parties to manage and operate a business and share its profits. A partnership doesn’t have to be registered with the Florida Department of State to exist, but may. A partnership is organized with the purpose of earning a profit through its operations. The parties involved in the partnership are called partners.
Partners: Meetings of the partners may be held by remote communications if all persons participating in the meeting can hear each other. Virtual meetings for a partnership may not be an issue since they are not required to hold annual meetings under Florida Statutes.
For more information on how to ensure your company remains compliant while operating virtually, contact our team.
This Blog was written by Hunter Business Law’s Advanced Certified Paralegal, Katelyn J. Dougherty.
DISCLAIMER: This blog is for educational purposes only and does not offer nor substitute legal advice. Additionally, this blog does not establish an attorney-client relationship and is not for advertising or solicitation purposes. Any of the content contained herein shall not be used to make any decision without first consulting an attorney. The hiring of an attorney is an important decision not to be based on advertisements or blogs. Hunter Business Law expressly disclaims any and all liability in regard to any actions, or lack thereof, based on any contents of this blog.
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