Updated: November 30, 2020
In the wake of COVID-19, many businesses have been faced with the challenge of organizing annual meetings that are both safe and comply with Maine law. In light of this, below is a summary of the statutory requirements for both business corporations and nonprofit corporations in Maine, along with considerations for how to safely comply with these current laws.
Business Corporations
Business Corporations in Maine are governed by Title 13-C: Maine Business Corporation Act. In respect to annual meetings, Sec. 701(2) under the Act states:
“Annual shareholders’ meetings may be held in or out of the State at the place stated in or fixed in accordance with a corporation’s bylaws. If no place is stated in or fixed in accordance with the bylaws, annual meetings must be held at the corporation’s principal office.”
This language requires a physical annual meeting at a place. In other words, virtual-only and/or proxy-only meetings are not permissible. The only exception to holding a physical meeting under the Act is provided for by Sec. 704, which permits a unanimous written consent in lieu of a meeting:
“Action required or permitted by this Act to be taken at a shareholders’ meeting may be taken without a meeting if the action is taken by all the shareholders entitled to vote on the action. The action must be evidenced by one or more written consents bearing the date of signature and describing the action taken, signed by all the shareholders entitled to vote on the action and delivered to the corporation for inclusion in the minutes or filing with the corporate records.”
With that being said, Sec. 709 allows shareholders to participate in both annual and special meetings via remote communication:
“1. Participation by means of remote communication. Shareholders of any class or series may participate in any meeting of shareholders by means of remote communication to the extent the board of directors authorizes participation for the class or series. Participation by means of remote communication is subject to guidelines and procedures adopted by the board of directors and must be in conformity with subsection 2.” [See subsection 2 below].
Participation via remote communication does not diminish a shareholder’s right to vote. In other words, both in-person votes, as well as electronic votes, will be counted. This is regardless of whether an in-person quorum exists. However, corporations must keep in mind the statutory requirements when permitting remote communication in meetings. See Sec. 709(2):
“2. Shareholder presence and voting. Shareholders participating in a shareholders’ meeting by means of remote communication are deemed present and may vote at the meeting if the corporation has implemented reasonable measures:
A. To verify that each person participating remotely is a shareholder; and
B. To provide the shareholders a reasonable opportunity to participate in the meeting and to vote on matters submitted to the shareholders, including an opportunity to communicate and to read or hear the proceedings of the meeting, substantially concurrently with the proceedings.”
With the above in mind, coordinating proxies and/or streaming the meeting via virtual communication is permitted; however, under current Maine law shareholders must still be given a chance to “show” up and participate at a meeting “place” in person, pursuant to Sec. 701(2) above. This of course, poses the risk that too many shareholders attend in person, in violation of the State’s current limit on in-person gatherings. If that is the case, the annual meeting would need to be adjourned and rescheduled – certainly an inconvenience. For this reason, we encourage businesses to schedule an Annual Meeting at its physical principal office location, with the meeting notice and proxy solicitation “strongly encouraging” all shareholders to submit proxies for safety/COVID reasons rather than attend in person. The entire meeting can then be livestreamed for shareholders who opt not to attend in person. Further, written proxies should cover the essential business items (i.e. election of directors). The meeting can ultimately be adjourned, with a video/livestream to listen to the president’s report and ask questions, but not conduct any official business.
Nonprofit Corporations
Nonprofit Corporations in Maine are governed by Title 13-B: Maine Nonprofit Corporation Act. In respect to annual meetings, Sec. 602 under the Act states:
“Where held. Meetings of members, if any, may be held at such place, either within or without this State, as may be provided in the bylaws. In the absence of any such provision, all meetings shall be held at the registered office of the corporation in this State.
Annual meetings. A meeting shall be held annually at such time as may be provided in the articles of incorporation or bylaws. If there shall be a failure, for whatever reason, to hold the annual meeting for a period of 30 days after the date for such meeting specified in the bylaws or articles of incorporation, or if no date has been specified, for a period of 13 months after the organization of the corporation or after its last annual meeting, a substitute annual meeting may be called by any person or persons entitled to call a special meeting of the members.”
The analysis for business corporations applies similarly to nonprofit corporations. Nonprofit corporations must hold a physical annual meeting at a place. In other words, virtual-only and/or proxy-only meetings are not permissible. Under the nonprofit act, the exception to holding a physical meeting is provided for by Sec. 606, which permits a unanimous written consent in lieu of a meeting:
“Any action required or permitted under this Act to be taken at a meeting of the members may be taken without a meeting if written consents, setting forth the action so taken, are signed by all the members entitled to vote on such action and are filed with the clerk of the corporation as part of the corporate records. Such written consents shall have the same effect as a unanimous vote of the members and may be stated as such in any certificate or document required or permitted to be filed with the Secretary of State, and in any certificate or document prepared or certified by any officer of the corporation for any purpose.”
As noted above, complying with these requirements may result in some members attending in-person, while others opt to attend via zoom (or another similar platform). This mix of attendance does not diminish the rights of members to vote. In other words, the in-person votes and the electronic votes, will be treated the same. See Sec. 604(5):
“Voting by electronic transmission. The bylaws may provide, or the board of directors or members may determine, that some or all votes by members, as well as actions taken in accordance with section 606 [unanimous written consent noted immediately above], may be conducted by electronic transmission under procedures established by the corporation. A vote conducted by electronic transmission must be filed with the minutes of members’ meetings and has the same effect as an in-person vote or a vote by proxy.”
Conclusion
Ultimately, these laws are antiquated in light of modern technology, and put individuals and businesses at risk in light of COVID-19. In respect to Title 13-C, it is Eaton Peabody’s understanding that legislation will be introduced to permit virtual-only meetings of shareholders, to be considered when the Maine Legislature reconvenes this winter. This change would align Maine law with Delaware law, the leading source of corporate governance. The status of any proposed amendments to Title 13-B to permit virtual meetings of members of nonprofit corporations is unknown at this time.
If you have questions, please contact Johanna Colpritt. Our office is trying as best we can to work remotely, while continuing to timely and effectively respond to, and anticipate, client concerns.