Dear Co-op Counselor:
Our annual meeting is fast approaching and with all this information going around about the coronavirus we are not certain we should be holding this meeting. We want to do our part to flatten the curve but our Bylaws require us to hold our annual meeting on a certain time and we can’t adjourn it without a vote of the membership. There just isn’t time. What do we do?
Dear Board Member:
The issue at hand is whether your Board has the legal authority to deviate from the date of the annual membership meeting that is set in your Bylaws. The WHO declared COVID-19 a Pandemic and the President of the United States (POTUS) in addition to declaring a national emergency, has given his own declarations against unnecessary public gatherings in line with CDC guidelines.
In Michigan, for example, unless your Bylaws have a mechanism for “absent” voting, or a provision that permits the Board to adjourn the annual meeting without member involvement, the law requires you to obtain a signed written consent from each of the members approving the proposed adjournment. This is not ideal in light of government declarations because there may be insufficient time to issue and gather written consents. For this reason, a public health crisis, such as that created by COVID-19, is, in our professional legal opinion, a sufficient basis to exercise your business judgment, as a Board. This means that should you, as a Board, determine that it is in the best interests of the Cooperative and the membership as a whole, to adjourn the annual meeting in light of the current public health crisis, your decision to adjourn without the written consent of the membership will be more favorably viewed so long as it was done absent bad faith, fraudulent intent or otherwise intended to be an oppressive action against the membership.
Absent a specific mechanism in your Bylaws permitting the Board to decide to change the annual meeting date and time, your Cooperative’s annual meeting is fixed. That being said, an alternative could be for the Board to make an executive decision in the interests of the membership based upon public health concerns and with reliance on State and Federal health authorities and lawmakers. Additionally, Directors, may be given authority under the Bylaws to promulgate rules and regulations for the use of the premises. Such a regulation for the use of the premises can include a temporary suspension of member activities, or in this case, adjournment of the annual member meeting based upon the risk to public health and safety conditions created by the COVID-19 virus.
Under the business judgment rule, generally speaking, courts are reluctant to intervene in the affairs of corporate bodies absent a clear showing or impending wrong. Willful abuse of discretionary powers or actions done with bad faith or malice, or, without performing due diligence including consulting your cooperative attorney may result in the court actually reviewing a decision in the event a member chooses to file a complaint. Be mindful of the situation and make sure you do your due diligence. Should you choose to adjourn the annual meeting using the Board’s authority to promulgate regulations governing the use of the premises, your due diligence will require you to ensure that any statutory guidelines that are applicable to your cooperative are also followed. Your cooperative attorney will help you with this. Failure to hold the meeting within applicable statutory guidelines could result in a court ordering the Board to hold the meeting and may subject the Cooperative to fines and costs.
To make a clean record for the Board and your Cooperative, have your cooperative attorney prepare a properly worded resolution and notice to your members so that any challenge, if raised, will be supported by your cooperative attorney’s legal opinion, duly entered resolution of the Board and notice to the members. The immediate goal is the health and safety of all of the members, staff and your corporate professionals. We believe these steps are consistent with the recommendations from the State and Federal health authorities and lawmakers.
Very truly yours,