This is one of three articles on dealing with the Coronavirus and its impact. This blog looks at how association boards and members transact business outside of in-person meetings. See also Coronavirus: What Should Homeowner and Condominium Associations Do? and “Let’s Have Our Meeting or Convention Online!”
As of today (February 27, 2020), estimates are that the Novel Coronavirus has infected 80,000 people worldwide, and killed 3,000. Flu statistics are even more shocking, with about 26 million Americans infected and 14,000 U.S. deaths. While I hope these crises will soon go away, we have been asked what to do if an association cannot (or does not wish to) meet in person, whether due to illness or a natural disaster. Have you considered how the work of the association would continue?
With all things association-related, the answer for any specific association can vary depending on state statutes and the governing documents. Generally, however, there are several methods by which association members or association boards transact business in the absence of everyone gathering at the same time and location—some form of written consent, electronic meetings, or a vote outside a physical meeting.
As a preface, understand that our general recommendation as attorneys is to always have an in-person meeting on matters of great importance. Announcing and holding a meeting avoids questions about notice, due process, etc. In addition, meetings allow for deliberation where proposals can be discussed and minds changed. Following debate, we have seen unacceptable proposals modified at a meeting to become more acceptable and pass. In contrast, most online and electronic voting simply permits an up or down, knee-jerk reaction to the proposal. That said, there are circumstances in which a meeting is simply not possible, so it is worth considering what other options exist to transact business.
Meeting Via Electronic Communications. Board members are fiduciaries of the association and are expected to talk through things. In addition, board meetings tend to be smaller than membership meetings. As a result, there are generally statutory options for board to hold electronic meetings. Of course, check your documents to make sure nothing is expressly prohibited, and for associations where the general membership is allowed to attend all board meetings, a host of other issues arise.
Like many state statutes, the NC Nonprofit Corporation Act provides that a director can participate in a Board meeting by electronic communications. The only requirement is that everyone must be able to simultaneously hear everyone else. Most often that means speakerphone, but other online communications platforms like Skype or Zoom can work as long as everyone can hear and speak to everyone else. Carried to its logical extreme, this also means that all members of a board can participate by telephone. As a result, boards can generally meet and transact business through:
- A properly noticed meeting at which there is a quorum with all board members physically present
- A properly noticed meeting at which there is a quorum with one or more board members present by speakerphone/online communications
- A properly noticed meeting at which there is a quorum with all board members participating by telephone/online communications.
Action Without Meeting. Instead of a meeting, the NC Nonprofit Corporation Act permits a Board to take action by written unanimous consent of all board members. That means every single board member. In times past, this consent usually took the form of a document circulated around and signed by all board members. In today’s world, it’s possible that a scanned or faxed image, or even an email, may be deemed sufficient depending on circumstances. This consent is then included in the minutes or filed with the corporate records.
Since an “Action Without Meeting” does not really include deliberation or the ability to have guests, it should not be used for highly significant issues. In other words, if the action the Board is taking is likely to end with the association on the news or in court, it’s far safer to have a meeting, whether in-person or electronic. Also, if any action taken between meetings is questionable for any reason, it may be a best practice for the board to ratify the action at the next in-person or electronic meeting at which a quorum is present.
Many states, including North Carolina, require an annual membership meeting for associations by statute. The governing documents often require the same. Because of that there there may have to be a notice of the annual meeting and location, even if few are planning to show up. FYI, under Robert’s Rules of Order Newly Revised (11th Edition), “if a quorum fails to appear at a regular or properly called meeting, the inability to transact business does not detract from the fact that the society’s rules requiring the meeting to be held were complied with and the meeting was convened—even though it had to adjourn immediately.” RONR § 40 (p. 347).
In North Carolina, there is no statute clearly authorizing electronic membership meetings. That makes sense, as it is difficult to conduct a telephonic or online meeting of 100 or 1,000 individuals. Very clear governing document language would be required. You should also consult the language in Robert’s about electronic meetings: “Extension of Parliamentary Law to Electronic Meetings” as well as “Additional Rules for the Conduct of Electronic Meetings.” RONR § 9 (p. 97-99). Generally, however, Robert’s discourages electronic meetings other than telephone/Internet phone/video, where everyone can hear and speak to each other:
It is important to understand that, regardless of the technology used, the opportunity for simultaneous aural communication is essential to the deliberative character of the meeting. Therefore, a group that attempts to conduct the deliberative process in writing (such as by postal mail, e-mail, “chat rooms,” or fax)–which is not recommended–does not constitute a deliberative assembly. Any such effort may achieve a consultative character, but it is foreign to the deliberative process as understood under parliamentary law.RONR § 9 (p. 98).
While membership meetings held electronically are not that common, there are methods of allowing members to make decisions outside of a meeting.
Action by Written Consent. As with boards, there is a North Carolina state statute allowing members of an association to make decisions by written unanimous consent. Yes, that means every single member of the association must consent to the action. If such consents are to be electronic, certain steps must have been taken by the association in advance. Again, though, this process requires 100% of all members to agree on the proposal. Since in some of our associations we couldn’t get 100% agreement that it’s dark at night, we seldom see Action by Written Consent of the membership.
Action by Written Ballot. A more common process for members to take action outside of a meeting is by “written ballot.” The state Nonprofit Corporation Act provides that any action that can be taken at an annual or special meeting can be done without a meeting, as long certain steps are followed:
- The association must “deliver a written ballot” setting forth the proposed action to every member
- There must be an opportunity to vote FOR or AGAINST the proposal
- The vote may be by electronic transmission, including electronic mail, as long as the electronic transmission sets forth or is submitted with information from which it can be determined that the electronic transmission was authorized by the member or the member’s proxy
- As many ballots must be returned as would constitute a quorum if a meeting had been held
- The solicitation must indicate the date by which the ballot must be received back, and written ballots received after that date are not counted
- Written ballots cannot be revoked.
Elections can usually also be held by written/electronic ballot, and some states mandate such action. FYI, the Community Associations Institute includes some “elections services” companies in its Professional Services Directory.
Miscellaneous Actions. There are also a couple North Carolina statutes that allow homeowner or condominiums to take specific actions without a meeting. For instance:
- To amend a Declaration: condominiums created on or after October 1, 1986 or planned communities/HOAs created at any time can amend their Declaration through “written agreement,” as long as the statutory process is followed.
- To ratify the association budget: condominiums created at any date or planned communities/HOAs created on or after January 1, 1999, can ratify the association budget even if no one appears at the meeting, pursuant to the statutory budget ratification process.
My hope is that the several diseases that currently have our attention will soon go away. However, regardless of that, there will likely be at some point a different crisis or natural disaster that will require the association or its Board to act outside of the standard, in-person meeting process. As noted above, there are options available. An attorney who regularly focuses on association issues should be able to advise you as to details for your specific needs.
To find a community association attorney, you may want to check the list of Fellows of the College of Community Association Lawyers (CCAL) (left side, “CCAL Directory”). If there are no CCAL members in your area, take a look at the list of attorneys that are Service Providers.
Read follow-up post: Coronavirus: What Should Homeowner and Condominium Associations Do?
For any HOA/condo meeting advice, contact one of the community association attorneys in our Greensboro, Charlotte, Triangle or Coastal offices. Both Jim Slaughter and Michael Taliercio are Professional Registered Parliamentarians and members of the American College of Parliamentary Lawyers.