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Should Your Business Consider Virtual Shareholder & BOD Meetings?

Considering the COVID-19 “shelter in home” orders might need to be in place for some time, if you are an Illinois small-midsize business, you might be wondering if it is permissible for your business to conduct virtual organizational meetings.

The short answer is probably “YES”!...

But first…

Review the Company's Operational Documents

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Due to our very technically savvy world, many company organizational documents (e.g.; articles of incorporation, by-laws, operating agreements) already address procedures for having non in-person meetings via remote/virtual means. If your company documents address remote meetings, then you should follow the procedures as outlined. However; if those documents are silent, regarding remote meetings, then Illinois Statues will apply.

Limited Liability Companies (LLC)

Under Illinois Statutes, if your company is organized as an LLC, there is no requirement to hold organizational meetings. Therefore, unless your operating agreement or other type of organizational agreement and/or policy restrict or prohibit the use of remote or virtual meetings, your LLC should be allowed to conduct virtual meetings, as per those agreements/policies, without issue.

When Illinois Statutes Apply

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While Illinois Statutes generally allow for "remote" meetings, as an acceptable form of having non in-person meetings, the term "remote" is sometimes not specifically stated within clause sections and the term "virtual is not specifically stated at all.

What does this mean? Absent the use of the terms "remote" or "virtual," in certain clauses, there are, nevertheless, clues in the language used to define acceptable methods for having non in-person meetings, such as by: "conference telephone", "other communications equipment", "interactive technology", and "internet usage." Since remote and virtual meetings use technology that is interactive such as: video, audio, and text to connect by telephone and/or online, via the internet, this might imply the terms “remote” and "virtual" would be included as compliant methods of having a non in-person meeting absent the specific terms in the clause.

Therefore, presuming remote/virtual meetings are included as acceptable forms of non in-person meetings under Illinois Statutes - the following is a break-down of how corporations, (for profit and not-for-profit), can address whether to have virtual directors, members and/or shareholder meetings.

Corporations (For-Profit)

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If your company is organized as a corporation, under Illinois Statues, certain organizational meetings should not be cancelled or delayed indefinitely, (e.g.; cancelled or delayed until COVID-19 "stay at home" orders are lifted).

The good news is that if in-person meetings are not possible, Illinois generally permits corporations to conduct remote meetings (see also "When Illinois Statutes Apply" section above). However, the allowance of remote meetings is contingent on compliance with the organization’s articles of incorporation and by-laws.

Directors (BOD) & Committee Meetings

Unless specifically prohibited by the articles of incorporation or by-laws, board of directors and committee meetings can be conducted remotely as long as the technology being used allows participants to communicate and hear each other during the meeting.

Shareholder Meetings

Unless particularly prohibited by the company articles of incorporation or by-laws, shareholder meetings may be held by remote means as long as participants can communicate and hear each other. However, certain formalities that would apply to in-person meetings are also required for non in-person meetings, such as: 1) notice, unless there is a waiver of notice, 2) a reasonable means for voting shareholders to attend and communicate at the meeting, and 3) the ability to provide voting shareholders with voting lists during the meetings.

Corporations (Not-for-Profit)

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Member Meetings

Unless specifically prohibited by the articles of incorporation or by-laws, IL Statutes provide that member meetings may be held by means of remote communication. Additionally, the statute sets forth that all participating members should be able to communicate with each other during the meetings.

Directors Meetings

Unless specifically prohibited by the articles of incorporation or by-laws, IL Statutes provide that directors meetings may be held by conference telephone or other communications equipment as long as all participants can communicate with each other during the meeting.

What is the main takeaway???

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Whether your business is formed as an LLC or a corporation, (for profit and non profit), your company should consider having virtual organizational meetings - especially since Illinois Statutes do not seem to prohibit such meetings. However, the common takeaway and caveat, when deciding whether or not to have virtual organizational meetings, is to carefully review the organizational documents for your business, (e.g.; articles of incorporation, by-laws, operating agreement), including company policies and procedures, to ensure having remote or virtual meetings is not prohibited under those documents. If any of those organizational documents prohibit remote/virtual meetings then, you will need to consider amending those documents or figuring out alternative measures if there is a need, as is the case now due to "shelter in home" orders, to meet virtually.

Does Your Business Need Help?

You’re not alone – feel free to inquire about a scheduled session with me to discuss how my services can help with your business organization and operations - actions, planning, and strategy measures that should or will need to be taken relating to the current and post COVID-19 environment.

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