Taking Board Action Without A Meeting

John Peiffer and Maggie Beecher
President & General Counsel; Research Fellow & Staff Attorney
Napa Legal
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April 17, 2020

Faith-based nonprofits, along with other businesses and entities, must act quickly to adjust to the economic and public health impacts of coronavirus. However, with shelter-in-place laws established across the country, holding a board meeting through traditional means is now difficult and even impossible.  

Fortunately, most state laws and corporate bylaws allow the board to act through a teleconference or through a unanimous written board action in lieu of meeting in person. Below are some examples of best practices for each method of meeting.

Telephone Conference or Video Call

State Law and Corporate Bylaws. Confirm the organization’s bylaws and state nonprofit corporation law permit that board action through teleconferencing. Under Sec. 8(b) of the Model Nonprofit Corporation Act, Third Edition, directors can meet using “any means of communication by which all directors participating may simultaneously hear each other during the meeting.”  

Quorum and Manner of Acting Requirements. Verify the quorum (number of directors present necessary to take action on behalf of the organization) and manner of acting (number of favorable votes required to approve the specific course of action) necessary to approve the decision. Most corporate laws and/or bylaws have specific levels for each requirement (e.g, bylaws may have special quorum or supermajority requirements for certain actions to be taken). If your corporate bylaws do not address this, check the state nonprofit corporation law.  

Waiver of Notice. Request all directors to waive notice. If any directors aren’t present on the call, it’s important to have their waiver of notice in writing.  

Send Preparation Materials. If possible, send the board background information to prepare for the discussion during the meeting. For example, if the organization were applying for a Paycheck Protection Loan, include a draft PPP loan application and relevant calculation in the board materials sent to the board prior to the meeting.  

Corporate Minutes. Take corporate minutes during the meeting, indicating key factors in any actions the board determines to take.  If the board is approving the organization’s application for a PPP loan, have the board designate authorized representatives who can apply for and sign the loan application, promissory note, and other loan documents. Some banks require a copy of this authorization before they will issue a loan.

Board Action by Written Consent

Check State Law and Corporate Bylaws. Confirm your organization’s bylaws and the state nonprofit corporation law permit written action. Under Sec. 8.21(a) of the Model Nonprofit Corporation Act, the board can take “without a meeting if each director signs a consent in the form of a record describing the action to be taken and delivers it to the nonprofit corporation.”

Written Resolution. Distribute a written resolution to all directors. Most states allow the written resolutions to be sent through email. If the written resolution includes approval of any specific documents, include the draft documents in the attachments. For example, if the organization’s board is approving a decision to apply for a PPP loan, include a draft PPP loan application in the board materials. Additionally, if the board is approving an application for a PPP loan, include a statement authorizing representatives who can apply for and sign the loan. As stated above, some banks may require this resolution.  

Inventory of Approvals. Remember, in most states, for a written action to be valid, written approval from all directors must be received. Many states permit electronic signatures, but be sure to check the laws of your state to ensure that your board is validly acting.  

Corporate Records. Preserve copies of the resolution and all approvals in the corporate records.