Delays, rescheduling, and closures due to COVID-19 will be a common theme in the next few weeks. Given the level of heightened concern regarding exposure to, and impact from, the virus, it is ok for you to delay any meetings/events that could result in the congregation and/or ongoing close proximity of people. And, if you have an upcoming event that will garner 50 or more in attendance, we strongly recommend you cancel/reschedule such event given the CDC’s most recent recommendation to do so. This would be the appropriate response in the face of the pandemic and likely something that homeowners are expecting.
Additionally, in last week’s blog we mentioned that associations can conduct meetings electronically in an effort to curb the spread of the coronavirus. Another alternative to conducting meetings electronically is to take action without a meeting altogether, such as board members taking action by email or homeowners taking action by written ballot. If you wish to move forward with either option, you need to know the requirements for each.
Board Action by Email
If you are considering conducting a Board vote entirely by email, make sure you review your Bylaws for the appropriate procedures and requirements. Although the Colorado Revised Nonprofit Corporation Act (“Nonprofit Code”), at C.R.S. §7-128-201, includes a procedure for such actions, the Nonprofit Code defers to the procedures and requirements contained in your existing Bylaws. Therefore, you need to follow your Bylaws. And, when reviewing your Bylaws, don’t just search for terms like voting by “email” or “electronic mail,” as many Bylaws do not use those terms. Instead, search for terms like “Action Taken Without a Meeting” or “Consent by Corporate Action”, as these headers are more typical.
You will find that many bylaws include the following provision (or language similar to it) when addressing Board action by email:
Action Taken Without a Meeting. The directors shall have the right to take any action in the absence of a meeting which they could take at a meeting by obtaining the written approval of the proposed action by all directors. Any action so approved shall have the same effect as though taken at a meeting of the directors.
The above provides that if the Board is taking action without a meeting (i.e., by email), then unanimous approval is required. If your Bylaws require unanimous approval for Board action without a meeting, then you need to follow your Bylaws and obtain approval from all Board members. Or, if your Bylaws prescribe some other procedures and/or requirements for the Board to take action without a meeting, you need to follow those express provisions. You may also want to consider amending the Bylaws in order to remove any such strict procedures and to incorporate the more flexible provisions under the Nonprofit Code.
If your Bylaws do not prescribe any procedures for Board action without a meeting, then C.R.S. §7-128-201 of the Nonprofit Code controls and provides the following:
7-128-202. Action without meeting
(1) Unless otherwise provided in the bylaws, any action required or permitted by articles 121 to 137 of this title to be taken at a board of directors’ meeting may be taken without a meeting if notice is transmitted in writing to each member of the board and each member of the board by the time stated in the notice:
(a) Votes in writing for such action; or
(b) Votes in writing against such action, abstains in writing from voting, or fails to respond or vote; and (II) Fails to demand in writing that action not be taken without a meeting.
(2) The notice required by subsection (1) of this section shall state:
(a) The action to be taken;
(b) The time by which a director must respond;
(c) That failure to respond by the time stated in the notice will have the same effect as abstaining in writing by the time stated in the notice and failing to demand in writing by the time stated in the notice that action not be taken without a meeting; and
(d) Any other matters the nonprofit corporation determines to include.
(3) Action is taken under this section only if, at the end of the time stated in the notice transmitted pursuant to subsection (1) of this section:
(a) The affirmative votes in writing for such action received by the nonprofit corporation and not revoked pursuant to subsection (5) of this section equal or exceed the minimum number of votes that would be necessary to take such action at a meeting at which all of the directors then in office were present and voted; and
(b) The nonprofit corporation has not received a written demand by a director that such action not be taken without a meeting other than a demand that has been revoked pursuant to subsection (5) of this section.
(4) A director’s right to demand that action not be taken without a meeting shall be deemed to have been waived unless the nonprofit corporation receives such demand from the director in writing by the time stated in the notice transmitted pursuant to subsection (1) of this section and such demand has not been revoked pursuant to subsection (5) of this section.
(5) Any director who in writing has voted, abstained, or demanded action not be taken without a meeting pursuant to this section may revoke such vote, abstention, or demand in writing received by the nonprofit corporation by the time stated in the notice transmitted pursuant to subsection (1) of this section.
(6) Unless the notice transmitted pursuant to subsection (1) of this section states a different effective date, action taken pursuant to this section shall be effective at the end of the time stated in the notice transmitted pursuant to subsection (1) of this section.
(7) A writing by a director under this section shall be in a form sufficient to inform the nonprofit corporation of the identity of the director, the vote, abstention, demand, or revocation of the director, and the proposed action to which such vote, abstention, demand, or revocation relates. Unless otherwise provided by the bylaws, all communications under this section may be transmitted or received by the nonprofit corporation by electronically transmitted facsimile, e-mail, or other form of wire or wireless communication. For purposes of this section, communications to the nonprofit corporation are not effective until received.
(8) Action taken pursuant to this section has the same effect as action taken at a meeting of directors and may be described as such in any document.
(9) All writings made pursuant to this section shall be filed with the minutes of the meetings of the board of directors.
It is important to note that the Nonprofit Code does not require unanimous Board approval. However, it also does not reflect the typical approval requirement for in-person Board meetings, which is approval by a majority of a quorum of the Board. Instead, the votes returned by the prescribed deadline must equal or exceed the minimum number of votes that would be necessary to take such action at a meeting at which all of the directors then in office were present and voted. That means, if you have 5 directors in office, then 3 directors must vote in favor of the proposed action. If you were voting at an in-person meeting with a 5-member board, then theoretically only 2 directors could approve the action, if only a majority of the directors showed up to meet quorum.
Also, note that if any directors demands a physical Board meeting by the deadline date, then you can no longer vote by email for the proposed action.
Again, a Board can only use the above provision of the Nonprofit Code if the Bylaws are silent on Board action without a meeting. If the Bylaws require a particular procedure and/or approval requirement, then such procedure/approval requirement controls.
Homeowner Action by Written Ballot
Similar to Board action by email the Nonprofit Code, at C.R.S. §7-127-109, allows any action that would typically take place at a meeting of the Members to be taken by written ballot in lieu of a meeting. Here are the steps for taking homeowner action by written ballot:
7-127-109. Action by written ballot.
(1) Unless otherwise provided by the bylaws, any action that may be taken at any annual, regular, or special meeting of members may be taken without a meeting if the nonprofit corporation delivers a written ballot to every member entitled to vote on the matter.
(2) A written ballot shall:
(a) State each proposed action; and
(b) Provide an opportunity to vote for or against each proposed action.
(3) Approval by written ballot pursuant to this section shall be valid only when the number of votes cast by ballot equals or exceeds the quorum required to be present at a meeting authorizing the action, and the number of approvals equals or exceeds the number of votes that would be required to approve the matter at a meeting at which the total number of votes cast was the same as the number of votes cast by ballot.
(4) All solicitations for votes by written ballot shall:
(a) Indicate the number of responses needed to meet the quorum requirements;
(b) State the percentage of approvals necessary to approve each matter other than election of directors;
(c) State the time by which a ballot must be received by the nonprofit corporation in order to be counted; and
(d) Be accompanied by written information sufficient to permit each person casting such ballot to reach an informed decision on the matter.
(5) Unless otherwise provided by the bylaws, a written ballot may not be revoked.
(6) Action taken under this section has the same effect as action taken at a meeting of members and may be described as such in any document.
Taking Board action by email or homeowner action by written ballot requires strict compliance with either your Bylaws or the Nonprofit Code, as applicable. If you have any questions on how to conduct either procedure, please feel free to contact any one of the Altitude Community Law attorneys at 303-432-9999.