Pending any release of the lockdown, measures are currently in place to enforce social distancing in the UK. Amongst other things, this prohibits public gatherings of more than two people. The measures will clearly impact on the ability of directors in most companies to hold physical board meetings. Virtual board meetings will, therefore, play an important role in ensuring that directors can continue to make decisions on behalf of the company.
Unlike general meetings and annual general meetings of shareholders, there is more flexibility when it comes to directors' board meetings. This is because the Companies Act 2006 contains almost no rules for holding such board meetings. The provisions will instead be contained in the company's articles of association. As a first step, directors should review the company's articles to find out what they say about holding board meetings remotely.
Most companies incorporated after 1 October 2009 will have adopted some or all of the provisions in the Model Articles for private companies limited by shares. Companies incorporated before 1 October 2009 will likely have adopted some or all of the provisions in the Table A articles. Where a company's articles are silent on a particular matter, the provisions in these articles (if adopted) will apply.
The Model Articles state that "in determining whether directors are participating in a directors' meeting, it is irrelevant where any director is or how they communicate with each other" and "if all the directors participating in a meeting are not in the same place, they may decide that the meeting is to be treated as taking place wherever any of them is." Therefore, unless the articles of association of a company specifically forbid remote board meetings, such meetings may be held electronically or via telephone.
Table A provides that the directors may regulate their proceedings as they think fit, subject to the provisions in the company's own articles. Whilst this does not give directors complete freedom to hold a board meeting in any way they like, it is generally accepted that Table A does not exclude virtual board meetings. However, this remains untested in the courts and ideally the company should amend its articles to explicitly permit such meetings. In any event, it is recommended that all the directors expressly consent to the meeting being held virtually.
Where a board meeting takes place virtually, the requirements as to the quorum must still be met. The quorum must remain in attendance throughout the meeting on the video link or phone call and be able to hear and speak at the meeting effectively. If technical issues prevent this, then the meeting should be adjourned until the issues are resolved. Ideally, all directors in attendance (and not just those constituting the quorum) should also be able to hear and speak at the meeting throughout. Moreover, minutes of the meeting must be taken as normal. They should confirm that the meeting was held by electronic means and state the enabling provision of the company's articles (or the Model Articles or Table A as the case may be). It is recommended that the minutes are then circulated to the directors to ensure everything in the meeting is captured before being signed by the chairperson. The chairperson may sign using an electronic signature.
Tips for holding an effective virtual board meeting
- Clear instructions on how to access the meeting should be provided a few days in advance to ensure all directors are ready to join when the meeting is scheduled.
- Check the company's articles for any additional requirements relating to notice of the meeting.
- The chairperson should consider devising ground rules for participants and circulate these before the meeting. For example, setting out how to get the chairperson's attention if you want to speak (hand signals or use of a 'chat' function can be helpful for a video meeting).
- Consider using an online tool, such as Zoom or Microsoft Teams, where the chairperson can mute and unmute speakers to ensure all directors can contribute. These tools also allow for screen sharing which can be a useful way of sharing the agenda or presenting documents.
- To avoid the confusion that may be caused with raising hands on video, the chairperson should ask each director in turn for their vote on a resolution.
- Make a contingency plan – Having a list of all directors' telephone numbers can be helpful in case connectivity issues prevent all directors accessing a video meeting. Ensuring IT support is at hand will also be helpful.
- Ask for feedback – at the end of the meeting give all directors the opportunity to provide feedback. You can consider any suggestions when you plan future virtual meetings.
The Chartered Governance Institute has published a detailed guidance note on virtual board meetings, which aims to help companies struggling with the impact of COVID-19. The guidance note can be found here.
Directors' written resolution
An alternative to holding a board meeting is to pass a written resolution of the directors. The company's articles should be checked to ensure directors' written resolutions are permitted. If the articles are silent, then the written resolution can still pass so long as there is unanimous agreement amongst the directors. Under the Model Articles this must be all the 'eligible' directors (those who would have been entitled to vote on the resolution at a board meeting). Under Table A, the written resolution must be agreed by all the directors entitled to receive notice of a meeting or committee of the directors. In order to indicate agreement, assent may be given by email, however, best practice would be for the directors to sign a physical or electronic copy of the resolution.
If you require any advice in relation to directors' board meetings, please get in touch with your usual Brodies contact.