The Perks – and Perils – of Virtual Board Meetings

Technology can be a wonderful thing, but when co-op boards boards use it, they need to be aware of its legal limits – and its legal dangers.

“Life moves a lot faster than it used to,” notes attorney Stuart Saft, a partner in the firm Holland & Knight, and it’s only natural for boards to look to technology to save them time – and aggravation – when conducting corporation business, especially when board members are on vacation or there’s an emergency requiring immediate board action. Saft says that New York state law governing co-ops allows for virtual board meetings via a conference telephone call – as long as all participants can hear the proceedings.

Attorney Howard Schechter, a partner in the firm Schechter & Brucker, adds that video-conferencing also is permissible under the Business Corporation Law. Section 708 of the law provides that one or more members of a co-op board may take part in a board meeting "by means of a conference telephone or similar communications equipment allowing all persons participating in the meeting to hear each other at the same time."

"You can have a telephone conference call meeting in which some members are in the room and one or more are on the phone, and that is perfectly legal, providing that all of the board members can hear what each of the members are saying," Saft says.

The use of email also carries caveats. It isn't unusual for board members to request a meeting by email because of scheduling problems, and the law does allow boards to act by unanimous written consent. Traditionally, Schechter says, that meant you could write out a resolution on a piece of paper and each of the directors could sign it.

"The law was liberalized a few years ago to allow electronic signatures to take the place of handwritten signatures in electronic communications," Schechter says. "So if you have emails that state the action that is being taken by the board and you have the consent of the directors accompanied by proper electronic signatures, and every director consents, you could have corporate action by the board through email."

Be advised: emails can come back to bite you. Attorney Mark Hankin, a partner at Hankin & Mazel, says co-op boards need to be aware that any exchange of information made by email can be subpoenaed if there is a lawsuit in which the communication is considered relevant.

Schecter urges board members not to take action by email unless there is no alternative – and then to limit the electronic communication to a resolution and the consent of the directors.

"They certainly should be circumspect about what they put in their emails," he says.

Saft says it’s permissible for board members to have an email conversation in which they schedule a later time to meet and cast their votes. If board members feel compelled to have an email discussion, he advises them to allow their attorney to be part of the exchange, so the discussion is protected by attorney-client privilege.

That privilege applies only if the board members are seeking guidance or feedback from their attorney, Shechter adds. If one of the board members discloses the email conversation to anyone outside of the board and its attorney, the privilege of confidentiality is lost, and the email becomes fair legal game.

If you go electronic, in other words, proceed with caution.