Coronavirus is causing untold difficulties and strain on the life of many businesses. As a result, boards of directors across the country are being asked many unexpected questions. Details of commercial contracts, employment and HR-related issues such as furlough, and the financing of a business are all high on the agenda. Companies tackling such issues at board level need to ensure that the decisions that a board of directors are making will not later be undone or challenged once this pandemic has passed.
Check the articles
The company’s articles of association is the document that outlines the ways in which directors’ decisions may be made correctly. It is therefore paramount that directors review their company’s articles of association prior to any meeting to ensure that they can hold such a meeting electronically; this is especially important if a company has bespoke articles of association. A company with model articles of association is not restricted from holding meetings electronically.
There are practical considerations about holding electronic meetings: the board needs to satisfy itself that all directors present can hear all the business of the meeting as well as be heard by others in attendance. It would be prudent to minute that all directors present were in attendance and could hear and be heard correctly.
Under company law, there is no preclusion to holding a meeting by electronic means, albeit it is considered that having such a provision within a company’s articles of association is the better option. A positive affirmation that meetings can be held electronically will protect a company from any potential disputes arising following the passing of the pandemic.
Once a board determines that electronic meetings are permissible under its articles of association, it needs to ensure that it continues to meet other company law requirements. The checklist below should act as a guide to help companies consider what needs to be done before convening a board meeting (N.B. the company’s articles of association should always be reviewed since they may contain bespoke provisions unique to your company).
| Notice |
Save in the case of an urgent issue, reasonable notice of the meeting (ie at least 24 hours) must be given to the directors. The notice must include date, time, place and method of communication for the meeting. |
| Declarations | Directors must make known any interest that they have in the business of the meeting. Appropriate resolutions may need to be passed in order to allow for interested directors to participate in the meeting. |
| Quorum | All directors’ meetings must be quorate before decisions are made and acted upon. |
| Resolutions | Given the current lockdown, the written resolution procedure should be used more widely if possible. |
| Voting | Most board decisions can be made by simple majority but consider whether the chairperson has a casting vote. |
| Administration | Even though board meetings may not be held in their normal locations, let alone normal circumstances, it is important that minutes are taken of the meeting and these are kept safe until they can be filed with the company books. |
The above points should serve as a reminder for companies about the little things that are required of directors when making decisions for the company.
Ensuring that these steps are taken will not only show that company decisions were correctly taken during this lockdown, but also, thinking longer-term, that on any potential sale of the business there will not be any uncomfortable questions arising from a due diligence exercise, or possible challenge in the future.
Please get in touch with our corporate lawyers if you need legal guidance for your business.
