Occasionally, urgent board action is required yet it is not possible or practical to have the board meet in person or even over the telephone. In these cases, most states permit the board members to conduct official business by signing a unanimous written consent. For instance, Arizona law states as follows:
â€œ[A]ction required or permitted by chapters 24 through 40 of [ARS Â§10] to be taken at a directors’ meeting may be taken without a meeting if the action is taken by all of the directors. The action must be evidenced by one or more written consents describing the action taken, signed by each director and included in the minutes filed with the corporate records reflecting the action taken.â€ ARS Â§10-3821(A)
Unlike directors voting at a meeting which may require only a majority of the directors to approve any board action, most states that permit action by written consent require unanimous approval. Once an action by written consent is signed by all of the directors, the written consent resolution will have the same effect as a unanimous vote of the Board.
In such cases, a consent resolution will be sent to each individual director by mail, email or fax for his or her signature. To streamline the signature gathering process, the written consent document can permit counterpart signatures. This means that each director can sign the signature page of his or her copy and the signed signature pages, when taken together, are considered a validly executed document.
In the case of direct mail or fax, the director will sign his or her approval and submit the signed copy to the secretary for filing. When written consents are conducted through email, however, some questions on legality arise. For instance, is it enough for a director to simply reply â€œyesâ€ to the email? What if the answer is â€œyesâ€ followed by some condition? Would this be valid? State law differs with respect to what is considered a valid electronic signature; however, where electronic signatures are permitted, the best practice is to have some sort of established electronic signature that only the individual director has access to. For example, Adobe permits users to create an electronic signature that is password protected to ensure that only authorized users can access and use it. This avoids complications in the future if some director tries to challenge the resolution on the grounds that it was not legally signed or argues that some other person accessed his or her email account and assented to the resolution. If it is too difficult to create an electronic signature, it is always easy enough to print and sign the email and then fax or e-mail a copy or mail the original to the secretary. In the case of consents that will be relied upon by a third party, such as a bank or title company, it is best if the records contain the signed original consents rather than copies or emails approving the transaction to ensure the signatures will be accepted.
Generally, the action is considered to be taken on the date the last director signs the consent. For recordkeeping purposes, the signed consents must be kept by the secretary in the corporate minute book. Additionally, the resolution should be entered into the minutes of the next board meeting and made part of the official record of the corporation.
For more information, Carter Law Group's Guide to Taking Minutes of Nonprofit Board Meetings as available for free at http://bit.ly/r0yt6f.
Ellis Carter is a nonprofit lawyer licensed to practice in Washington and Arizona. Ellis advises tax-exempt clients on federal tax matters nationwide.