Public health recommendations are asking the public to reduce contact with other people to limit the spread of COVID-19, in an attempt to ultimately save lives. But avoiding in-person meetings in a not-for-profit can have legal implications.
Legal Issues around In-Person Meetings
The difficulty is that the law has always considered in-person meetings as the default way valid decisions are made, at least as far as a not-for-profits’ boards of directors and general meetings of members are concerned. At some point, these bodies must make decisions. Members are responsible for certain key decisions, notably electing the directors, and annual general meetings are mandatory. The board of directors is responsible for the overarching management of the organization. If the organization has an executive director, for example, the board will almost inescapably be the body to hire and supervise them.
This post describes three legally valid alternatives to in-person board and general meetings that not-for-profits can consider. Note that when these bodies attempt to make decisions without respecting the legal requirements this generally results in the decisions being invalid or open to challenge.
This post concerns not-for-profits in Quebec, whether their governing law is the federal Canada Not-for-profit Corporations Act or Part III of Quebec’s Companies Act.
1. Hold meetings by videoconference or telephone
In some cases, directors and members can choose to participate in meetings by videoconference or telephone, or a meeting can be held entirely in this way. Those who participate using these means are considered to have attended the meeting, in a legal sense.
Here are some considerations to take into account when holding meetings this way:
The communication means used must allow all participants in the meeting to communicate with one another “directly” (for not-for-profits governed by the Quebec Companies Act) or “adequately” (for those governed by the Canada Not-for-profit Corporations Act). There’s little if any case law on these requirements, so it’s not clear whether something different is required for the two types of non-profits.
At a general meeting of members, a voting mechanism must allow each vote to be verified afterwards and, if a secret ballot is requested, preserve each vote’s secrecy. (The Quebec Companies Act states that this rule also applies at meetings of the board of directors, though this is questionable in practice given that it is legally unclear whether vote by secret ballot is allowed at board meetings).
Participation using these means of communication is allowed for nonprofits governed by the Quebec Companies Act, unless prohibited by the not-for-profit’s governing documents, if the means are made available.
In contrast, for a meeting of members of an organization governed by the Canada Not-for-profit Corporations Act to be held entirely by such means, the organization’s by-laws must explicitly allow the meeting to be held using these means.
2. Make decisions by written resolution
A written resolution can be just as valid as a resolution adopted at a properly convened meeting. It can be used to make any decision required at a board meeting, a special general meeting, or an annual general meeting.
Here’s how it works:
A resolution is drafted. Often, these will be drafted so that decisions begin with “IT IS RESOLVED THAT …”. They may also include sentences at the outset beginning with “WHEREAS …” that give context about why the decision has been made. Because signed resolutions must be unanimous, the decisions can begin with “IT IS UNANIMOUSLY RESOLVED THAT … “;
It’s helpful to incorporate the resolution into letterhead indicating the name of the organization, the date the resolution will take effect, and a title such as “Resolution passed in lieu of a meeting of the board of directors” (or “of the members assembled in a general meeting”, as the case may be).
The completed resolution is then signed by all of the people who would have the right to vote on a resolution if it had been passed at a properly convened, in-person meeting. The signed document can be returned by email or other means. In either case, it’s valid to have each person sign a separate copy, and then to store all of the copies together, which might be more practical.
The organization’s secretary stores the signed resolution with the other corporate records the not-for-profit keeps in the section reserved for meeting minutes and signed resolutions of the decision-making body in question (board or membership).
One drawback of making decisions by written resolutions is that, because they must be signed by every person who would be entitled to vote on the resolution at a meeting, they may be unworkable when:
- more than a small number of people would have a vote (often the case for the general membership) or,
- some of the people with a right to vote are slow to respond (sometimes the case for boards of directors).
3. Cancel meetings
A final option is simply to cancel as many meetings as is feasible. The board has no fixed meeting schedule to follow unless the organization’s governing documents provide otherwise. Annual general meetings of members must be convened, however, (unless written resolutions are adopted in their place) and must generally be set in motion by a decision of the board.
There will be more latitude to eliminate board meetings where:
- the organization’s officers (e.g. the president, secretary, etc.) and its key employees (e.g. the executive director) have the necessary authority under the organization’s by-laws or past resolutions of the board of directors to see to the organization’s foreseeable practical management needs; and
- the directors ensure that they remain informed at all times of how the organization is being managed, and have good reason at all times to be convinced it is being managed appropriately.
This approach should be considered with caution. Directors owe a duty to exercise general supervision over the organization and to act diligently. Neither duty can be delegated to another person. A director can violate their duty to act diligently either by failing to act or by failing to remain informed. A director can be held personally liable for these violations, as well as for others that risk arising where the board is hands-off or mismanages the organization.
Failing to convene required annual general meetings can eventually expose the organization to consequences including dissolution. This is one of the reasons COCo is going ahead with our Annual General Meeting- but doing so online. You can check out our post on that at this link.
Legal Information for Non-Profits in Quebec
We also recommend checking out the Educaloi website for additional information!
This blog post was written by Mark Phillips, a lawyer who advises non-profits and charities. He can be reached at firstname.lastname@example.org. Nothing in this blog post is legal advice: please consult a lawyer to receive advice regarding your organization’s situation.