Nonprofits rely heavily, if not solely, on their boards of directors and members to make decisions and conduct business. In response to health concerns brought about by the novel coronavirus (COVID-19), it has become necessary to cancel meetings, and these organizations must look to alternative ways to deliberate and make decisions. This dramatically changes the way most nonprofits do business. As Indiana nonprofits contemplate how to continue their decision-making processes as normally as possible, they may consider holding required meetings by electronic means or even taking action without meeting. For most Hoosier nonprofits, Indiana’s Nonprofit Corporation Act provides flexibility, but they must ensure their articles of incorporation or bylaws allow for electronic meetings or acting by written consent.
The law provides different default rules for membership and board meetings. An organization’s articles of incorporation or bylaws can override each of the default rules. For board meetings, the law allows remote participation as long as the articles or bylaws don’t prohibit it. But for membership meetings, the law prohibits remote participation unless articles or bylaws allow them. So nonprofit leaders should first look at their governing documents.
Indiana law allows for remote meetings of boards of directors unless articles or bylaws prohibit them.
By default, boards of directors have flexibility in Indiana. Directors may participate in a regular or a special meeting by using electronic means “unless articles of incorporation or bylaws provide otherwise.” (Ind. Code § 23‑17‑15‑1(c)). Notice for regular board meetings is required only if the governing documents require them (I.C. § 23‑17‑15‑3(a)). Special meetings require at least two days’ notice (I.C. § 23‑17‑15‑3(b)).
Indiana law allows for remote membership meetings only if articles or bylaws provide for them.
Unlike boards of directors, nonprofits may not hold membership meetings remotely by default. But articles or bylaws may expressly allow remote participation in both regular and special meetings (I.C. §§ 23‑17‑10‑1(g), 23‑17‑10‑2(f)). Although not all nonprofits have members, those that do must have an annual meeting, where officers report to the members and other business is conducted (I.C. § 23‑17‑10‑1(a), (d)). But if a nonprofit fails to hold an annual meeting, corporate actions that would otherwise be valid remain valid. And the corporation will not forfeit anything or be dissolved (I.C. § 23‑17‑10‑1(f)). Before holding a membership meeting, the nonprofit must provide ten days’ notice to members that should include, among other information, the location of the meeting with information about participating remotely (I.C. § 23‑17‑10‑5).
When holding an electronic meeting, ensure participants can hear each other simultaneously.
Whether the meeting is of directors or members, the requirements for valid participation by electronic means are the same. It must ensure that participants can simultaneously hear each other during the meeting. The meeting must therefore be live (not recorded or in writing). Supplemental tools, like those in which participants may vote electronically or indicate their desire to talk (some conference services call this “raising your hand”) during a telephonic meeting are permitted and useful, especially for larger meetings.
Indiana law does not permit “meetings” by e‑mail or other written communications.
Related to the question about whether the law permits electronic meetings is the question of making decisions by other means. Decision-making by e‑mail or other remote communications that do not allow for live deliberation follow different rules from meetings because they do not permit live deliberations. Like remote meetings, Indiana law has different rules for membership meetings than board meetings. And like remote meetings, the articles or bylaws may change the default rules, so it’s important to start there.
Boards of directors may act without meeting by written consent (I.C. § 23‑17‑15‑2). This must be in writing, must describe the action to be taken, must be signed by all directors, and must be filed in corporate records(e.g., including them in the corporation’s minutes). The action taken may be treated as any action approved at a board meeting and is effective either when the last director signs the consent or the effective date included in the consent. Articles or bylaws may allow for different rules related to action without meetings.
Membership may take action without meeting only by written consent with approval of members holding at least 80 percent of the votes entitled to be cast on the action (I.C. § 23‑17‑10‑4). The consent must be signed by the members approving it and be delivered to the corporation. Articles or bylaws may make these requirements more restrictive, including prohibiting action without meeting, but they may not make action without meeting easier.
Because it’s usually easier to get a quorum able to agree on a time for a conference call than participation by all directors or 80 percent of members, written consents typically prove more burdensome than holding a remote meeting. Because they come with the added disadvantage of precluding deliberation, inviting less thoughtful decision-making, it’s usually better to use remote meetings.
The nonprofit attorneys at Plews Shadley Racher & Braun will gladly answer your questions and help you navigate through these challenging times.