Although best practices suggest most board decisions be made during board meetings, real life oftentimes gets in the way. Sometimes it becomes necessary to make emergency decisions that cannot wait until the next board meeting, and other times it is simply not feasible for all directors to be available to meet, yet decisions must be made.
With these types of situations, boards do have the option of taking action outside of meetings. But what does this actually mean and how does a board accomplish this? The language authorizing this type of decision-making is set forth in the Colorado Revised Nonprofit Corporations Act (“Nonprofit Act”).
More particularly, Article 128, Section 202 of the Nonprofit Act sets forth the process for a board to take action outside of a meeting. Nevertheless, it is important to remember this process is still subject to the terms of the bylaws, so if the association’s bylaws require a different process for the board taking action outside of a meeting, such process must be followed. For example, we oftentimes see bylaws requiring 100% director approval for actions outside meetings, and if you have such a provision, then you must comply.
Article 128, Section 202 sets forth the following process for boards to take action outside of meetings:
- Notice must be transmitted in writing (i.e. email) to each director which contains the following information:
- Action to be taken;
- Time by when director must respond;
- Failure to respond is the same as abstaining;
- Failure to respond and request the decision be made at a meeting, waives the director’s right to demand a meeting to vote on the measure;
- After the voting deadline, the director votes are tabulated and the measure passes if:
- The yes votes equal or exceed the votes needed for the measure to pass at a meeting; and
- No written demands have been received from any director to vote at a meeting
- Action pursuant to this section of the Nonprofit Act has the same effect as action taken at a board meeting;
- All writings made for the purpose of taking action outside of a meeting must be filed with the minutes of the board.
When boards make decisions outside of meetings as set forth above (or as may be otherwise provided in their bylaws), two issues typically come up: 1) concerns over how this meshes with the Colorado Common Interest Ownership Act’s (“CCIOA”) requirement allowing owners to comment prior to a board vote during meetings; and 2) the concept of ratifying these decisions during board meetings.
Section 308 of CCIOA requires associations to allow owner commentary before boards vote on an issue; but when an action is taken outside of a meeting, owners do not receive this opportunity for comment. Therefore, there tends to be confusion around a board’s ability to take action outside of a meeting while complying with the owner comment requirement in CCIOA.
Although it is understandable why many are confused, it is important to understand the distinction between the owner comment requirement in CCIOA and the ability to take action outside of meetings in accordance with the Nonprofit Act. The requirement to allow owners an opportunity to comment before a vote only applies when a vote is being taken at a meeting. By contrast, taking action outside of a meeting is exactly that—a decision being made outside a meeting. In other words, this is a decision not being made during a board meeting. Therefore, the owner comment requirement does not apply to actions taken outside of a meeting in accordance with the Nonprofit Act, and boards who make decisions outside of meetings do not violate CCIOA’s owner comment requirement.
When it comes to ratification of decisions, it is important to understand the true legal purpose of this process, which is to formalize decisions that may have originally been made incorrectly or without authority. Nevertheless, some associations use the ratification process as a means to have their meeting minutes reflect the decision.
Regardless of whether your board ratifies its decisions made outside meetings, or why it ratifies them, it is important to understand that such ratification is not required by Colorado law as long as the board made the decision in accordance with its governing documents and the Nonprofit Act.
For more information concerning board actions outside meetings, please contact an Altitude attorney at 303.432.9999 or at [email protected].