Holding board meetings remotely
In the current climate where those who can are working from home it becomes all the more important to observe the formalities around director meetings. The room for confusion, ambiguity and discord for failing to properly record a decision made is heightened in the current circumstances. As and when the dust settles there could be a forensic examination of what went on.
We have set out a checklist below, but in every case it is a matter of the detail. Accuracy and checking of the detail is paramount, and if necessary take legal advice.
Do your Articles permit remote meetings?
The first point to check is whether your company articles allow remote meeting. Usually articles will set out separate regimes for majority decisions taking in directors’ meetings and unanimous decisions made in writing outside directors’ meetings. Note therefore that unless specifically provided for in the company’s articles, directors cannot act otherwise than unanimously without holding a formal meeting.
Pre Companies Act 2006 companies do not address remote meetings simply stating that “directors may regulate their proceedings as they think fit” (Table A). Well drafted articles adopted to sit on top of Table A will often allow directors to meet remotely provided they are able to hear and communicate effectively with each other throughout the meeting. The 2006 Act model articles allow for virtual meetings providing “directors participate in a directors’ meeting when they can each communicate to the others any information or opinions they have on any particular item of the business of the meeting” and “in determining whether directors are participating in a directors’ meeting it is irrelevant where any director is or how they communicate with each other”.
Has proper notice of the meeting been given?
The usual rules apply here, namely that reasonable notice needs to be given to all directors including those overseas and those known to be unable to attend unless they have waived their right to notice. Reasonable notice will be determined by what length of notice is normally given, what business is to be transacted, whether the length of notice is sufficient to enable all directors to participate and in accordance with any agreement between the shareholders. A meeting will not be properly convened, and any business transaction transacted will be void, unless proper notice is given to all of the directors entitled to receive it. The form of the notice need not be in writing, but it is always good practise to confirm in writing (emails and texts will suffice) and to keep a copy of the notice to demonstrate compliance.
Choose the right technology
The important point about technology is to choose a method whereby everyone participating can hear and contribute and where the risk of drop out or blank out is minimal. This can often mean choosing a technology which is more reliable in favour of one which allows a greater degree of participation. It is best to take account of connection difficulties that any director might have and to remember that not everyone is familiar with video conferencing technologies (despite the steep learning curve those working from home have all been on in the last few weeks). Video conferencing allows the host to monitor drop offs but even then, the chair should make regular checks with participants that they can hear and have been heard.
Holding the meeting
Virtual meetings should be carefully managed and minuted in the usual way: it is not generally advisable to record them. The chair should recap the ground rules at the outset as well as the agenda and tips for using the meeting technology including how to mute/unmute, screen share, ask questions via chat functions etc. It is good practice to confirm at the beginning that all directors agreed to the board meeting being via the chosen technology and at the end that all could hear and communicate effectively with each other throughout the meeting.
Extra care should be taken to declare and minute directors’ interests and to authorise conflicts in accordance with the requirements of the Companies Act 2006, the articles and any conditions imposed from previous authorities. At this point the quorum requirements should be checked.
During the meeting the chair should ensure that each director is given a proper opportunity to debate the business and the meeting should be adjourned and resumed if communication is lost.
When it comes to decision making the usual nods or show of hands will need to be replaced by spoken assent or dissent. If there is some electronic voting system then that may be used but care should be taken by those voting and by the chair to make sure votes are recorded unambiguously then and there.
The chair should state clearly what the board has decided once all votes are in. If there is no consensus it is up to the chair to determine the best course of action and that might be to return the item to the next meeting with more information or an updated proposal or for the item to be deferred for a longer period of time or dropped entirely.
Please refer to our previous updates for further guidance on directors’ duties and insolvency.