With the UK lockdown showing no signs of being lifted for the foreseeable future, company stakeholders are becoming increasingly familiar with dialling into conference facilities and the plethora of newly-popular teleconferencing apps. If you are one of the thousands of companies now conducting board meetings and making decisions via telephone or video-conference, it is important to remember that you are still required to follow the decision-making processes set out in your articles of association, even during a global pandemic.
This post provides a refresher on decision-making provisions in the default model articles, and flags the key issues to bear in mind for any company that is making board decisions during the COVID-19 pandemic.
Contents
Board decision-making – Do the usual rules still apply?
In short, yes. Although the Government has been keen to make sweeping reforms to the law in many areas in response to the COVID-19 pandemic, company decision-making is an area that remains unaffected. All companies must continue to follow the procedures set out in their articles of association in order to make decisions.
If your company is one of the many that uses the default model articles of association, this means that your directors have general power to manage the business of your company. Decisions can broadly be taken by directors in one of two ways:
- At a board meeting – this is the usual way for directors’ decisions to be made, and will always be necessary where a matter needs to be discussed between two or more directors.
- Unanimously in writing (or informally) – as an alternative to a meeting, where the matter is uncontroversial or unanimously agreed, a board resolution can be passed more informally. You should record all such unanimous decisions in writing, and for more important decisions you should ensure a written resolution is signed by all directors.
If your company only has one director, they are free to make decisions in any way they wish, but it is good practice to ensure any notable decisions are recorded in writing in the form of sole director resolutions.
Conducting board meetings during the COVID-19 pandemic
Board meetings remain the bread and butter mechanism for making company decisions, even during the ongoing UK lockdown. You should check your company’s articles of association to identify whether there are any restrictions on holding board meetings by telephone or video-conference. In most cases, including if you have the model articles, your company will be free to conduct board meetings in any manner which allows the directors to communicate with one another. This flexibility includes board meetings held by telephone and by video-conferencing.
You can always use our helpful checklist to ensure you take all the necessary steps to hold a valid board meeting, and our guidance on How to make a board decision. For board meetings held by telephone or video-conference during the COVID-19 pandemic, you should:
Before the meeting
- Give reasonable notice of the meeting. An agenda is particularly helpful to keep a telephone or video-conference meeting on track.
- Circulate copies of any documents to be discussed at the meeting in advance.
- Ensure your notice sets out the dial-in details or video-conference link (including any password or access code required, and instructions for any apps or programs that need to be downloaded).
During the meeting
- Have the Chair host the meeting. Give the Chair the ability to mute speakers where appropriate, to facilitate discussion and to keep matters on track.
- Before commencing any business, ensure:
- a quorum is present (at least two directors if you have the model articles);
- everyone can be heard; and
- the connection is stable.
- Ensure a quorum is present throughout the meeting. If a director is disconnected during the meeting, you should stop until they are able to reconnect. If a director is unable to reconnect, and you still have a quorum present, you can continue the meeting in their absence (with the disconnected director’s consent), but this should be noted in the minutes.
- Make use of any available screen share facility to present any documents for discussion at the meeting.
- If voting on any resolution or matter, the clearest way is for the Chair to ask each director separately to confirm whether they agree or not, rather than using a show of hands (where a frozen screen or lag could cause issues).
- If there is any doubt regarding voting, the Chair should ask directors to confirm their votes in writing (via any text chat facility, messaging, or email).
After the meeting
- The Chair should circulate minutes after the meeting. These should be sent to all directors, and the directors who participated should read these and ensure they reflect the matters discussed and approved at the relevant meeting. The minutes can then be signed by the Chair (an electronic signature is acceptable, if easier).
- A copy of the minutes should be kept for 10 years from the date of the meeting.
Passing written board resolutions during the COVID-19 pandemic
For uncontroversial business during the ongoing UK lockdown, where a discussion is not required and there is clear unanimous approval, it may be more efficient for your company to reach a decision informally. The clearest way to record approval of a unanimous decision is to circulate and pass a written board resolution. As with board meetings, you should check your company’s articles of association to see if there are any restrictions or requirements for passing board resolutions in writing. In many cases, including if you have the model articles, a written board resolution can be passed simply by having all directors sign or approve an agreed form of resolution.
To ensure you take all the necessary steps to pass a valid written board resolution during the COVID-19 pandemic, you should:
Before circulating the resolution
- Ensure that your directors have printing and scanning facilities, or that your resolution can be circulated via an app or software which allows electronic signatures or some other electronic or written method of approval.
- Send the wording of the proposed written board resolution in draft to all directors, to ensure the wording is agreed. If there is any dissent or substantive discussion to be had, you should convene a meeting rather than proceeding with a written resolution, to ensure all directors views are properly heard and discussed.
Circulating the resolution
- Once the wording is agreed, the signature version of the resolution should be circulated to all directors eligible to vote on it by the Chair or by another nominated director, secretary or member of staff.
- The resolution should be accompanied by clear instructions on how it should be signed or approved and who it should be returned to.
- If you have the software available, circulating the resolution using a program or app which permits electronic signatures is likely to enable the resolution to be passed more efficiently.
Passing the resolution
- Directors should follow any instructions for signing or approving the resolution.
- Electronic signatures are acceptable for a board resolution.
- If a director is unable to provide an electronic signature, they may print the resolution, sign it by hand, and return either a scan or clear photograph of the signed resolution.
- If an electronic signature is not possible, and a director cannot print or scan a signed copy, a written board resolution can potentially be approved by the director indicating their approval in writing (for instance in an email). However, it is better to have the director sign the wording of the resolution itself so that there is no doubt regarding what they have approved.
- Directors should return the signed resolution, or indicate their approval, to the Chair or any other nominated director, secretary or member of staff.
- The resolution will only be passed once it has been signed or approved by all directors eligible to vote on it.
After the resolution is passed
- The Chair (or other person who is receiving signed resolutions or approvals) should confirm to all directors when the resolution is passed.
- A copy of the resolution should be kept for 10 years from the date it is passed.
For further guidance on how your company should make, and record, its decisions see Board and shareholder decisions. Our template documents contain hundreds of fully customisable template board minutes, written board resolutions and sole director resolutions to approve a range of company matters.
The content in this article is up to date at the date of publishing. The information provided is intended only for information purposes, and is not for the purpose of providing legal advice. Sparqa Legal’s Terms of Use apply.
Harry is General Counsel and Company Secretary of FromCounsel, the specialist corporate legal resource trusted by top global law firms and FTSE 100 companies. Before joining FromCounsel in 2021, Harry was a member of Sparqa’s editorial team for over 4 years, having previously practised as a corporate solicitor for 6 years at Farrer & Co. Harry regularly contributes his expertise to the blog, focusing on corporate and commercial law.