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Can a Board of Directors Take Action Without Meeting In Person?

 Anyone serving on a board of directors (whether for a business, for a charitable organization, or for a homeowner’s association) knows the situation: just a week after the last board meeting, the board needs to take a certain action, and half of the board is not available to meet in person before it is too late.  Fortunately, the North Carolina Business Corporation Act (the “Business Corporation Act”) and the North Carolina Nonprofit Act (the “Nonprofit Act”) allow board of directors to take action outside of a formal, in-person meeting.  Unfortunately, many individuals serving on boards of directors do not understand the requirements for taking such action.

The Business Corporation Act and the Nonprofit Act allow directors to “participate in a regular or special meeting by, or conduct the meeting through the use of, any means of communication by which all directors participating may simultaneously hear each other during the meeting.”  N.C.G.S. § 55-8-20(b) and 55A-8-20(b) (emphasis added).  The board of directors may take action during a regular or special meeting in which some directors are not physically present as long as all directors participating in the meeting can be heard simultaneously, for instance, through a conference call or videoconference.  Since directors cannot hear each other simultaneously using written communication or email, such communication cannot qualify as an acceptable means of conducting a regular or special meeting.

Alternative Actions for Board Meetings

As an alternative to holding a regular or special meeting through a conference call or videoconference, the Business Corporation Act and Nonprofit Act allow a board of directors to take action by unanimous written consent.  Action by written consent outside of a formal meeting is only effective if the board of directors unanimously approves the action.  N.C.G.S. §§ 55-8-21(a) and 55A-8-21(a).  The action must be accompanied by a written consent “signed by each director, describing the action taken, and included in the minutes or filed with the corporate records reflecting the action taken.”  Id.  “The action is effective when the last director signs the consent, unless the consent specifies a different effective date.”  N.C.G.S. §§ 55-8-21(b) and 55A-8-21(b).  

Obtaining a written consent signed by all directors may be more efficient than holding a special meeting, but it could still be insufficient for timely action when one or more directors is unable to sign the consent.  As a potential solution, both Acts allow the written consents to be in electronic format, including e-mail, if authorized by the articles of incorporation, bylaws, or by action of the board of directors.  N.C.G.S. §§ 55-1-50 and 55A-1-70.  To ensure that the board of directors can act as efficiently as possible for the benefit of the corporation, it may be in the corporation’s best interest to amend its bylaws to allow written consents to board action to be in electronic form and delivered by electronic means.

In summary, the Business Corporation Act and the Nonprofit Act provide only two ways in which directors of a corporation can take action outside of a formal, in-person meeting.  First, the directors can “unanimously take action without a meeting if the action is described in one or more written consents signed by all of the directors. . . .” §§ 55-8-21(a) and 55A-8-21(a).  The written consents may be in electronic format if authorized by the articles of incorporation, bylaws, or action of the board of directors.  Second, the directors “may participate in a regular or special meeting by telephone or any other means of communication by which all participants can simultaneously hear each other during the meeting.”  §§ 55-8-20(b) and 55A-8-20(b).

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