On March 21, St. Louis County and St. Louis City issued stay-at-home orders in response to the global COVID-19 health crisis. The COVID-19 pandemic has challenged — and will continue to challenge — the usual functioning of communities, such as conducting annual and board meetings, holding elections, ratifying budgets and other typical business processes.
This information is for communities operating under the Nonprofit Corporation Act trying to figure out how to manage operations during the COVID-19 pandemic.
Missouri law permits a board of directors to meet electronically, per Section 355.376, as long as “all directors participating may simultaneously hear each other during the meeting.” At such a meeting, appearance electronically counts toward quorum. The board may conduct its usual business if a quorum is present electronically.
Unlike board meetings, electronic meetings of the members are not meetings. Therefore, while the association may meet electronically for informal information sharing, an action of the members in an electronic meeting is not an official act of the association. Section 355.266 provides a workable solution, where the association may act by written ballot for any action that would otherwise occur at an annual or other meeting of the membership. The community could still discuss the matters during an electronic meeting, but the official action would occur through the written ballot. The statute, summarized below, includes several requirements that the association should ensure are met so that all actions are valid.
To take action by written ballot, the association must deliver a written ballot to every member entitled to vote, setting forth each proposed action and provide an opportunity to vote for or against each proposed action. Approval is valid only when: 1) the number of votes cast equals or exceeds the quorum required for the meeting authorizing the action, and 2) the number of approvals equals or exceeds the required approval at a meeting. The solicitation for votes by written ballot shall: a) indicate the number of responses needed to meet quorum, b) meet the percentage of approvals needed to approve each matter other than election of directors, and c) specify the time by which ballots must be received to be counted.
While the foregoing suggestions provide means for most communities to operate during this crisis, the Missouri statute provides two emergency provisions. Pursuant to Sections 355.121 and 355.136 of the act, nonprofit corporations have certain additional powers in emergency situations: “An emergency exists for purposes of this section if a quorum of the corporation’s directors cannot readily be assembled because of some catastrophic event.” Missouri statutes and Missouri courts do not specifically provide guidance as to the definition of a “catastrophic event;” however, it seems likely that a court would consider the global COVID-19 health crisis a catastrophic event.
- Section 355.121 allows a board to adopt emergency bylaws, including how to call board meetings, quorum requirements for board meetings and designation of additional or substitute directors. These last only for the emergency. Per this section, “corporate action taken in good faith in accordance with the emergency bylaws binds the corporation.”
- Section 355.136 focuses on the incapacity of a director, how to notice meetings and how to meet quorum.
Navigating the everchanging COVID-19 situation may bring additional stress and uncertainty to the functioning of your clients’ communities especially due to the recent stay-at-home orders. Hopefully, this information positions you better to help.
Stephen G. Davis is a litigator at Carmody MacDonald in Clayton. As part of his practice, he focuses on homeowner and condominium association law and represents more than 180 associations throughout the St. Louis metropolitan area.