Holding directors’ meetings during lockdown

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One of the many challenges facing companies during the pandemic is to ensure that they can continue to function on a day to day basis with appropriate authority in their decision making and in full compliance of the law and other regulatory frameworks.

As with shareholder meetings, a Board should first look at the company’s Articles of Association to see how the company’s own constitution regulates how and when board meetings take place, how they are constituted, who may attend and vote etc. All of this is important to ensure that any decisions made by the board cannot later be challenged as being either improperly arrived at or, in some way, procedurally defective.

In respect of those companies incorporated after October 2009, many will have adopted the provisions of the Model Articles for private companies set out as part of The Companies Act 2006. However, for those companies formed prior to October 2009, they will be regulated predominantly by reference to Table A of the 1985 Companies Act. Of course, the extent to which a company chooses to vary either the Model Articles or Table A to create a bespoke solution for their individual requirements is entirely up to them.

Technology has moved on considerably since the 1985 Companies Act, and the Model Articles do contain more generous provisions to enable directors’ to meet. Subject to meeting requirements, Model Article 10(2) says that “in determining whether directors’ are participating in a directors’ meeting, it is irrelevant where any director is or how they communicate with each other”. Therefore, it’s very easy for those companies that have adopted Model Articles to constitute valid directors’ meetings where directors’ are not physically present and may be joining by telephone, video conference or other means. It is, of course, possible to circulate resolutions that require board support and have them passed by means of a Written Resolution that is signed by all of the directors’, thus negating the requirement to have a meeting at all.

If, however, it’s determined to use a particular electronic platform to conduct directors’ meetings (for example Microsoft Teams or Zoom) then this should certainly be with the agreement of the board and the basis upon which business is to be conducted should be agreed in advance before the meeting to establish the ground rules. Does the raising of a hand indicate the support of a resolution or merely that a question needs to be asked? For the sake of clarity, the Chairperson of the meeting should ask each individual member joining electronically to indicate their support or otherwise to any proposed resolution to avoid uncertainty. It should also be remembered that, for those employees who are also directors and who may be furloughed from their employed position, this does not negate their responsibility as a director of the company. They can and should still participate in directors’ meetings as this is a role independent of their employed status. As directors owe fiduciary duties to the company (arguably irrespective of whether they are furloughed) in exercise of those duties, they should participate in all directors’ deliberations in order to avoid any allegation that they are, somehow, in dereliction of those duties.

In summary, recall should first be had to the company’s Articles of Association to determine how and when board meetings are to be held and then, in light of the current restrictions on movement, establish how the board is to conduct business going forward. In the event of any uncertainty or confusion, the board would be advised to take advice on its position to ensure compliance with statutory and other regulatory requirements.

It’s important to take advice on this issue. If you wish to discuss any of the details covered here or you’re unsure of how to proceed, please get in touch.