Corporate Governance and Coronavirus

Staying safe during the Coronavirus pandemic is, and should be, everyone’s primary concern. As more and more physical facilities (offices, restaurants, meeting facilities) are being closed to enforce safe social distancing, and telecommuting is becoming more the norm, it is important to realize that this does not have to disrupt the ordinary corporate governance of your business. The laws of the state where you formed your entity will govern these issues.

Pennsylvania

Pennsylvania entities may, unless their bylaws or operating agreements require otherwise, hold virtual board and shareholder meetings. The Pennsylvania Business Corporation Law allows shareholder meetings to “be held by means of the Internet or other electronic communications technology” as long as “the shareholders have the opportunity to read or hear the proceedings substantially concurrently with their occurrence, vote on matters submitted to the shareholders, pose questions to the directors, make appropriate motions and comment on the business of the meeting” (15 Pa.C.S.A. 1704(a)). Shareholder participation and voting through such means “shall constitute the presence of…the shareholder” for such meeting (15 Pa.C.S.A. 1708(b)).

Directors may participate in any board meeting via conference call or other electronic technology, as long as everyone can hear each other. Director participation and voting through such means “shall constitute presence in person at the meeting” (15 Pa.C.S.A. 1708(a)).

Unless the articles or bylaws restrict it, shareholders may act by unanimous written consent in lieu of a meeting; further, if the bylaws permit it, shareholders may act by the partial written consent of shareholders having at least the minimum number of votes necessary to authorize an action (15 Pa.C.S.A. 1766).  Unless the articles or bylaws restrict it, the board may also act by unanimous written consent in lieu of a meeting (15 Pa.C.S.A. 1727).

Delaware

Delaware entities are generally permitted to hold virtual shareholder meetings, as long as certain conditions are met. If the certificate of incorporation or bylaws do not designate or provide for the place or manner of shareholder meetings, the board of directors may designate and provide for the manner of such meetings, including holding them solely through remote communication, as long as the shareholders are provided means to participate and vote remotely (8 Del.C. 211).

Unless restricted by the certificate of incorporation or bylaws, directors may participate in any board meeting “by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other.” Such participation “shall constitute presence in person at the meeting” (8 Del.C. 141(i)).

Unless the certificate of incorporation restricts it, shareholders may act by partial written consent in lieu of a meeting, as long as the consenting shareholders have the minimum number of votes necessary to authorize an action (8 Del.C. 228). Unless the certificate of incorporation or bylaws restrict it, the board may also act by unanimous written consent in lieu of a meeting (8 Del.C. 141).

New York

Although New York law ordinarily requires a physical meeting, in response to the pandemic Governor Cuomo issued Executive Order 202.8, dated March 20, 2020, temporarily suspending any provisions of the New York Business Corporation Law that required a physical meeting; this suspension currently last through April 19, 2020. In addition, if authorized by the board, a company may permit shareholders “not physically present” to participate in and vote at meetings electronically. Such shareholders shall be deemed present in person at such meeting (N.Y. Bus.Corp. Sec. 602(a) and (b)).

Unless the certificate of incorporation or bylaws restrict it, Directors may participate in board meetings “by means of a conference telephone or similar communications equipment allowing all persons participating in the meeting to hear each other at the same time;” such participation “shall constitute presence in person at a meeting” (N.Y. Bus.Corp. Sec. 708(c)).

Shareholders may act by unanimous written consent in lieu of a meeting; further, if the certificate of incorporation permits it, shareholders may act by the partial written consent of shareholders having at least the minimum number of votes necessary to authorize an action (N.Y. Bus.Corp Sec. 615(a)).  Unless the certificate of incorporation or bylaws restrict it, the board may also act by unanimous written consent in lieu of a meeting (N.Y. Bus.Corp. Sec. 708(b)).

California

With regard to California entities, shareholders are permitted to participate in meetings electronically as long as the bylaws do not prohibit such action and the entity has obtained such shareholders’ permission in advance (West’s Ann.Cal.Corp.Code T.1, D.1, Refs & Annos). Such shareholders shall be permitted to vote, and shall be deemed present in person, at such meeting (West’s Ann.Cal.Corp. Code sec. 600).

Directors may participate in any board meeting “through use of conference telephone, electronic video screen communication, or electronic transmission”, and as long as everyone can hear each other, such participation shall constitute “presence in person at that meeting” (West’s Ann.Cal.Corp. Code sec. 307).

Unless otherwise provided in the articles, shareholders may act by partial written consent, provided the consenting shareholders have at least the minimum number of votes that would be necessary to authorize or take that action at a meeting.  (West’s Ann.Cal.Corp. Code sec. 603(a)). If it is impractical for the directors to meet, but board authorization is required to take some action, the directors may act by unanimous written consent without holding a meeting (West’s Ann.Cal.Corp. Code sec. 307(b)).

Illinois

In Illinois, shareholders of corporations may, unless specifically prohibited by the articles of incorporation or by-laws, participate in and act at any meeting of the shareholders through the use of a conference call or interactive technology, including but not limited to electronic transmission, internet usage, or remote communication, where all persons participating in the meeting can communicate with each other. Participation by shareholders in such a meeting shall constitute attendance and presence in person at the meeting (805 ILCS 5/7.05). Similarly, members of the board of directors, or members of any committee of the board of directors, of Illinois corporations, unless specifically prohibited by the articles of incorporation or by-laws, may participate in and act at any meeting of the board or committee through conference call or other communications equipment where all persons participating in the meeting can hear each other, and participation in such a meeting shall constitute attendance and presence in person at the meeting (805 ILCS 5/8.15(d)).

Additionally, unless otherwise provided in the articles of incorporation or if in relation to a dissolution of a corporation, shareholders of Illinois corporations may take action without a shareholder meeting: (i) via partial written consent signed by shareholders having at least the minimum number of votes necessary to authorize such action, provided that 5 day advance written notice is provided to all shareholders entitled to vote on the action and prompt written notice of the action taken is provided to the shareholders who have not consented in writing; or (ii) via unanimous written consent  of the shareholders entitled to vote (805 ILCS 5/7.10(a)). Further, boards of directors of Illinois corporations, or committees of a board, unless specifically prohibited by the articles of incorporation or by-laws, may take action without a meeting via unanimous written consent (805 ILCS 5/8.45(a)).

Florida

Florida law expressly authorizes the board of directors, in its sole discretion, to determine that the meeting can be held at a physical place or solely by means of remote communication (i.e., a virtual meeting) (West’s F.S.A. Sec. 607.0709(4)). After such authorization by the board, shareholders may participate in any virtual annual or special meetings subject to guidelines and procedures the board adopts (West’s F.S.A. § 607.0709(1) and (2)).

Further, the corporation must implement reasonable measures to: “verify that each person participating remotely” is the appropriate party entitled to vote; and (ii) provide such parties entitled to vote a “reasonable opportunity to participate in the meeting and vote on matters submitted to the shareholder including an opportunity to communicate, and to read or hear the proceedings of the meeting, substantially concurrently with such proceedings” (West’s F.S.A. Sec. 607.0709(2)). Lastly, the corporation must also keep and maintain a record of such votes (West’s F.S.A. Sec. 607.0709(3)).

Unless otherwise provided in the articles, shareholders may act by partial written consent, provided the consenting shareholders have at least the minimum number of votes that would be necessary to authorize or take that action at a meeting; provided, however, that voting for directors must be unanimous if cumulative voting is permitted (West’s F.S.A. Sec. 607.0704(1) and (8)). Unless the articles or bylaws restrict it, the board may also act by unanimous written consent in lieu of a meeting (West’s F.S.A. Sec. 607.0821(1)).

If you have any questions about laws regarding corporate governance for these or any other jurisdictions, please contact Douglas L. Rabuzzi. Doug is a Partner with Leech Tishman and a member of the Corporate Practice Group. Doug is based in the Pittsburgh office and can be reached at 412.261.1600 or via email at drabuzzi@leechtishman.com.

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