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Conducting Corporate Online Meetings for Associations and Other Nonprofit Organizations

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March 12, 2020

Table of Contents

I.  Introduction

II. General Requirements for Online Meetings

III. Specific Requirements for Board Of Directors' Meetings

IV. Specific Requirements for Members' Meetings

V. Members' Actions Without Holding a Meeting Via Ballots

VI. Members' & Board of Directors' Actions Without Holding a Meeting Via Unanimous Written Consent

VII. Online Meetings 

I. Introduction

 

An association consists of many members who have joined together to pursue common interests. The members elect a board of directors to govern the association. The board of directors promotes the members' common interests by making objective, informed, and intelligent decisions.

 

The laws and courts impose various requirements to ensure that the board of directors acts in the best interest of the association's members and to prevent directors from acting in their own selfish interest. The laws and courts seek to create an open forum through which all directors can communicate any and all information concerning relevant facts prior to making a decision.

 

Likewise, an association may act under the direct governance of the members such as when the members gather to elect directors. Acts or decisions derived from membership meetings are presumed to be in the best interest of the members, and consequently, the laws and courts impose fewer requirements on members' meetings as opposed to board of directors' meetings.

 

In either a board of directors' meeting or a members' meeting, face-to-face deliberations allow for verbal expression, gestures, informational items, and writings to be easily exchanged and discussed openly and thoroughly.  Although face-to-face communication is extremely effective, face-to-face is not necessarily efficient.  Due to modern technology, the laws and courts are now forced to recognize "Online" board of directors' meetings and members' meetings. "Online" for purposes of this legal article means a meeting conducted by conference telephone, electronic video screen communication or other communications equipment that enables each member to (1) communicate with all participants, (2) participate in all pending matters, (3) propose or interpose an objection to specific corporate action, and (4) verify the identity of the member and all actions or votes cast.

 

This legal article addresses how California laws and courts accommodate these recent technological advancements.

 

This legal article addresses the laws applicable to non-profit mutual benefit corporations in California.  Although the laws for for-profit corporations and non-profit public benefit corporations are largely similar, there may be differences that are beyond the scope of this article to discuss.  All citations unless otherwise specified refer to the California Corporate Code.

II. General Requirements for Online Meetings

 

1. Does California law allow corporate Online meetings?

 

Yes. California law permits the time, manner, and place of the meeting to be fixed by the bylaws or by the board of directors. (Corp. Code § 7151(c)(2).) The law further permits directors or members to attend via electronic methods unless otherwise provided in the corporation’s articles or bylaws.  (Corp. Code § 7211(a)(6); Corp. Code § 7510(f).)

 

2. What are the different types of board meetings?

 

California law recognizes two types of meetings: regular meetings and special meetings.

 

3. What is a regular meeting?

 

A regular meeting is a scheduled meeting pursuant to a preset schedule outlined in the bylaws or by the board of directors. (Corp. Code § 7211(a)(2).)

 

4. How often should a regular meeting be held?

 

The frequency of regular board meetings depends on the board's size and structure, its role in the association, and on the nature of the association. There is no rule on how frequently a board should meet.

 

Regular members' meetings shall be held on a date, time, and frequency set forth in the association’s bylaws, however a regular members' meeting must be held in each year in which directors are to be elected, and the election must be conducted at that meeting. (Corp. Code § 7510(b).)

 

5. What is a special meeting?

 

A special meeting is any meeting held whenever action is required before the next regular meeting.

 

6. Does the association have to adopt a special provision in their bylaws enabling the board of directors' meetings and/or members' meetings to be conducted online or via other electronic methods?

 

No. Unless otherwise prohibited by the corporation’s articles or bylaws, California law permits a board or members’ meeting to be held fully or partially by electronic methods including online.  (Corp. Code § 7211(a)(6); Corp. Code § 7510(f).)  The law does set forth certain conditions that must be met for a meeting to have been validly conducted online or by electronic methods; Questions 19 and 29 below address these conditions for board and members’ Meetings respectively.

 

Further, even if the bylaws specifically state the date, place, and time of board or members' meetings, the board may, in its discretion, authorize members to attend and participate in a meeting via online or other electronic methods, subject to the consent of the member or members participating electronically. (Corp. Code § 7510(a).)

 

7. If the association conducts board or members’ meetings electronically or online, does the association have to transcribe the actions taken during the online/electronic meetings into the association's minutes?

 

Yes. An association is required to keep minutes of the proceedings of its members, board, and committees of the board. (Corp. Code § 8320(a)(2).)

 

8. What are minutes?

 

Minutes are the official notes or records of the association's meetings and/or transactions in written form.

 

9. What is an Electronic Transmission?

 

An "Electronic transmission by the corporation" means a communication delivered by fax, e-mail, posting on an electronic message board or network, or other means of electronic communication, to a recipient who has provided consent to the use of those means of transmission for communications, and that creates a record that is capable of retention, retrieval, and review which may thereafter be rendered into clearly legible tangible form. (Corp. Code § 20.)

 

An "Electronic transmission to the corporation" means a communication delivered by fax, e-mail, posting on an electronic message board or network, or other means of electronic communication, as to which the corporation has placed in effect reasonable measures to verify that the sender is the shareholder, member, or director purporting to send the transmission, and that creates a record that is capable of retention, retrieval, and review which may thereafter be rendered into clearly legible tangible form. (Corp. Code § 21.)

III. Specific Requirements for Board of Directors' Meetings

 

1. What are California’s legal requirements for online board meetings?

 

For in-person meetings and online, electronically conducted meetings, California law requires compliance with the following four elements to ensure that the board of directors' actions are in the best interest of the members and that the board of directors' decisions are based upon a thorough deliberation of relevant information:

 

  • Notice

  • Quorum and Attendance 

  • Presence

  • Vote

 

 2. What is notice?

 

Notice is a communication, either verbal or written, to a director or member specifying the time, manner, and place of a regular or special meeting. The notice does not need to specify the purpose of any regular or special meeting of the board, unless required by the bylaws. (Corp. Code § 7211(a)(2).)

 

3. When is notice required for a board of directors' meeting?

 

Regular board Meetings may be held without notice, if the time and place of the meetings is fixed by the bylaws or by board resolution.

 

Special meetings of the board shall be held upon four days' notice by first-class mail or 48 hours' notice delivered personally or by telephone, including a voice messaging system or by electronic transmission by the corporation. The articles or bylaws may not dispense with notice of a special meeting. (Corp. Code § 7211(a)(2).)

 

4. Does every director need to receive notice of special board meetings, or regular board meetings if the time and place of the meetings is not fixed?

 

Yes, unless the individual director waives notice. A director may waive notice by signing a written waiver of notice, a written consent to holding a meeting, or an approval of minutes of the meeting, or a director may waive notice by merely attending the meeting and not protesting the lack of notice before or at the start of the meeting. These waivers, consents, and approvals must be filed with the association records or made part of the minutes of the meetings. (Corp. Code § 7211(a)(3).)

 

5. What is a quorum for purposes of board of directors' meetings?

 

Ordinarily, a majority of directors constitutes a quorum, but the articles or bylaws may provide otherwise.

 

However, the bylaws of public benefit and mutual benefit corporations (unless there is only one authorized director) cannot establish a quorum that is either less than one fifth (1/5) the authorized number of directors or less than two, whichever is larger. (Corp. Code § 7211(a)(7).)

 

In comparison, a for-profit corporation's bylaws cannot establish a quorum that is either less than one third (1/3) the authorized number of directors or less than two, whichever is larger, unless the authorized number of directors is one, in which case one director constitutes a quorum. (Corp. Code § 307(a)(7).)

 

6. What if a quorum is established but enough directors withdraw from the meeting and leave less than a quorum? Can the remaining group still conduct business?

 

Yes, as long as any action taken is approved by at least a majority (unless otherwise specified in the bylaws) of the directors required to constitute a quorum for that meeting. (Corp. Code § 7211(a)(8).)

 

7. What is attendance?

 

Attendance is the actual presence of the requisite number of directors to constitute a quorum. The corporate records for the association must verify that all voting participants were present throughout the meeting.

 

8. What is presence?

 

Presence means that the attending directors can communicate with one another simultaneously.

 

9. Is a director considered to be in attendance and present if he/she participates by conference telephone or video screen communication?

 

Yes. Participation by conference telephone constitutes presence in person at the meeting as long as all the participating directors can hear one another. (Corp. Code § 7211(a)(6).)

 

10. Is a director considered to be in attendance and present if he/she participates by e-mail or other electronic transmission by and to the corporation?

 

Yes, subject to conditions. Participation through electronic transmission other than conference telephone or video screen communication constitutes attendance and presence in person if the following two (2) conditions are met:

 

  • Each participating director can communicate with all participants concurrently; and

  • Each director has the means to participate in all pending matters and the capacity to propose or interpose an objection to specific corporate action.

 

(Cal. Corp. Code § 7211(a)(6).)

 

11. How does the board take action?

 

Any proposed action to be taken by the board must be approved by a majority of the directors present at a meeting where a quorum has been formed.  Each director has a single vote on each matter to be voted upon and directors may not vote by proxy.  (Corp. Code § 7211(c).)

 

Alternatively, the Board may take action without holding a meeting if all the directors agree in writing to the proposed action, known as Unanimous Written Consent.  See Section VI for more information on unanimous written consents. 

IV. Specific Requirements for Members' Meetings

 

1. What are California’s legal requirements for members' meetings held online or via other electronic methods?

 

AFor in-person members’ meetings and online, electronically conducted members’ meetings, California law requires compliance with the following six (6) elements:

 

  • Record Date

  • Notice

  • Quorum and Attendance

  • Presence

  • Vote

  • Minutes

 

2. What is a record date?

 

AA record date is an established date for determining who are the association’s members entitled to receive notice of a membership meeting. The bylaws may provide or the board may fix in advance a record date. This Record Date must be no more than 90 days nor less than 10 days before the meeting date.

 

If no record date is fixed, notice must be given to all persons who were members as of the close of business on the business day preceding the day notice is sent. (Corp. Code. § 7611(a).)

 

3. When is notice required for a members' meeting?

 

A written notice of the meeting is required no less than 10 days nor more than 90 days before the date of the meeting. (Corp. Code § 7511(a).) However, if notice is given by mail, and is not sent by first-class, registered or certified mail, the notice must be given at least 20 days before the date of the meeting. 

 

4. Does every member need to receive a written notice?

 

No. Only members who as of the record date are required or permitted to take any action at a meeting are required to be given written Notice. (Corp. Code § 7611(a).)

 

5. How should the notice be transmitted?

 

Notice may be delivered personally, by electronic transmission, by mail, or by another means of written communication.  The notice should be addressed to the member at the address for that member appearing on the books of the association or given by a member to the association for purposes of notice. (Corp. Code § 7511(b).)

 

A Notice sent by electronic transmission must meet the requirements of Corp. Code § 20, meaning that the notice must be in a form of electronic communication that creates a record capable of retention, retrieval and review, sent to a member who has provided unrevoked consent to the corporation’s use of such form of electronic communications.  (See Question 9 for more information.)

 

However, the corporation may not give notice by electronic transmission if either (1) it has been unable to deliver two consecutive notices to the member by that means of communication; or (2) the person responsible for giving notice becomes aware of the inability to deliver notices to the member by that means of communication. 

 

6. What information should be included in the notice?

 

AThe Notice shall state the place, date and time of the meeting, the means of electronic transmission by and to the corporation or electronic video screen communication, if any, by which members may participate in that meeting, and in the case of a regular members' Meeting, the matters that the board of directors, at the time that the notice was given, intends to present for action by the members.

 

In case of a special members' meeting, the notice must specify the general nature of the business to be transacted, and that no other business may be conducted other than that mentioned in the notice.

 

The notice of any meeting at which directors are to be elected shall include the names of all those who are nominees at the time the notice is given to members. (Corp. Code § 7511(a).)

 

7. What is a quorum for purposes of members' meetings?

 

A quorum is one-third (1/3) of the voting power, represented in person or by proxy, unless the articles or bylaws provide otherwise. (Corp. Code § 7512(a).)

 

8. What if a quorum is established but enough members' withdrawal leaves less than a quorum? Can the remaining members still conduct business?

 

Yes, as long as any action taken is approved by at least a majority of the members required to constitute a quorum unless the bylaws require more than a majority of the Quorum to approve an action. (Corp. Code § 7512(c).)

 

9. Can a meeting of the members be conducted by video screen communication, e-mail, or electronic transmission by and to the corporation?

 

Yes, subject to a few conditions. A meeting of the members may be conducted, in whole or in part, by electronic transmission by and to the corporation or by electronic video screen communication if the following two conditions are met:

 

  • The corporation implements reasonable measures to provide members attending in person a reasonable opportunity to participate in the meeting and to vote on matters submitted to the members, including an opportunity to read or hear the proceedings of the meeting substantially concurrently with those proceedings; and 

  • If any member votes or takes other action at the meeting using electronic methods, a record of that vote or action is maintained by the corporation.

 

(Corp. Code § 7510(f).)

 

10. What is a proxy?

 

A proxy is any person who is authorized by another person to act for him or her, in this case to vote for him or her at a members' meeting. (Corp. Code § 5069.)

 

11. What members are entitled to vote?

 

Members who are entitled to vote on the date of the meeting’s record date will be entitled to vote at the members’ meeting. Either the bylaws, or the board of directors if the bylaws are silent, may set a date in advance of the meeting as the record date to determine which members are entitled to vote at the meeting. The record date in this situation cannot be set more than 60 days prior to the meeting date. If a record date for this purpose is not set, members on the meeting date who would otherwise be eligible to vote are entitled to vote at the meeting.  (Corp. Code § 7611(b).)

 

Unless otherwise provided in the articles or bylaws of the corporation, each member is entitled to cast one vote on each matter submitted to a vote of the members.  (Corp. Code § 7610.)

V. Members' Actions Without Holding a Meeting Via Ballots

 

1. Does California law allow members to take action without calling a meeting?

 

Yes, unless prohibited in the articles or bylaws of the association. Any action that may be taken at any regular members' meeting or special members' meeting may be taken without a meeting if the association distributes a written or electronic ballot to every member entitled to vote on the matter. (Corp. Code § 7513(a).)

 

2. What information must be on the ballot?

 

The ballot must set forth the proposed action, provide an opportunity to specify approval or disapproval of the proposal, and provide reasonable time within which to return the ballot to the association. (Corp. Code § 7513(a).)

 

3. What additional information must accompany the ballot?

 

In addition to the ballot itself, the ballot solicitation must disclose the total number of responses needed to meet the quorum requirement and, for ballots except those for the election of directors, the ballot solicitation must state the percentage of approvals necessary to pass the measure in question. The solicitations must also specify the time by which the ballot must be received by the corporation in order to be counted. (Corp. Code § 7513(c).)

 

4. How many written and/or electronic ballots are required to approve an action?

 

Approval by written or electronic ballots is valid only when the number of votes cast by ballot within the time period specified is equal to or more than the number that would be required to be present at a meeting to form a quorum necessary to authorize the proposed action, and the number of approvals is equal to or more than the number of votes required to approve the action at a meeting had the vote been taken in a face-to-face meeting. (Corp. Code § 7513(b).)

 

5. How should the ballots be distributed?

 

Ballots must be distributed in the same manner as if a notice of a meeting were being sent to members. (Corp. Code § 7513(c).)

 

Unless otherwise provided by the articles or bylaws, and only if approved by the board of directors, the ballot and any related material may be sent by electronic transmission by the corporation and responses may be returned to the corporation by electronic transmission to the corporation. (Corp. Code § 7513(a).)

 

6. Can a written or electronic ballot be revoked?

 

No, unless the articles or bylaws provide otherwise. (Corp. Code § 7513(d).) 

 

7. May directors be elected by written or electronic ballot?

 

AYes, where authorized by the articles and bylaws of the association (such as the language in the California Model Bylaws). (Corp. Code § 7513(e).)

 

VI. Members' and Board of Directors' Actions Without Holding a Meeting Via Unanimous Written Consent

 

8. May members or directors act without holding a meeting and without submitting ballots?

 

Yes. Any action required or permitted to be taken by the members or directors may be taken without a meeting, if all the authorized members or directors consent in writing to the action. The written consent or consents must be filed with the minutes of the proceedings of the members or the board of directors. An action by written consent has the same force and effect as a unanimous vote of the members and/or directors. (Corp. Code § 7516.)

 

9. What is Unanimous Written Consent?

 

Unanimous written consent, in general, is a scripted, typed, or electronic document signed by all the members or directors agreeing to the action stated on the document.

 

10. Does unanimous mean all members?

 

No. Unanimous means all the members entitled to vote on the action proposed. (Corp. Code § 7511(f).)

 

11. Does unanimous mean all directors?

 

Not necessarily. Unanimous does not include any "interested director". An "interested director" is a director who stands to personally profit above that of the general membership from the action being proposed. Only the written consent of "disinterested directors" is required for the action to be unanimous. (Corp. Code § 7211(b).)

 

12. What is written consent?

 

Written consent may be in the form of one or more documents signed by the directors or members, facsimiles of those documents, telegraphic communications, and/or electronic copies of those documents. (Corp. Code § 195.)

 

13. Do the written consents need to be filed in the minutes of the board of directors' or members' proceedings?

 

Yes. Consents must be filed with the minutes of board of directors' or members' proceedings. (Corp. Code § 7516.)

 

Although the consent is effective as of the date the last signature is obtained, the consent can specify that the action taken is effective as of a different date, including an earlier date than that of the last signature obtained.

VII. Online Meetings

 

1. What are the advantages to conducting online or electronic meetings?

 

There are numerous advantages to conducting corporate meetings online or via electronic methods, even if the meetings do not end up with actions being decided upon:

 

  • Issues and ideas can be thoroughly discussed via prior e-mail or other electronic correspondence, and when the directors or members meet face-to-face, all that is required is a vote.

  • Routine business matters can be handled quickly by gathering the requisite written consents via e-mail, and consequently governing committees can spend more in-person time addressing larger policy goals and strategic planning measures.

  • Transmitting informational items to directors or members electronically prior to the face-to-face meeting results in a greater level of preparation.

  • The association is more responsive to rapid changes due to the ease of calling and conducting a meeting by conference telephone, electronic video screen communication, or other communications equipment.

  • Finally, meetings conducted by conference telephone, electronic video screen communication or other communications equipment reduce the expenses for faxes, postage, copies, and traveling expenses typically associated with traditional face-to-face meetings.

 

2. What are the disadvantages to conducting corporate meetings by conference telephone, electronic video screen communication, or other communications equipment?

 

Likewise, there are numerous disadvantages to conducting corporate meetings by conference telephone, electronic video screen communication or other communications equipment even if the meetings do not end up with issues being decided upon:

 

  • Absent pre-established parliamentary procedures, the meetings can become chaotic and unruly.

  • The meetings require that the members or directors be familiar with how to use electronic communication, and some members or directors who are not comfortable with e-mail or modern technology may resolutely refuse to participate.

  • The one-dimensional nature of online debate can be limiting. In live meetings, members or directors can be quick to pick up on non-verbal and verbal cues, and the discussion can be synergistic and dynamic, whereas electronic meetings, even those conducted by video screen communication, can tend to force the discussion into restrictive or formalistic patterns, and for text-based communications the discussion can be bound by the limitations of the written word. For example, what might be a flippant remark around the table may come across as biting or ill-humored when expressed online without the social context provided by the in-person format. Therefore, it requires a different set of skills to conduct an online meeting.

 

3. What is the best means of conducting a meeting by conference telephone, electronic video screen communication, or other communications equipment?

 

Instituting and maintaining quality procedures is especially critical, and due to each association's peculiarities there is no set process that works for all. A well-managed process requires significant investment in time and attention and must be a group effort. Although each association is unique, the following are some guidelines for developing an effective written protocol:

 

  • It is a good practice to adopt formal parliamentary rules and adapt them to meetings conducted by conference telephone, electronic video screen communication, or other communications equipment (e.g., Roberts' Rules of Order).

  • Designate an individual (such as the president) to manage and facilitate the process.

    • The chairman of the board or president of the corporation ordinarily presides at the board meetings. If neither is available, the highest-ranking available vice president of the corporation usually presides.

    • It is advised that the presiding officer seek help and guidance from the association's attorney in matters such as preparing the agenda, deciding how to conduct the meeting and determining required numbers for quorum and voting purposes.

    • However, the presiding officer should not become the hub of communication.

  • Create voting procedures that adhere to federal law, California law, and the association's articles and bylaws.

  • Maintain a written record of the proceedings to serve as prima facie evidence that the meeting was held and that the matters stated in the written record are true. The following information should be recorded:

    • The nature of the corporate action;

    • The time and circumstances under which the action was taken; and 

    • The basis for the action.

  • Allow for an issue to be pulled from the process if it becomes too complicated to discuss by conference telephone, electronic video screen communication, or other communications equipment.

  • Keep the process under constant revision.

  • Develop an access policy for members or directors who do not have access to or lose access to the communication devices used.

  • Make allowances for members or directors who are not comfortable with the technology.

  • Focus on the process, not the person.

  • Always clarify positions of members or directors - never assume.

  • Assist members or directors who do not communicate well by conference telephone, electronic video screen communication, or other communications equipment.

  • Make provisions to address a system failure.

  • Establish responsibility to inform and respond to members or directors regarding actions taken within the meeting.

 

4. Where can I find additional information?

 

This legal article is just one of the many legal publications and services offered by C.A.R. to its members. For a complete listing of C.A.R.'s legal products and services, please visit car.org. Readers who require specific advice should consult an attorney. C.A.R. members requiring legal assistance may contact C.A.R.'s Member Legal Hotline at (213) 739-8282, Monday through Friday, 9 a.m. to 6 p.m. and Saturday, 10 a.m. to 2 p.m. C.A.R. members who are broker-owners, office managers, or Designated REALTORS® may contact the Member Legal Hotline at (213) 739-8350 to receive expedited service. Members may also submit online requests to speak with an attorney on the Member Legal Hotline by going to http://www.car.org/legal/legal-hotline-access/. Written correspondence should be addressed to:

 

CALIFORNIA ASSOCIATION OF REALTORS®

Member Legal Services 

525 South Virgil Avenue 

Los Angeles, CA 90020

 

The information contained herein is believed accurate as of March 12, 2020. It is intended to provide general answers to general questions and is not intended as a substitute for individual legal advice. Advice in specific situations may differ depending upon a wide variety of factors. Therefore, readers with specific legal questions should seek the advice of an attorney. Revised by Dave Radmore, Esq.

 

Copyright© 2020 CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.). Permission is granted to C.A.R. members to reprint this material in hardcopy or PDF format only for personal use or with individual clients. This material may not be used or reproduced for commercial purposes. Other reproduction or use is strictly prohibited without the express written permission of the C.A.R Legal Department. All rights reserved.

 
 
 
 
 
 
 

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