While it may be common practice for nonprofit boards to take action by email voting, this may not be permissible under the California Nonprofit Corporation Law. Boards may take action only at a duly held meeting or by unanimous written consent. The issue then is whether an email vote meets the requirements of a duly held meeting or unanimous written consent.
A board meeting may take place via conference call or electronic video screen communication, provided that all directors participating can hear one another. A meeting may also take place via other electronic transmission if (a) each director participating can communicate with all other directors participating concurrently, and (b) each director is provided the means of participating in all matters before the board. Generally, an email vote would not meet such requirements because of the lack of real-time participation by all participating directors.
A board may also take action by unanimous written consent, that is, “if all members of the board shall individually or collectively consent in writing to that action.” An “interested director” (generally, one with a material financial interest in the transaction being voted upon) is excluded from the “all members of the board” requirement. Such action has the effect of a unanimous vote of the directors.
The California Corporation Law does not expressly authorize a unanimous written consent to be executed by email. However, an email vote may constitute a unanimous written consent if all directors, other than any interested directors, approve the same action “in writing.” A “writing” is defined in the Nonprofit Corporation Law to include “facsimile, telegraphic, and other electronic communication as authorized by this code, including an electronic transmission by a corporation that satisfied the requirements of section 20.” At the time this post was originally written, section 20 required that an email by a corporation satisfy the federal E-Sign Act, which defines an “electronic signature” as “an electronic sound, symbol, or process, attached to or logically associated with a contract or other record and executed or adopted by a person with the intent to sign the record.” Since such time, section 20 has been amended to omit such reference. However, a written consent sent by email is an electronic transmission to a corporation and not by a corporation, and accordingly section 20 would not directly apply regardless.
For a unanimous written consent, it is generally believed that an approval in writing requires a valid signature of the director, whether it be manual or electronic, or other validation that the director’s consent has been provided. Where the signature is simply the typed name of the sender, an issue is whether the board relied with due care on the authenticity of the signature. While not directly applicable, the California Government Code, which applies only to communications with public entities, offers some guidance. It states that “the use of a digital signature shall have the same force and effect as the use of a manual signature if and only if it embodies all of the following attributes:
- It is unique to the person using it.
- It is capable of verification.
- It is under the sole control of the person using it.
- It is linked to data in such a manner that if the data are changed, the digital signature is invalidated.”
For a trivial action, If the purported sender of an email consent denies sending it, there may be little, if any, harm. However, the same may not be true for a major transaction or corporate change. In such case, the requirement of a manual signature (on a form that can be scanned and sent to the corporation by email) seems prudent. Because it may be too much trouble to determine where an email consent would or would not be appropriate, I generally disfavor unanimous written consents by email without use of manual signatures or unique digital signatures.
Can Nonprofit Boards Vote by Email? by Gene Takagi & Emily Chan
Can a California Nonprofit Board Vote by Email? by Steven R. Chiodini
Can Association Boards of Directors Vote by E-Mail or Fax? by Jeffrey S. Tenenbaum; and