The past 19 months have been a difficult time.
In the wake of the coronavirus pandemic, numerous precautions and restrictions have been put in place to prevent the transmission and spread of COVID-19, including executive orders issued by Governor Cooper limiting the number of people who can meet in person . This restriction had the potential to stifle the ability of community associations to hold annual membership meetings, which are necessary to ensure proper ratification of the budget and the election of new board members. Fortunately, the Governor has temporarily allowed community associations to hold membership meetings virtually (more recently through Executive Decree 212, which expired on June 1, 2021).
In March of this year, the North Carolina Legislature introduced two bills aimed at making the virtual flexibility offered by previous Governor’s Orders permanent.
Today Governor Cooper signed the law North Carolina House Bill 320, which creates flexibility for meeting and voting procedures under the North Carolina Nonprofit Corporation Act (“Chapter 55A”). Specifically, Part II of House Bill 320 creates the right (not the obligation) for nonprofit corporations, including community associations, to respect and vote virtually.
Prior to this new law, member action could only take place in face-to-face meetings, by written ballot or by uniform written consent. With the passage of House Bill 320, community associations now have the capacity, under Chapter 55A, to:
hold membership meetings virtually;
allow their members to vote in virtual meetings; and,
allow their members to vote on the proposed shares by electronic vote without meeting.
However, each community association should review its governing documents to confirm that there are no prohibitions or limitations in these documents that would prevent virtual meetings from being held or allowing members to vote electronically.
Membership meetings and voting
Specifically, House Bill 320 enables the virtual holding of annual, regular or special member meetings using remote communication.
Members participating through distance communication are deemed to be present and may vote at the meeting if the community association takes reasonable steps to confirm the following:
Check that each remote participant is indeed a member;
Provide a reasonable opportunity for members to participate in the meeting; and
Provide members with a reasonable opportunity to vote on matters referred to members.
The above measures should ensure that members can participate and vote to the same extent that members could participate and vote if they are present at a meeting of members in person, including the ability for members to communicate and read or hear the proceedings of the meeting in real time.
When a meeting of members is held using distance communication only, the notice of meeting must include a notice that the meeting will be held exclusively via distance communication and provide instructions on how members can join the meeting.
Representatives of members’ meetings
House Bill 320 extends the proxy voting process in a meeting. Unless the articles of association or bylaws of community associations prohibit it, members may vote by proxy. Members may appoint a proxy by submitting an electronic record that shows either the member’s electronic signature or is sent from the email address designated by the member, provided that the electronic record can be directly reproduced in paper form. This means that a member unable to attend a virtual meeting can designate a proxy to attend the virtual meeting in their stead.
Members’ action without meeting
Members can now take action outside of a meeting through written ballots, uniform written consent, or electronic vote. Members entitled to vote on the proposed action must be permitted to vote by written or electronic ballot, or both.
For members who choose to use the new electronic voting option, they must provide their community association with an email address to use for communication between the member and the community association. Under the new law, community associations are responsible for educating their members on how to designate an email address, update the email address, and any additional information the community association needs. for such electronic transactions, including how to provide the additional information.
The board of directors may determine the manner in which the votes will be cast (for example, by written ballot, by electronic vote or both), with a qualification. The board of directors may alone require that all votes be cast only by electronic vote if all members entitled to vote on the share have provided the community association with a designated email address.
Impact on the list of members
All community associations are required to prepare a list of the names and addresses of all their members who are entitled to a notice of meeting. As of two working days after the notice of meeting, the list of members must be made available to any member for review for the purposes of communication with other members regarding meetings. Before the new law, the membership list had to be available either at the main office of the community association or at a reasonable location identified in the notice of meeting. House Bill 320 gives community associations the additional option of providing membership lists on a “reasonably accessible electronic network”. If a community association chooses the electronic network option, the notice of meeting must provide the information necessary to access the list on the electronic network. In addition, community associations should also take steps to ensure that information on the electronic network is only accessible to members of the community association.
If the meeting is held only by means of remote communication, the list of members must be available and open for inspection. during meeting over a reasonably accessible electronic network and should presumably include members’ email addresses in place of the physical address.
So when can we go virtual?
Effective today, September 20, 2021, all community associations incorporated under Chapter 55A have the option of holding membership meetings and voting virtually.
Â© 2021 Ward and Smith, Pennsylvania. All rights reserved.Revue nationale de droit, volume XI, number 263