For obvious reasons, 2020 paved the way for nonprofit organizations to hold member meetings remotely,1 many for the first time. While some associations and other nonprofit organizations have chosen to stick with the flexibility offered by remote meetings, the latter half of 2021 saw other nonprofit organizations eagerly resuming in-person meetings. In light of our collective advancement through the Greek alphabet of COVID-19 variants, many trade associations and professional membership societies are once again revisiting their approach to member meetings and, in doing so, will need to consider the legality of holding them remotely.
Before the pandemic, many states permitted board meetings to be held remotely, but states often either expressly prohibited member meetings from being held remotely or were silent on whether remote member meetings were permitted. In response to the pandemic, many states issued emergency orders or temporary legislation that permitted nonprofit organizations to hold their member meetings virtually; many jurisdictions that did not previously allow remote member meetings began to allow them; and, jurisdictions that already allowed remote member meetings subject to the provisions of an organization’s incorporation documents or bylaws allowed organizations to disregard the restrictions in those documents. Although remote member meetings have become commonplace, many of these emergency orders and temporary legislation have expired. It is important for nonprofit membership organizations to reexamine the laws of their state of incorporation to determine whether they may legally continue to hold remote member meetings going forward. This alert focuses on the laws in effect as of January 1, 2022, in three common jurisdictions for nonprofit incorporation—Delaware, the District of Columbia, and New York—and provides alternative options for member action and gatherings that nonprofit organizations incorporated in these states can consider.
1. Delaware Law
Delaware law predating the pandemic allows nonprofit organizations to hold remote member meetings under certain conditions. If a Delaware nonprofit organization’s certificate of incorporation or bylaws permits the organization’s board of directors to determine the place of the member meetings, or if those governing documents are silent as to where meetings will be held and who has authority to decide, then the Board will have authority under Delaware law to determine where the meetings will be held. If this is the case, then the Board can decide to hold a member meeting remotely. The organization will need to implement reasonable measures to verify that each member participating remotely is a valid member, to ensure that each member can participate in the meeting as the meeting is being held, and to record the votes of these members in the organization’s records. If, in contrast, the organization’s certificate of incorporation or bylaws state that member meetings must be held in person or must be held in a particular physical location (e.g., the organization’s headquarters building), that provision will control.
2. District of Columbia Law
The District of Columbia Code allows D.C. nonprofit organizations to hold remote member meetings if the organization is expressly permitted to do so in its articles of incorporation or bylaws. The communication equipment used must allow members to read or hear the proceedings live, pose questions, make comments, and vote. Under temporary legislation in effect until February 4, 2022, D.C. nonprofit organizations can hold member meetings remotely, even if their articles of incorporation or bylaws do not have such a provision with respect to remote member meetings. Therefore, even if an organization’s governing documents only permit member meetings to be held in person or are silent on the matter, member meetings for D.C.-incorporated membership organizations can be held remotely until February 4, 2022.
An organization whose articles of incorporation or bylaws do not expressly authorize remote member meetings will need to amend its articles of incorporation or bylaws to include this express authorization in order to hold remote member meetings beginning February 4, 2022.
3. New York Law
Historically, New York nonprofit organizations were not allowed to hold remote member meetings. That is no longer the case thanks to legislation signed late last year, which Venable wrote about here. This legislation modified and made permanent the changes first enacted by previously passed temporary legislation. Now, New York nonprofit organizations—specifically not-for-profit corporations governed by the Not-for-Profit Corporation Law, as opposed to religious corporations, which have slightly different requirements—may hold remote member meetings if approved by the organization’s board of directors, unless remote meetings are prohibited by the organization’s certificate of incorporation or bylaws.
As noted in Venable’s earlier alert about the New York legislation, the current law is different from the temporary legislation, which allowed nonprofit organizations to hold remote member meetings even if the organization’s certificate of incorporation or bylaws prohibited it. Under the current law, such prohibition would prevail. Thus, a New York nonprofit organization that wants to hold remote member meetings must ensure that its certificate of incorporation and bylaws do not explicitly prohibit remote member meetings; if they do, amendments will be required before the organization is able to hold member meetings remotely.
4. Additional Options for Member Action and Gatherings
While Delaware, the District of Columbia, and New York all provide paths for nonprofit organizations to hold remote member meetings, some organizations may find themselves prevented from doing so due to provisions in (or absent from) their governing documents or may not be able to hold a remote meeting for other reasons. In the absence of a traditional, in-person member meeting, here are three other options to consider for facilitating member action or gatherings.
1. Action by Written Consent or Ballot
a. Delaware: Members can vote by written consent. The minimum number of consents required to take such action is the number of votes that would be required if all voting members were present and voting in person. For organizations with a large number of members, it may be difficult to obtain a sufficient number of members to submit written consents in order to approve any vote by written consent.
b. District of Columbia: Members can vote by ballot (and without a meeting) on any action that could be taken at a meeting of the members (except as restricted by an organization’s articles of incorporation or bylaws). All voting members must be sent a ballot, and ballots must conform to the requirements set forth in the law. In order for an action to be approved by ballot, the number of votes cast have to equal or exceed the quorum required to be present at a meeting of the members (except with respect to the election of directors), and the percentage of affirmative votes received have to equal or exceed the number of votes that would be required to approve the action at a meeting at which the total number of votes cast was the same as the number of votes cast by ballot.
c. New York: Members may act by written consent without a meeting. Action by written consent must be approved by all members with the right to vote, unless an organization’s certificate of incorporation (not its bylaws) allows for written consent by a lower threshold.
2. Voting by Proxy
Delaware, the District of Columbia, and New York all allow members of nonprofit organizations to vote by proxy (although the governing documents of D.C. and New York organizations can restrict those rights). For organizations that allow voting by proxy, a member meeting can be held in person, with only one (or a few) individuals appearing in person at the meeting, provided that those individuals have a sufficient number of proxies from other members to make quorum. (Note that it may not be possible to prohibit members from attending an in-person meeting, but this approach would solve the challenge of failing to make a quorum because not enough members were able to attend.) Members can grant their proxies to these individual(s) to vote on their behalf. The reliance on proxies does not affect the notice, quorum, or voting requirements applicable to an in-person member meeting. An organization taking this approach could consider offering remote participation or viewing options, but the members participating remotely would not be considered present for purposes of satisfying quorum and would not have the right to vote apart from their proxy.
3. Town Halls and Gatherings
Regardless of the rules applicable to remote member meetings, nonprofit organizations are not prohibited from holding town halls or other informational or social gatherings that do not require any member vote by means of remote communication. Separate from the legal member meetings, an organization may arrange for remote town halls, business updates, or social gatherings to keep members informed and connected.
1When discussing remote meetings in this article, we are including hybrid meetings, in which some attend the meeting physically in person with the option of others joining and participating remotely as if they were present in person.