In these unprecedented times of “shelter in home” orders, remote working, and other strategies Americans are taking to mitigate the risks associated with COVID-19, we anticipate that many organizations will decide to transition to virtual meetings of shareholders, directors, members, and managers of entities. This alert is intended to provide basic guidance to entities organized in Texas considering virtual meetings. For additional considerations applicable to public companies, please see our prior client alert.
General Considerations for Virtual Meetings
As our world has become increasingly technologically dependent, many organizations have already addressed the concept of remote meetings in their governing documents. In that regard, you should review your by-laws (if a corporation) or operating agreement (if a limited liability company (“LLC”). If your governing documents provide for remote meetings, you should follow the procedures outlined in them.
If your governing documents do not already provide for virtual meetings, certain provisions of the Texas Business Organizations will apply (the “TBOC”).
Limited Liability Companies
As an initial matter, the TBOC does not require an annual meeting for an LLC unless such a meeting is required by the LLC’s governing documents. If such a meeting is required under an LLC’s governing documents, the TBOC provides that meetings of the governing persons of the LLC (which may be its members or its managers) may be held by means of remote communications.
The TBOC provides that unless the governing documents provide otherwise, the governing persons may conduct a meeting by means of remote communications, including conference calls, videoconferencing, or other electronic communications systems, as long as each person participating in the meeting can participate with all other persons participating in the meeting.
If voting is to take place at the meeting, the LLC must (1) implement reasonable measures to verify that every person voting at the meeting by means of remote communications is sufficiently identified; and (2) keep a record of any vote or other action taken.1
Corporations2
Shareholder Meetings
Shareholder meetings of corporations may be held by means of remote communications.
The TBOC provides that unless the certificate of formation or bylaws provide otherwise, the shareholders may conduct a meeting by means of remote communications, including conference calls, videoconferencing, or other electronic communications systems, as long as each person participating in the meeting can participate with all other persons participating in the meeting.
If voting is to take place at the meeting, the corporation must (1) implement reasonable measures to verify that every person voting at the meeting by means of remote communications is sufficiently identified; and (2) keep a record of any vote or other action taken.3
Director Meetings
Board of directors meetings of corporations may be held by means of remote communications.
The TBOC provides that unless the certificate of formation or bylaws provide otherwise, the board of directors may conduct a meeting by means of remote communications, including conference calls, videoconferencing, or other electronic communications systems, as long as each person participating in the meeting can participate with all other persons participating in the meeting.
If voting is to take place at the meeting, the corporation must (1) implement reasonable measures to verify that every person voting at the meeting by means of remote communications is sufficiently identified; and (2) keep a record of any vote or other action taken.4
The TBOC also permits a corporation’s governing documents to contain provisions governing the management of such corporation during an emergency, specifically including provisions concerning calling meetings, establishing quorum, and designating substitute directors. However, in the absence of such a provision in the corporation’s governing documents, the TBOC does not provide statutorily authorized governance powers in the event of an emergency.5
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1 Tex. Bus. Org. Code § 6.002(b).
2 The relevant rules are the same for meetings held by for-profit and non-profit Texas corporations.
3 Tex. Bus. Org. Code § 6.002(b).
4 Tex. Bus. Org. Code § 6.002(b).
5 Tex. Bus. Org. Code § 3.252.
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