Virtual board meetings for third sector organisations - technical tips for legal compliance

These days we’re all getting very used to working from home, to video calls, and to all the joys that come with that due to the coronavirus crisis. And while Skyping your colleagues in your pyjamas (with your peanut-butter smeared toddler on your knee) may be fine for internal meetings, it hardly feels appropriate for more formal meetings. We’ve had countless queries from clients in relation to what can and cannot be done virtually at this time, especially vis-a-vis board meetings. We thought it would be useful to set out some key principles for third sector organisations to consider.

Social-distancing

As a result of social-distancing measures, the vast majority of third sector organisations are now looking at alternatives to face-to-face board meetings. The approach being taken by many is to hold meetings by video-call via apps such as Zoom and Skype. In an ideal world (the world being far from ideal at present), an organisation’s constitution would specifically permit board meetings to take place in this way; and stating expressly that all board members participating as such would be deemed to be physically present.

But where that is not the case, regulators such as OSCR are taking a pragmatic approach and are specifically recognising virtual meetings as “a good option”. In OSCR’s recently published guidance on COVID-19, OSCR specifically states that they are happy for charities to hold their meetings in this way even if the governing document is silent on this.

There is also legal authority (in the form of a court judgement issued in 1989) to the effect that, at a general meeting of members of a company, members who are participating in the meeting must be able to both “see” and “hear” one another. Extrapolating from that 1989 case, participation via video is permissible (other than in the unlikely scenario where this is specifically precluded by an organisation’s constitution) as participants can see and hear one another.

Telephone/video conference

Board meetings by telephone conference are more typically referred to in the constitutions of third sector organisations (rather than meetings by video conference) – and if this is the case for your organisation, then it is fine to proceed in this way. If telephone conferences are not specifically referred to, it could be argued that these are not valid as participants cannot see one another – but we think the risk of challenge would likely be low.  And this is especially so as the case referred to above (requiring members to be able to “see” one another) related to meetings of members (which typically require a greater degree of formality than meetings of the board).

As for quorum requirements, many constitutions will refer to the need for a certain number of individuals to be “personally present” (as opposed to participating by proxy vote); in the present circumstances, we are of the view that “personally present” should be interpreted as meaning “personally participating”.

New applications

It may be, however, that holding a meeting by way of video conference or telephone conference is not suitable for all members of your board. It may not be something that all board members feel comfortable with and/or not all board members may have access to the necessary technology.

We would recommend that you speak with your board members and assist, in any way you can, in talking board members through how to use any proposed app (Zoom etc). But if there is a sense that critical decisions need to be taken and an insufficient number of board members are able to participate in a virtual or conference call meeting, you could resort to some other way of taking decisions.

Approval process

The constitutions of many third sector organisations will allow for decisions to be taken by boards “in writing” as an alternative to decision-making at board meetings. Generally, this involves setting out the text of the proposed resolution – with all board members being invited either to agree to that resolution (and traditionally, demonstrating that agreement by signing a copy of it) or disagree. The written resolution can of course be circulated by email, with each board member printing and signing his/her own copy and sending that (or a pdf) back to the company secretary (or whoever is tasked with coordinating the process).

- In writing

Sometimes constitutions refer specifically to giving approval to a written resolution by email, as an alternative to signing it; if there is no reference in the constitution to approval by email, we would still take the view that – particularly if the decision is an important one, and needs to be taken urgently – it would be best to take a pragmatic approach and treat approval by email as sufficient (given that the risk of a technical challenge is low, particularly if all board members have agreed to approach it in this way).

The written resolution approach becomes quite clumsy, though, where one or more board members are comfortable with some of what is proposed, but are not willing to agree to a resolution in quite those terms. The technically-correct solution in that situation would be to amend the wording of the resolution and then circulate that amended resolution around the board members, asking them to indicate if they agree with the resolution in that amended form. It has to be said, however, that written resolutions are still not ideal from the point of view of best practice in governance – since it is hard to ensure that all of the various perspectives can be taken on board. Also, people are sometimes more reluctant to commit to writing what they would say verbally. And of course there are the various potential technical issues, such as emails finding their way into junk mail boxes.

A further consideration – particularly given the difficult decisions which many third sector boards are currently facing – is the need to ensure that the rationale for particular decisions is recorded in some way. If the written resolution only sets out the decision itself (rather than the various other options which the board had considered – something which would normally be included, at least in outline, in board minutes) it may for example be difficult to persuade OSCR that the board had fulfilled its legal duties, in considering all options and testing them against the question of what was in the best interests of the charity.

If you are considering the use of a written resolution approach, it is important to note that most constitutions will require unanimous decision-making involving all board members, for a written resolution to be valid. That means that everyone holding office as a board member at the time needs to indicate that they are favour – not just those board members who respond; and also, they all need to indicate that they are in favour ie majority support is not sufficient.

The various pdfs of signed written resolutions - and/or emails confirming approval – should be treated as falling within the same category as board minutes, and should be retained by the organisation on a long-term basis accordingly. That is particularly important given the critical nature of many decisions which are being taken by the boards of third sector organisations in current circumstances; there is a very real possibility of OSCR and/or other regulators wanting, at some future date, to drill into the basis on which certain decisions were made and/or certain steps taken.

We are often asked whether decisions can be made just by way of exchange of emails, avoiding the formality of written resolutions (see above). The difficulty there is in making sure that all of the board members can fully participate (so a “reply to all” approach needs to be rigorously enforced); and also ensuring that where different options have been explored, that there is full clarity about what the final decision was. On that last point, best practice would be for the person chairing the email exchange to record the final decision in a single email and ask all the board members to confirm their agreement to that (in a similar way to the written resolution approach). As with written resolutions, the exchange of emails should be retained as a long-term record, in a similar way to board minutes; and actually the exchange of emails may be more helpful than a stand-along written resolution from the point of view of recording how the board came to its decision.

- Delegation

An alternative course of action might be to make increased use of schemes of delegation, and decision-making by committees of the board. Prior to doing so, however, you should make sure that you are clear on exactly what authority has been and can be delegated. In particular, where a decision is of such importance that it would generally be regarded as something requiring a board decision, it would be unsafe to delegate it to a committee (or to senior management staff) given the legal duties attaching to board members; though a committee might be tasked with carrying out a preliminary assessment of possible options, on the basis that their provisional findings would then be considered by the full board. And as with all of the above, any decisions reached by a committee should be carefully recorded in the relevant minutes (or by retaining copies of written resolutions, emails etc – as above); or, in the case of increased delegation to senior management staff, there should be if anything an enhanced approach to reporting to the board.

Conclusion

Ultimately, these are extraordinary times, and the key thing is that boards should be able to fulfill the role expected of them in providing strategic leadership and oversight notwithstanding that conventional board meetings are not currently an option. We would expect that the risk of challenge (as a result of a third sector organisation not having followed its constitution to the letter) would be low; and indeed OSCR has provided some reassurance on that point.

We have followed up with a separate blog on AGMs here.

If you would like any further advice or help considering your specific situation, please don’t hesitate to get in touch.