by Tim Hughes, Managing Shareholder, Bean, Kinney & Korman
Effective July 1, 2016, it will get a little bit easier for nonprofit boards to do their work without the need for formal meetings of the full board. The General Assembly passed HB 234 which will allow non-profit boards to act without having a formal meeting if they comply with the new statute.
The Issue
Having served on a lot of nonprofit boards, I am acutely aware that we are all struggling for time. Organizing a board meeting, even using the currently available means of telephone attendance, can be a real struggle. As a result, I see non-profits conduct a lot of decision-making via email. The problem is that email is not permitted for formal board action. Many boards are undisciplined about documenting ratification of email decisions at the next board meeting.
The current provisions of the Code of Virginia allow for action without a board meeting, but they require written agreement from each and every board member. One unengaged board member, or one person upset about a course of action, could stymie a non-profit and block prompt action.
The Solution
My colleague at Bean, Kinney & Korman, PC, Delegate Rip Sullivan, introduced HB 234 to allow board action without a meeting. The code changes will be effective July 1, 2016 and provide as follows:
- The non-stock corporation needs to expressly adopt the power to act under this statute in its Articles of Incorporation;
- The greater of the majority of the board, or a quorum of the board if greater, must agree to action without the meeting;
- The voting for any action must comply with the entity’s applicable voting rules for action during board meetings, such as quorum and majority/supermajority voting;
- Notice of action without a meeting must be expressly given to each director; and
- Any director is allowed to object to acting without a formal meeting thereby forcing the action towards a more formal meeting for decision.
Next Steps
Based on my experience, I would hazard a guess that most smaller nonprofits are not even aware that their board’s ability to act through email as opposed to in person meeting was so limited in Virginia. I am a big fan of flexibility and options, so I would counsel all Virginia non-stock corporations to amend their Articles of Incorporation to add this option to their available governance practices.
Timothy R. Hughes is the Managing Shareholder of the law firm of Bean, Kinney & Korman, PC, in Arlington, Virginia. He represents clients in construction and commercial litigation, and corporate, contracts, and general business matters. He can be reached by email at thughes@beankinney.com and by phone at 703-525-4000.
Effective July 1, 2016, it will get a little bit easier for nonprofit boards to do their work without the need for formal meetings of the full board. The General Assembly passed HB 234 which will allow non-profit boards to act without having a formal meeting if they comply with the new statute.
The Issue
Having served on a lot of nonprofit boards, I am acutely aware that we are all struggling for time. Organizing a board meeting, even using the currently available means of telephone attendance, can be a real struggle. As a result, I see non-profits conduct a lot of decision-making via email. The problem is that email is not permitted for formal board action. Many boards are undisciplined about documenting ratification of email decisions at the next board meeting.
The current provisions of the Code of Virginia allow for action without a board meeting, but they require written agreement from each and every board member. One unengaged board member, or one person upset about a course of action, could stymie a non-profit and block prompt action.
The Solution
My colleague at Bean, Kinney & Korman, PC, Delegate Rip Sullivan, introduced HB 234 to allow board action without a meeting. The code changes will be effective July 1, 2016 and provide as follows:
- The non-stock corporation needs to expressly adopt the power to act under this statute in its Articles of Incorporation;
- The greater of the majority of the board, or a quorum of the board if greater, must agree to action without the meeting;
- The voting for any action must comply with the entity’s applicable voting rules for action during board meetings, such as quorum and majority/supermajority voting;
- Notice of action without a meeting must be expressly given to each director; and
- Any director is allowed to object to acting without a formal meeting thereby forcing the action towards a more formal meeting for decision.
Next Steps
Based on my experience, I would hazard a guess that most smaller nonprofits are not even aware that their board’s ability to act through email as opposed to in person meeting was so limited in Virginia. I am a big fan of flexibility and options, so I would counsel all Virginia non-stock corporations to amend their Articles of Incorporation to add this option to their available governance practices.
Timothy R. Hughes is the Managing Shareholder of the law firm of Bean, Kinney & Korman, PC, in Arlington, Virginia. He represents clients in construction and commercial litigation, and corporate, contracts, and general business matters. He can be reached by email at thughes@beankinney.com and by phone at 703-525-4000.
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