NC Community Association Legislative Update – September 15, 2021
Community association (HOA and condo) boards have long been permitted to meet virtually by phone or videoconference, but the ability to hold membership meetings electronically ended with the expiration of the Governor’s Executive Order this spring. Since that time, while members can certainly meet virtually as an informal “town hall” and then vote afterward by written ballot, it has not been possible to hold virtual membership meetings. And even under the Governor’s prior Executive Order, members could not vote during virtual meetings. That’s all changing with the adoption today of legislation by the General Assembly that allows nonprofit member meetings “by means of remote communication.”
As noted in my May 14 NC Community Association Legislative Update, there were two different proposed bills to allow nonprofit association member meetings, including homeowner and condominium associations, to be held virtually. The adopted proposal is HB 320 (short title: “Modernize Remote Business Access”). The bill will become not become effective until signed by the Governor, but that is anticipated to happen quickly.
This post serves as (a) quick notification that the bill has been adopted, and (b) a brief summary of the soon-to-be new law. For details or advice for your specific association, talk to an attorney! That’s because the bill is thirteen pages long, complicated in wording, covers for-profit corporations, non-profit corporations, and even insurance policyholder meetings, and has many specific details. Not only that, but the bill covers far more than just remote member participation at meetings. Without question, there will be many articles, discussions, and even different interpretations on how to best follow the new law!
Here are a few highlights of the legislation that aren’t specific to virtual meetings:
- The definition of “vote” in the Nonprofit Corporation Act is expanded to include “through an electronic voting system.”
- “Written notice” to members is expanded to include electronic notice by email “to a member who has designated an email address” through the process of the legislation.
- Nonprofit corporations are given authority to “conduct a transaction by electronic means,” except as limited by the governing documents or by the board. Members who wish to conduct business or communicate with their association by electronic means must designate an email address, and the association must “inform the members on how to designate an email address.”
- If a member agrees to transact business by electronic means, a proxy “sent from the member’s designated email address” is acceptable.
- Under the old law, a board could adopt emergency bylaws for certain situations, but “emergency” was restricted to instances where a board quorum could not be assembled due to “some catastrophic event.” The word “emergency” has been expanded to instances where “a natural or man-made disaster impedes the ability of the corporation’s board of directors or members to comply with one or more provisions of the corporation’s bylaws.”
- Members’ lists previously had to be made available to members for inspection beginning two days after the end of meeting notice, but now can be made available “on a reasonably accessible electronic network, provided that the information required to gain access to the list is provided with the notice of the meeting.” If a meeting will be held only by means of remote communication, the members’ list must also be available to members during the virtual meeting.
- The statute on electronic board meetings has been edited to clarify that all board members must be able to “simultaneously hear and be heard by each other during the meeting.”
- Other changes align the concepts for remote member participation and voting with the Nonprofit Corporation Act.
FYI, this legislation is complicated. Simpler approaches might have been to codify the Governor’s virtual meetings Executive Order or to add “electronic” to the description of permitted types of member meetings. However, HB 320 is drafted to both provide many details as well as give a variety of options for associations that wish to meet virtually or make decisions without an in-person meeting.
Again, here is a summary:
DECISIONS MADE AT A REMOTE (OR “VIRTUAL”) MEETING
- A board “in its sole discretion” may determine that a membership meeting will not be held in person and authorize participation in a membership meeting by means of “remote communication.” Such meeting is also subject to “any guidelines and procedures the board of directors adopts.”
- Notice of such a remote meeting must notify the members that the meeting “will be held solely by means of remote communications and [contain] sufficient instruction and information on how members may join the meeting remotely.”
- To hold such a remote meeting, the association must have “implemented reasonable measures” to (a) verify participants are members, and (b) provide members a reasonable opportunity to participate in the meeting and vote on matters as “if present in person,” including an opportunity to “communicate and to read or hear the proceedings of the meeting, substantially concurrently with the proceeding.”
- Again, the definition of “vote” has been expanded to include “through an electronic voting system.”
TAKEAWAY: A board at its discretion can call a membership meeting to be held virtually instead of in person. Any notice must be clear that the meeting will be solely by means of remote communication. The Board must adopt “reasonable measures” to allow members to participate in the meeting and to vote on matters as if present in person, which could include voice votes, hand votes, or an electronic voting system, depending on the circumstances. Such measures will likely take the form of “meeting rules” (which we can help draft) governing access to the meeting, seeking recognition, debate rules, and voting, as discussed in previous articles (Yes, You Can Hold a Productive North Carolina Annual HOA/Condo Meeting During a Pandemic and Differences Between Virtual and In-Person Large Annual Meetings).
DECISIONS MADE WITHOUT A MEETING BY WRITTEN BALLOTS OR ELECTRONIC VOTING.
In the past, associations could make decisions without a meeting so long as a written ballot was sent to all members for a vote. The new law expands this concept to electronic ballots and electronic voting outside of a meeting. Unless prohibited by the governing documents, any vote that can be taken at a meeting can be taken without a meeting “by written ballots or electronic voting.” The board “in its discretion” may determine whether a vote shall be cast by “written ballots or by electronic voting, or by both.” The deadline for the return of written ballots and electronic ballots and for the casting of electronic votes must be identical. Once submitted, written ballots, electronic ballots, and electronic votes cannot be revoked unless the governing documents permit it.
- The association may deliver a written ballot to members that sets forth each proposed action and provides an opportunity to vote “for or against” each proposed action.
- Unless a secret ballot is required, the ballot must contain or request information from the member sufficient to identify the member or proxy submitting the ballot.
- Written ballots can be submitted “by any reasonable means specified by the corporation,” including email.
- Solicitations must indicate the day and time by which written or electronic ballots must be returned.
- If members have agreed to conduct electronic transactions with the association (as described earlier), the association may provide to members an electronic ballot that sets forth each proposed action and provides an opportunity to vote “for or against” each proposed action “using the electronic ballot or an electronic voting system.”
- As noted earlier, the board in its discretion determines whether votes are cast by written ballot or by electronic voting or both. However, the use of electronic voting alone may only be used if ALL members of the association have agreed to conduct electronic transactions with the association. In other instances, all members entitled to vote “shall be given the opportunity to vote on the proposed action by written ballot or electronic voting, or both.”
- Solicitations for electronic voting must indicate the time by which electronic votes must be cast.
TAKEAWAY: A board in its discretion may choose not to have a meeting, but to vote on a proposal by (a) electronic voting, (b) written ballot, or (c) both electronic voting and written ballot. Electronic voting will likely involve one of the many electronic voting platforms, such as The Ballot Box, Inspectors of Elections, Vote-Now, VoteHOANow, Election Buddy, Simply Voting, or others. Electronic voting alone can be used only if all members have agreed to conduct electronic transactions with the association. That likely means only smaller associations will have the option to use electronic voting only. Remember: This is a way to make membership decisions WITHOUT a meeting.
For a written ballot, the association must deliver a written ballot to all members (by mail to everyone or electronically to those members that have agreed to transact business with the association electronically). The ballot must set forth each proposed action and provide an opportunity to vote “for or against” each proposed action. Unless a secret ballot is required, the ballot must contain or request information sufficient to identify the member or the member’s proxy submitting the ballot. Written ballots can be sent back to the association by any reasonable means specified by the board, including by email. Until more members agree to electronic transactions, a combination of written and electronic voting will likely be the preferred method if it is desired to make a decision without a meeting.
For more details, the full bill as adopted can be found at https://www.ncleg.gov/BillLookUp/2021/H320.
Content provided by Law Firm Carolinas. Original article can be found here.