As the COVID-19 pandemic continues, and governments and health officials repeatedly remind us to maintain social or physical distance and avoid multi-person gatherings, many businesses are facing the reality of not being able to proceed with business decision-making at meetings of directors and shareholders, including annual general meetings, in their usual manner of meeting in person. While we all adjust to the remotely connected world to mitigate the further spread of the virus, there are options for businesses to adapt to electronic and virtual decision-making practices as alternatives to in-person meetings. Many businesses have already been doing this for efficiency, and decision-making need not stop or slow down.
What are some alternatives B.C. companies can consider, while also ensuring such meetings are validly held in accordance with legislative requirements?
Written Consent Resolution and Electronic Signatures
Both federally and provincially incorporated companies are permitted through the applicable legislation to pass directors’ and shareholders’ resolutions through written consent resolutions in lieu of holding a meeting of directors or shareholders. Additional requirements apply to reporting issuers, which are not the subject matter of this post, but are discussed here.
The Canada Business Corporations Act (the ‟CBCA”) permits all shareholders entitled to vote on a resolution at shareholders’ meetings, to instead sign a resolution in lieu of holding a meeting. Under the CBCA, these written consent resolutions are valid as if they had been passed at a shareholders’ meeting. The British Columbia Business Corporations Act (the ‟BCBCA”) contains similar provisions allowing all shareholders to sign written consent resolutions in lieu of a meeting. However, it is important to keep in mind that written consent resolutions require the signature of all voting shareholders, instead of votes by the ‘required majority’ (less than unanimous for most matters) that would be acceptable at a duly called meeting.
Similarly, the CBCA and the BCBCA allow directors of a corporation to pass a resolution without a meeting if all of the directors consent to it in writing. If this is done, the resolution is deemed to have occurred at a meeting of directors and is as valid and effective as if it had been passed at a duly called meeting of directors.
Most agreements, with some exceptions, can be entered without having to put actual pen to paper by signing an agreement electronically instead. The British Columbia Electronics Transactions Act (the “BCETA”) permits us to execute documents while maintaining a safe distance from one another.
What constitutes an electronic signature is quite broad. It includes signing a document and sending a scanned copy by email or by fax. It also includes signatures that you have either created or adopted as your own using online software such as DocuSign. In light of adjusting to COVID-19 related physical distancing measures, keep in mind that authorizing resolutions and executing documents remotely and then exchanging them as scanned copies or by using software such as DocuSign are options, and for most matters, can be done from the comfort of our homes.
The fact that you have signed a document, permitted by the BCETA, does not make it any less valid or enforceable merely based on the fact that it was done electronically. However, it is important to note that not all documents can be signed electronically without affecting their validity, and applicable legislation will still require “wet signatures” for certain categories of documents. Businesses and business owners are advised to reach out to their legal advisors to ensure the appropriate requirements are met for electronically signed agreements and documents to be valid.
Holding Virtual or Hybrid Meetings
For some companies, collecting signatures on written consent resolutions may not be an option or desired for various reasons. In such cases, meetings can still take place while complying with social distancing measures. This can take the form of a fully virtual meeting (if the company’s governing legislation and constating documents permit this) or holding a physical meeting with a few individuals present in person or by proxy, and the remaining shareholders or directors attending that meeting virtually (a hybrid meeting option).
Companies governed by both the CBCA ad BCBCA, provided the companies’ by-laws or articles, as applicable, permit this, can hold shareholders meetings virtually as long as certain requirements are met. While the requirements vary depending on the applicable governing legislation, an important requirement for being able to proceed with a virtual or hybrid meeting is that participants must be able to adequately communicate with each other if they are attending the meeting using the virtual platform or technology.
It is extremely important that such meetings be duly called in compliance with notice requirements set out in the company’s constating documents and its governing legislation. Notice to shareholders of either the fully virtual or hybrid meeting should clearly provide details of the location (in accordance with the requirements of the constating documents), date and time of the proposed meeting, including details of the virtual option. It is recommended that connectivity requirements, video or audio requirements to be able to participate in the meeting and technical support details be well thought out and communicated to the participants in advance of the meeting and in compliance with notice requirements. In order to meet the legislative requirements, companies must also turn their minds to ensuring virtual attendees have an opportunity to participate, ask questions, be heard, hear others who are attending the meeting, and ensuring there is a clear manner for casting and counting votes on resolutions being passed. While these are general recommendations, businesses are advised to discuss with their legal advisors the specifics of the information the meeting notice for their particular company must contain.
At the meeting itself, proper quorum must be established. Both the CBCA and BCBCA contain provisions that will allow those who are present virtually to be deemed present at the meeting. Those who are present virtually, so long as they have the ability to communicate adequately with each other, qualify as shareholders who are present at the meeting for the purposes of establishing quorum.
If a company’s constating documents have not been updated recently, they will most likely not include an explicit provision allowing votes to be cast virtually. Many companies’ constating documents may state that voting will be done by a show of hands, unless a ballot or poll is requested. As either a fully virtual or partially virtual meeting may not lend itself to be able to cast votes through a show of hands, depending on the communication medium being used, companies may wish to consider a ballot or poll for the purposes of voting. Both the CBCA and the BCBCA include provisions which allow votes cast virtually to be valid.
The exact requirements to hold a validly called virtual or hybrid meeting will vary from company to company. However, given the current socially distant environment we find ourselves in, it is reassuring to know that there are options to proceed with decision-making without the need to be physically present.
As there are additional requirements and considerations for companies to hold virtual or hybrid meetings, we strongly recommend speaking to a legal advisor before proceeding with these options. Please contact Pratibha Sharma, Alexandra Madden or any other member of our Private Company Transactions Group lawyers at Clark Wilson LLP to ensure that companies remain compliant when relying on electronic signatures or holding virtual or hybrid shareholder meetings.