Client Alert: COVID-19 Relief for Nonprofit Governing Boards

April 6, 2020

Client Alert: COVID-19 Relief for Nonprofit Governing Boards

Written by: Anita S. Lichtblau and Sharon C. Lincoln

By: Sharon C. Lincoln and Anita S. Lichtblau

On Friday April 3, 2020, Governor Baker signed into law emergency provisions that will permit nonprofits organized in the Commonwealth to adapt their governance practices to the unique challenges posed by the current COVID-19 crisis.

One of the key issues the emergency provisions are intended to address is the difficulty some nonprofits have faced during the crisis in holding members’ meetings and consequently obtaining members’ votes on necessary actions such as the election of directors or approval of budgets. The bylaws of some nonprofits with members prohibit proxy voting and the state nonprofit statute, at least before these emergency provisions, did not permit members to meet by telephone or videoconference. The provisions will now resolve that problem by, among other things, permitting members to meet remotely and vote by proxy, unless the nonprofit’s articles of organization expressly prohibit this. The emergency provisions will be effective for the duration of the Governor’s March 10, 2020 state of emergency and for 60 days thereafter.

Unless the articles of organization provide otherwise, these emergency provisions state that the board of directors of a nonprofit corporation may:

(1) provide notice of a meeting of the board of directors:

a. only to those directors it is practicable to reach; and
b. in any practicable manner;

(2) cancel a meeting of the members, with notice of cancellation given in any practicable manner;

(3) allow a director or officer to continue to serve during the Governor’s March 10, 2020 state of emergency and until the director’s or officer’s successor is elected, appointed or designated; provided that directors and officers whose term is extended pursuant to this section shall continue to serve until the director’s or officer’s successor takes office, despite the expiration of a director’s or officer’s term;

(4) allow a director to participate in a regular or special meeting by, or conduct the meeting through the use of, any means of communication by which all directors participating are able to simultaneously communicate with each other during the meeting;

(5) allow members at a meeting of the members to vote in person or by proxy; provided that any member voting by proxy shall be considered present at the meeting for purposes of any quorum requirement;

(6) appoint successors to any of the officers, directors, employees or agents;

(7) appoint successors to any of the officers, directors, employees or agents;

(8) relocate the principal office or designate alternative offices; and

(9) allow members to participate in any meeting of members by remote participation, even if not physically present at the meeting.

In connection with any meeting of the members during this time, the Governor’s emergency measure provides that participation by remote communication at any meeting of the members shall constitute presence at such meeting only if:

(1) reasonable measures are implemented to verify that each person deemed present and permitted to vote at the meeting by means of remote communication is a member or proxyholder;

(2) reasonable measures are implemented to provide such members and proxyholders a reasonable opportunity to participate in the meeting and to vote on matters submitted to the members, including an opportunity to read or hear to the proceedings of the meeting substantially concurrently with such proceedings, pose questions and make comments, regardless of whether the members can simultaneously communicate with each other during the meeting; and

(3) if any member or proxyholder votes or takes other action at the meeting by means of remote communication, a record of such vote or other action shall be maintained by the corporation.

Finally, the Governor’s measure provide that directors who participate in a meeting of the board of directors pursuant to these rules shall constitute a quorum. In a corporation with members, the corporation shall notify the members, as soon as reasonably practicable, of any action taken by the board of directors pursuant to this these rules.

These emergency provisions are drawn from Chapter 156D, the corporate law applicable to business entities, with additional input from the American Bar Association Model Nonprofit Corporation Act, to address the pressing need for governance flexibility within Massachusetts nonprofits at this unprecedented time. Chapter 180 has remained largely unchanged since 1971 and is notable for its lack of emergency provisions, which have now become an urgent issue with the COVID-19 crisis. These temporary emergency provisions thus fill a needed gap.

The Boston Bar Association has been developing a revised draft of Chapter 180 and this revised draft statute includes many of the features included in the new emergency provisions.

Should you need assistance or have any questions concerning these emergency provisions, contact Sharon C. Lincoln at lincoln@casneredwards.com, Anita S. Lichtblau at lichtblau@casneredwards.com or your Casner & Edwards attorney.

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