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MA Corporations: Consider Alternatives to “In-Person” Shareholder and Board of Director Meetings.

Written by: Gena B. Lavallee & Michael B. Tule

3/30/2020

In light of the essential services and gatherings orders issued by Governor Baker in response to the COVID-19 outbreak, Massachusetts corporations that hold “live” shareholder or director meetings may need seek alternative approaches to an in-person meeting. Fortunately, the Massachusetts Business Corporation Act (the “Act”) allows for alternatives to holding in-person meetings.

Shareholder Meetings and Action

Many Massachusetts closely held corporations and corporations in which a single or small number of shareholder constitute the majority do not hold in-person shareholder meetings and use written consents in lieu of holding meetings.  Section 7.04 of the Act allows shareholders to act by unanimous written consent, and, if permitted by a corporation’s articles of organization, shareholders can take action by less than unanimous written consent provided that the corporation follow the formalities for post-action notice of the actions taken. Shareholder action by written consent must be evidenced by a writing that describes the action taken, is signed by shareholders having the number of shares that would be required if a meeting at which all shareholders entitled to vote were present, includes the date of the signatures of the shareholders, and is delivered to the corporation for inclusion in the corporate records within 60 days of the earliest dated consent. To avoid having shareholders mail or deliver written consents to the corporation, the bylaws or the written consent should include a resolution consenting to the use of electronic signatures. Doing so allows the shareholders to deliver the consent to the corporation by emailing a PDF of the signed, dated consent or using a recognized electronic signature service such as DocuSign®.

If use of a written consent is not feasible or desireable, the Act provides for an alternative to “in-person” meetings.  Pursuant to Section 7.08 of the Act, unless prohibited by the articles of organization or the bylaws, the board of directors may authorize shareholders to participate in shareholders’ meetings by means of remote communication. To ensure compliance with the Act, the board must adopt guidelines and procedures regarding participation of shareholders by means of remote communication. The Act requires the corporation to implement reasonable measures to verify that each person deemed present and permitted to vote is, in fact, a shareholder or proxyholder and provide shareholders a reasonable opportunity to participate and vote on matters submitted to them. Shareholders must have the opportunity to read or hear the proceedings substantially concurrently with such proceedings.

Director Meetings and Action

Many Massachusetts corporations do not hold in-person director meetings and instead use written consents in lieu of holding such meetings. Pursuant to Section 8.21 of the Act, the board of directors may take action without a meeting if the action is taken by the unanimous consent of the board of directors, is evidenced by a written consent describing the action taken, is signed by each director, and is delivered to the corporation by electronic transmission or sent to the address specified by the corporation.  As with the shareholder consent, the unanimous written consent of the board of directors should include a resolution consenting to the use of electronic signatures.  Unlike shareholder consents, written board consents must be unanimous.

If acting by written consent is feasible or desirable, the Act provides an alternative to “in-person” director meetings.  Pursuant to Section 8.21 of the Act, unless prohibited by the articles of organization or the bylaws, the board of directors may hold meetings solely by means of remote communication, provided that each director is able to hear one another during the meeting.  Holding director meetings by remote communication is fairly common and well-recognized in most states.

Under Section 3.03, unless emergency or other bylaws specifically refer to Section 3.03 and provide otherwise, the board has emergency powers to act if a quorum of the corporation's directors cannot readily be assembled due to a catastrophic event. Notice need be given only to directors who it is practical to reach. Quorum requirements can be reduced and officers in attendance can be treated as directors to reach quorum. The board has emergency powers to modify the lines to succession due to the incapacity of any officer, director, or employee and relocate the principal office.

The text of the Act can be found by clicking on the following:

https://malegislature.gov/Laws/GeneralLaws/PartI/TitleXXII/Chapter156D

Governor Baker’s emergency orders can be found by clicking on the following:

https://www.mass.gov/info-details/covid-19-state-of-emergency

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