27 March, 2020
The coronavirus pandemic is presenting organisations of all kinds (including charities, schools and colleges, housing providers and businesses across the board) with complex issues as urgent decisions need to be made by decision-makers who are harder to bring together. In these unprecedented times, organisations are exploring changes to the way in which decisions are taken to reduce the risk while ensuring that executives, directors, trustees and governors are able to perform their roles and support their colleagues.
For the business and charity community, these governance issues are proving to be testing. Boards of directors or trustees have overall responsibility for the organisation's management, including its response to the pandemic. The board's role is one of strategy and governance oversight including on health and safety, data protection and other key issues. How a board fulfils its decision-making obligations is dependent not just on practicalities but also on the powers granted to it by way of the organisation's governing document.
From a practical perspective, simple precautions are required. According to a 2010 Charity Commission study the average age of a charity trustee in the UK is 57 and the average age of a non-executive director of a FTSE 100 is 62 years. The organisation therefore needs to consider how a board might meet without being physically present in the same room.
It may be possible to have a meeting across several locations if the participants can communicate with each other and the constitution allows it.
Article 9 of the current Model Articles for both companies limited by shares and those limited by guarantee states that in giving notice of a meeting, the notice must indicate "if it is anticipated that directors participating in the meeting will not be in the same place, how it is proposed that they should communicate with each other during the meeting." Therefore, assuming the company has adopted the model articles without amendment to this article, there is no requirement for directors to be present in the same room for a meeting to take place. Voting in such situations could be as simple as a yes or no vote cast via the telephone. A show of hands is possible in a video conference and some platforms will allow voting by participants.
The solution may not be as clear for older companies, or those charitable unincorporated bodies, such as trusts, governed by documents which are silent on these issues. Those organisations should review their governing document before deciding how to proceed. For older organisations which may be based on older constitutional wording it is necessary to assess whether that remains limiting or has been overtaken by later legislation.
Organisations should consider whether in fact it is necessary to convene a board meeting at all. As an alternative, it may be possible to circulate a written resolution. Written confirmation of agreement to the resolution is enough to create the effect of a majority vote in a meeting and can be done by post or by email if the constitution allows for electronic communications. We recommend checking the constitution and seeking advice to assess whether a written resolution is workable and in what way. Some constitutions require unanimous agreement for a written resolution to be valid so full availability of the decision-makers to respond within the required time may be necessary for this method to work.
Organisations also need to consider provision for meetings of their membership and the same two approaches apply.
As a result of section 360A of the Companies Act 2006, provision for UK companies to hold virtual meetings has been in existence since August 2009.
However, existing articles are likely to refer to the "place" of the meeting and the requirement for members being able to see and hear each other. Therefore, in anticipation of a virtual AGM or EGM, the organisation may be required to amend its articles to ensure that a virtual meeting can take place. Any amendment to the articles would have to be done using the current rules.
Whether a provision for virtual meetings has been included into the governing document of an trust or association would require a review of the governing document.
One of the more obvious practical solutions for virtual meetings is the conference call. There is a plethora of providers available with prices often dependant on the number of users. However, organisations would need to consider how they might provide for voting particularly if the number of attendees is high.
Alternatively, there are a number of companies offering online platforms to run online virtual meetings. The technology allows for presentations and voting to take place. While this appears to be the answer to the problem, organisations should be aware than such provision comes at a cost.
Membership decisions can also be taken by written resolution if the constitution permits it.
In limited companies under section 288 of the Companies Act 2006 once enough members have indicated their agreement the resolution is treated as passed by that majority.
It is important to remember that in written decisions any member that has not responded is treated as voting "no". That is different to the rules for meetings where only those who attend count in calculating the level of approval. That difference may dictate which option is best to get a decision taken if a limited number of members is available.
The current circumstances have presented organisations with a variety of challenges. Good governance requires decisions to be taken and that requires different approaches and constructive use of constitutional rules which might allow for more than organisations have traditionally done.