With the level of technology currently available to directors enabling remote or flexible working (think Skype, conference calls, tablets and 4G mobiles), directors would be forgiven for thinking that they can automatically hold board meetings remotely. However, the position is not so simple.
Whether a meeting can be held remotely is determined by the company’s articles of association (‘oh no’, we hear you groan!). That should not be an issue for more recently incorporated companies as the Model Articles will apply which, provided they have not been amended by the company’s bespoke articles, allow directors to deal with their board meetings remotely.
But the directors of a company incorporated before 1 October 2009 will not be able to hold their meetings remotely unless the company has either updated its articles to enable board meetings to be held in this way or adopted the new Model Articles. This is because the old default articles, known as “Table A”, did not give directors the ability to hold meetings other than in person.
Table A does allow directors to ‘regulate their own proceedings’ but case law suggests this is unlikely to cover remote board meetings – unless the directors have been blessed with the foresight to resolve to do this at a previously held meeting (which isn’t usually the case!).
So what can we do?
- An alternative is to have all the directors sign a written resolution of the board. However, usually the issue of a remote board meeting being held arises because not all of the directors are available and/or they are not in close proximity to equipment or technology which will enable them to circulate and sign a written resolution.
- Hold the call initially and then back it up with a confirmatory written resolution as soon as possible. Not perfect, but it does provide evidence that the resolutions were passed albeit that evidence is provided at a later date, which may not be acceptable in the situations mentioned below.
- Hold the call and let it be challenged? This has the advantage of ensuring that the directors do actually discuss the business at hand and they can then record the decisions made. The attendees at a subsequent meeting may approve the minutes of the previous, remote, meeting. But where there are significant or sensitive transactions being approved, or fundamental disputes between directors, this approach may not be appropriate.
Who cares what the articles say?
- Lawyers - On a corporate transaction the process for holding board meetings, and approving transactions, comes under greater scrutiny.
- Banks - Often the banks, or the lawyers they instruct, will be keen to see that the proceedings of directors follow the articles to the letter.
- Courts - As reported on our Talking Finance blog recently (see The need for board meetings), if a transaction by a company is not properly authorised by the board this can have significant results, including the transaction being void.
- Directors - Failing to act in accordance with the company’s articles is a breach of the duties owed by directors to their company. So directors certainly should care what those articles say!
In the ‘real’ world…
In reality, particularly with owner-managed businesses, it is unlikely that every single meeting of the board is held in accordance with the articles.
But directors need to be aware of the limits placed on them by the articles, and the dangers of failing to comply with them, as the consequences can be significant for both the company and the directors personally.