Amendments to Michigan’s Nonprofit Act Alter Rule for Remote Attendance at Meetings by Shareholders, Members, and Boards of Directors
In March 2015, the Michigan Legislature amended the Nonprofit Corporation Act by enacting Public Acts 557, 558, and 559 of 2014. These amendments changed many different aspects of the Nonprofit Corporation Act, and as a result, some of the more nuanced amendments have not been brought to the attention of many nonprofit entities. One of the most overlooked changes is the alteration of the rule covering remote presence at meetings by shareholders, members, and board members. Before, remote attendance at shareholder and member meetings was not permissible unless the articles of incorporation or by-laws provided this type of attendance was acceptable. Now, remote attendance at meetings is permissible by default at shareholder, director, and member meetings unless the articles of incorporation or by-laws expressly prohibit such attendance. See MCL 450.2521 (covering remote presence by board members); MCL 450.2405 (covering remote presence by shareholders and members).
Although this change is minor in relation to some of the other changes ushered in by the amendments, it does have the potential to create issues surrounding the corporate governance of your nonprofit organization. If participation in member, shareholder, or board of director meetings is unaddressed in the nonprofit’s articles of incorporation or by-laws, this provision could impact how shareholder, members, and board members can conduct their business on behalf of the entity. This is true even if the articles or by-laws expressly require ‘presence in person’ at the meetings because both MCL 450.2521 and MCL 450.2405 state that remote participation by shareholders, members, or board members constitutes ‘presence in person’ at the meeting. Thus, even if the corporate by-laws or articles of incorporation state that shareholders, members, or board members must participate in person or must be physically present to vote, the articles or by-laws may still be insufficient to stop the operation of these statutes. The articles or by-laws need to expressly prohibit remote participation by shareholders, members, and directors at meetings in order to be effective against the recent amendments to the Nonprofit Corporation Act.
This change to the Nonprofit Corporation Act can also impact nonprofit corporations who are subject to the requirements of the Open Meetings Act, including local school boards and public school academies. This is because remote presence by teleconference is permissible under the Open Meetings Act. Goode v Dept of Soc Serv’s, 143 Mich App 756, 759-760 (1985), lv den 424 Mich 882 (1986). In order to comply with the Open Meetings Act, however, “the meeting must satisfy the openness and notice requirements in that act . . . [and] . . . the central site must be set up so that interaction among all the representatives of the constituent districts, whether they be on or off that site, and interested members of the public is possible.” 1995 OAG 6835. Thus, if a nonprofit that is subject to the Open Meetings Act wishes to allow remote presence at meetings, its corporate governance documents need to be amended so the Open Meetings Act is not violated by remote participation at meetings.
Because these changes could impact the operation of your nonprofit entity or your school board, your corporate governance documents, including the by-laws and articles of incorporation, should be reviewed to ensure that remote presence at board meetings is acceptable is properly addressed. If your nonprofit wishes to allow remote attendance at meetings, its corporate by-laws and articles should still be reviewed and amended to address when this type of attendance is permissible and what will happen if the technology fails in some manner. In addition, if your nonprofit is subject to the Open Meetings Act, the corporate governance documents need to be amended so that remote participation comports with the requirements of the Open Meetings Act. Any language you wish to have added to the corporate by-laws or articles should be drafted by an attorney to ensure meetings are properly conducted.
If you need any assistance in reviewing, drafting, or amending a provision of the corporate by-laws or articles of incorporation, Shifman & Carlson, P.C. would be happy to assist you.