How to make business decisions ‘virtually’

18th May 2020

Emma Peacock, Trainee Solicitor, DAS Law, looks at what organisations need to know when making those critical decisions ‘virtually’…

Over the last few years, the running of most organisations has become increasingly globalised. This is largely as a result of rapid technological growth and the international expansion of many companies and charities. An example of this is renowned fashion company Jimmy Choo plc which, in July 2016, became the first UK-listed company to host a virtual AGM (Annual General Meeting).

The COVID-19 pandemic and the government’s rules on social distancing have bought into sharp focus the need for all organisations, but particularly those run by committee such as charities, to consider their decision making processes.

Many charities and boards run by committee that had not already embraced the rapid technological growth of the last few years may now find themselves with little alternative but to adapt their processes quickly and effectively to ensure critical and urgent business decisions can be taken whilst complying with their constitution and the government’s rules on social distancing.

Interestingly, the government has recently (4 April 2020 ) given local authorities in England the powers needed to hold public meetings virtually through the use of telephone or video conferencing facilities such as Skype. This is not something that they were accustomed to before.

Do your organisations rules (the constitution) allow for virtual meetings?

When considering whether your constitution allow for virtual meetings, you should first check your articles of association. If your company has adopted the ‘Model Articles’ without amendment to Article 9 of the Model Articles, there is no requirement for directors to be present in the same room for a meeting to take place and therefore you can proceed to undertake virtual meetings without any need to amend the constitution.

It may be slightly more difficult for older companies (those which pre-date the October 2009 Model Articles) or charitable unincorporated bodies, such as trusts. These organisations should carefully review their governing documents to ascertain whether their constitution allows for virtual meetings.

What if the articles are silent on holding board meetings remotely?

If the articles do not specify that directors must attend meetings in person, this is slightly more difficult and a question which has divided legal opinion.  Given the unprecedented times that we find ourselves in, it is likely that as long as the board follows all other procedures needed to hold a meeting, a virtual meeting will be valid.

It is advisable to ensure that there is a clear paper trail of any agreement to hold a virtual meeting by all members of the committee and of course any decisions made during the virtual meeting.

What if the articles currently stipulate that a board meeting can be held in person only?

If the articles require a board meeting to be held in person, it is likely that they can be amended by way of a special resolution of the company’s shareholders to permit board meetings to be held remotely.

Top tips for virtual meetings

  1. You will need to bear in mind that the usual rules relating to meetings such as notice periods, quorum and the compilation of minutes will still apply.
  2. It is unlikely that you will be able to ensure that every attendee at the meeting has access to pertinent documents. Some conferencing technology has facilities to “share your screen”, which is worth considering when choosing which conferencing provider to use.
  3. Similarly, it may be worth using conferencing technology that includes voting software or considering whether separate voting software can be utilized – counting hands via video conferencing has the potential to cause a headache!
  4. A lot of people won’t have been involved in any form of virtual meeting before – it might be useful to send a quick guide before the meeting with details of a suggested dress code and any rules that you want to put in place, such as requiring all participants to remain ‘muted’ unless speaking in order to avoid any audio feedback.
  5. Try a test-run first – this will allow you to get over any potential hiccups and check that the technology you are going to be using is up to scratch.
What alternative options are there if a virtual meeting is not possible?

If holding virtual meetings is not possible for any reason, one alternative option is for decisions to be made by way of a written resolution. This will be permitted if the articles allow for this form of decision making, so again the first step should be to check your articles of association.

The advantage of a written resolution is that it allows for greater flexibility - copies of the resolution do not need to be signed (e.g. an e-mail signifying agreement to the resolution will be sufficient) and it does not rely on all members being available at the same time and having the technology in place to conduct a virtual meeting.

If you have any concerns as to whether your constitution allows for virtual meetings or the process required in order to amend the articles of association to allow for virtual meetings, we would suggest that you seek legal advice.

Disclaimer: This information is for general guidance regarding rights and responsibilities and is not formal legal advice as no lawyer-client relationship has been created. Note that the information was accurate at the time of publication but laws may have since changed.

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