The charity and not-for-profit sector has been affected by the COVID-19 pandemic as much as the rest of society. In some provinces, there has been a Declaration of Emergency, and people are prohibited from assembling together. Some charities, such as those which operate places of worship, have been explicitly singled out. Even without those governmental prohibitions, most not-for-profit organizations (NFPs) have heeded the call to avoid public meetings to prevent the spread of the coronavirus. Electronic meetings or simple conference telephone calls are now already commonplace.
Unfortunately, the quickness of the onset of social distancing and the timing of this pandemic raise a real problem for many NFPs. Some organizations will need to call emergency meetings of their members or will be obligated to hold a members meeting in the near future. Many NFPs’ organizational by-laws or rules require, or at least contemplate their members meeting together physically.
The situation is typically less of a problem for a board of directors or whatever board makes the decisions for an unincorporated organization (the “Board”) than it is for the members. They are usually a much smaller group, are used to working together, have processes in place for conference calls or electronic meetings and probably fall within the size limit imposed by governmental authorities (e.g. 50 people in Ontario). Most NFPs’ by-laws, rules or constitutions already allow for the Board to meet by telephone conference or electronically. Even if they do not, there is usually a separate provision or an understanding that the Board can change its rules for its own meetings or can, if all of the members of that Board agree (perhaps in writing), to telephonic or electronic meetings. We encourage that all Board members sign (electronically and in counterparts) a written resolution authorizing telephonic and electronic meetings.
If the NFP’s by-law or rules explicitly preclude telephonic or electronic Board meetings, then the best practice is to amend the by-law or rule. Depending on the corporate legislation applicable to that NFP, its own rules or any rules that the international organizations/denomination it is affiliated with may have for approval or confirmation of such amendments, that amendment may be immediately effective until it can be confirmed at a later date. Some legislation explicitly provides that actions taken before the next members meeting is not prejudiced even if the amendment is repealed or modified.
Even if there is an explicit provision in the by-law that they must meet in person and an amendment made by the Board cannot become immediately effective, then the Board must decide whether it is riskier to do nothing or to make decisions subject to some potential challenge. Our society finds itself in extraordinary circumstances, and consideration should be given to documenting the agreement of all of the Board members to a remote meeting and resist challenges later.
The Need for Members Meeting
It is possible, even probable, that social isolation may extend well into the summer or fall of 2020. Many charities, especially those that rely on regular meetings at which donations are sought, will see their donation income decrease. Membership decisions about how to deal with the consequences may be required urgently. In addition, most NFPs have their annual general meetings in the first part of the calendar year. Reasons a NFP may need to hold a members meeting over the next few months include:
- Emergency decisions, such as:
- Staffing and operations,
- Mission and ministry changes,
- Financial emergencies,
- Sale or leasing of property,
- Dispositions of all or a substantial portion of the NFP’s assets, and
- Dissolution or amalgamation.
- Corporate legislation often requires an annual meeting within 15 months of the last annual meeting.
- There may be an ongoing process that needs to be confirmed or approved
- Budget needs to be approved or changed.
- Financial Statements and audit reports need to be reviewed
- A key employee (e.g. a senior pastor, Chief Executive Officer, etc.) needs to be appointed, disciplined or fired, and the by-law/rules require membership approval.
- The Charity Information Return (T3010) must be filed with the Canada Revenue Agency within six months of the charity’s fiscal year end, which is often December 31, resulting in a June 30 deadline.
Can Members Meetings Be Held Remotely?
Even where a NFP’s by-law or rules provide that the Board can meet by telephone or electronically, there is usually a presumption that the members will meet in person. The by-laws may explicitly require this or, more frequently, simply not provide that right for the meetings of the members. Coupled with quorum requirements, the by-law or rules may make it initially difficult to hold those meetings electronically or by telephone conference.
Fortunately, much of the modern NFP corporate legislation provides that:
- any member may attend any meeting electronically or by telephone
- so long as all members can hear and respond to each other, and
- provided the by-laws do not provide otherwise;
- the entire meeting can be held electronically or telephonically
- so long as all members can hear and respond to each other; and
- the by-law explicitly provides for that.
Initially, those two provisions might seem contradictory, but the key to understanding the scheme of such corporate legislation is to see that first provision as a permission that applies to all members meetings, even those that are held physically or in-person. It allows someone to attend an otherwise in-person meeting remotely. The second provision is best considered as both a permission and a restriction. It permits a completely electronic and telephonic meeting of the members, where no one needs to be in the same room with anyone else, but also imposes the restriction that the NFP’s by-law explicitly allow that. The two provisions really deal with two separate situations.
In-Person Meeting with Remote Attendees
If your NFP is governed by this sort of legislation, it can proceed to call a normal in-person meeting, ensure that at least two people actually meet together at the designated location and then encourage the rest of the members to attend the meeting remotely, provided the by-law does not provide otherwise. Please note that because this type of corporate legislation typically requires that each member be able to communicate adequately with each other, simply hosting a live video feed of the in-person meeting with some sort of remote voting arrangement may not be compliant. In some cases, a simple conference telephone arrangement may suffice. There are, however, a number of electronic meeting facilities that allow for better live interactions between members. Depending on the number of members that need to attend, simple smartphone applications like Facetime, WhatsApp or Google Video Chat may be adequate. Larger meetings for hundreds of members may require more complex arrangements with service providers like Zoom or WebEx. Miller Thomson LLP may be able to assist our clients with these arrangements.
It is likely that your NFP will need to specifically remind its members of its minimum quorum requirements to ensure that its members take seriously the need to join the meeting electronically.
If the NFP’s by-law somehow precludes telephonic or electronic attendance, whether explicitly or by requiring something that is inconsistent with remote attendance, the by-law will need to be amended. How that can be processed will be further discussed in the next section of this article.
If your NFP proceeds down this path, please consider what implications this will have in the future and whether a by-law amendment should be considered in any event. It is likely most members are currently unaware the corporate legislation permits them to attend in-person meetings by telephone or electronically. Once your NFP makes them aware of that possibility, there may be demands for this in the future. That may be highly inconvenient and/or inappropriate. Consider carefully whether you need to put in place now a mechanism that allows you to put that genie back in the bottle. It may be wiser to immediately implement an amendment to the by-law or rules to explicitly limit the conditions under which electronic or telephonic attendance can be utilized. Doing so now, when there is a clear fact situation that justifies remote attendance, may help your organization justify and rationalize the establishment of clear parameters for when telephonic and electronic attendances are permitted.
Amend By-law/Rules to Allow Entirely Remote Meeting(s)
To take advantage of the second type of provision, a by-law amendment may be needed. A by-law amendment may be needed to remove a provision that precludes some of the members attending remotely.
Much of the not-for-profit corporate legislation provides that the by-law amendment is effective immediately upon the adoption by the Board. The legislation usually also requires the amendment to be presented to, and confirmed by, the members at the next members meeting. In the case of unincorporated organizations, the constitution, rules and practice of the organization should be reviewed to determine if that same approach can be utilized. If so, an entirely electronic or telephonic members meeting can be called, and the confirmation of the by-law or constitution/rule amendment could be added to the matters that otherwise need to be considered at that meeting.
When crafting such an amendment, careful consideration should be given to whether or not the change to allow electronic and/or telephonic meetings (or attendance) should be permanent, time-limited or be restricted to either to the current circumstances, a specific condition or some combination of conditions, including a discretion to be exercised by the Board.
Specific Legislation, Agreements and Specific By-laws/Rules/Constitution Matter
It should be obvious that your NFP may be subject to different corporate legislation than that discussed in this article, and its by-laws, rules or constitution may provide for something totally different.
However, there are other matters that may need attention. Some NFPs are subject to contracts with affiliated organizations. For example, there may be a provincial, national or international affiliate which has approval or veto rights. Religious organizations may be subject to their denominational requirements, including approval for changes to their by-laws or rules. Charities may be subject to trust conditions found in trust deeds. There may be contractual limitations found in donation or gift agreements. Consideration thus needs to be given to those documents as well.
Miller Thomson is closely monitoring the COVID-19 situation to ensure that we provide our clients with appropriate support in this rapidly changing environment. For articles, information updates and firm developments, please visit our COVID-19 Resources page.