Can a company hold a virtual board meeting? A live question before, but now a necessary one - all companies need to ensure that they can fully function despite the disruption caused by the pandemic.
We have received many queries from our clients regarding this very issue – seeking to ensure that their directors still have a means of meeting to make decisions on behalf of the company.
Through these questions, some common themes have emerged:
- Any private limited company, which has not disapplied model article 10(2) of the statutory model articles, will be permitted to convene a board meeting in any manner and using any communication equipment that it wishes.
- The statutory model articles even make it possible for decisions to be made by a messaging app or other forms of electronic communication.
- If the company has disapplied the model articles, it may still be possible to hold a virtual directors' meeting if all directors agree.
- Decisions can also be evidenced by written resolutions, which must be signed by all eligible directors – so a meeting may not even need to be convened.
- The Court of Appeal has accepted the use of audio-visual equipment to connect a general shareholder meeting. As a result, while the specific question has not been put to the courts, such an approach may likely be taken to board meetings – given a board meeting's relative informality compared to a general shareholder meeting.
Virtual board meeting considerations
Often, it is the case that a company will be able to convene and hold a virtual meeting of its directors, even if explicit permission is not included in the articles. However, where this is not permitted, and the directors try to hold a virtual board meeting, it can lead to subsequent questions about the validity of decisions taken at that meeting.
As a result, directors should always seek clarity as to the ability to hold, and requirements for, a virtual board meeting. It will remove any doubt as to the validity of such a meeting. It may be that amendments to the company's articles of association will be required if such meetings are not currently permitted.
There are other alternatives to holding a virtual meeting. For example, many companies allow their directors to decide by unanimous written consent. It is something we have seen relatively frequently over the last few weeks.
We can always work with our clients to find a constructive and timely solution to allow directors, who cannot meet face to face, to take decisions collectively. This enables our clients to carry on with the important job of guiding their company through these challenging times.
Originally published 24 April, 2020
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