Through December 31, 2020, New York business corporations and New York Not for Profit corporations may hold virtual annual or special shareholder and member meetings through electronic means. Recognizing Governor Andrew Cuomo’s Executive Orders banning large gatherings, and his Executive Order 202.18 modifying Section 602(a) of the New York Business Corporation Law (the “BCL”) and Section 603(b) of the Not-for-Profit Corporations Law (the “NFPCL”), the NY State Senate and NY State Assembly have passed bills permitting electronic meetings of shareholders and members. The bills have been sent to the Governor to sign, but have not as of yet become law.
The new provisions are only effective “for the duration of the state disaster emergency declared by Executive Order two hundred two that began on March seventh, two thousand twenty” and only if the board of directors of the applicable corporation determines
“that meetings of members [or shareholders] be held partially or solely by means of electronic communication.”
The Governor may extend the expiry date of the new law which currently sunsets on December 31, 2020.
The bills have important limitations. The limitations provide:
“Meetings conducted partially or solely by means of electronic communications in reliance upon this paragraph and any member's electronic participation in such meetings shall be subject to those guidelines and procedures as the board adopts, provided the board shall implement reasonable measures to: (1) verify that each person participating electronically is a member [or shareholder] or a proxy of a member; (2) provide each member [shareholder] participating electronically with a reasonable opportunity to participate in the meeting, including an opportunity to propose, object to, and vote upon a specific action to be taken by the members, and to see, read or hear the proceedings of the meeting substantially concurrently with those proceedings; and (3) record and maintain a record of any votes or other actions taken by electronic communication. “
An amendment to Section 708(b) of the BCL was also passed by the legislature at the same time to permit execution “electronically” by Board members of business corporations by “consents in writing.” The new provision is similarly limited in duration and will expire December 31, 2020 unless extended by the Governor. Board resolutions adopted electronically during this period by New York business corporations will only be valid
“where such consent is submitted via electronic mail along with information from which it can be reasonably determined that the transmission was authorized by such member.”
Where previously many practitioners believed that faxes or attachments to text messages or to emails forwarding copies of signed resolutions or electronic signatures affixed to board or committee resolutions that were logically associated with the resolutions were valid under the New York State Technology Law (New York’s electronic signature law), the adoption of this amendment to Section 708(b) may cause counsel to rethink what is meant by “consent in writing” or by “electronic mail” in Section 708(b) after the Covid-19 crisis abates. One would hope that a court would interpret the new Covid-19 “temporary additions” and the Executive Orders issued by the Governor with respect to written consents as merely made to clarify what was already the law with respect to board actions and not a statement that faxed, emailed or otherwise authenticated and logically associated copies of consents should not be considered sufficient “writings” for purposes of the Business Corporation Law prior to the 2020 emergency enactments.
The bills passed by the New York State Senate and New York State Assembly also provide for changes to the provisions of The Religious Corporations Law that deal with meetings of members to permit meetings to be held solely by electronic means during the continuation of the Covid-19 pandemic.
Each of the above amendments to the BCL, NFPCL and The Religious Corporations Law provide that the amendments shall not apply if the applicable Corporation’s certificate of incorporation or by-laws provide to the contrary. Accordingly, before relying on the amendments during the Covid-19 crisis period, directors and officers must review the certificate of incorporation and by-laws governing the applicable entity and check to see if the sections discussed above have been amended or interpreted by the courts to limit or expand the meanings of the words used by the Governor or the legislature.
The New York Charities Bureau of the New York Department of Law has issued two guidance documents for the Boards and officers managing membership organizations governed by the Not-For-Profit Corporation Law and Religious Corporations Law. The Guidance documents can be found at:
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