How the new normal impacts on virtual board meeting governance
In our previous two articles, we examined several ways companies can overcome the challenges typically associated with virtual meetings and discussed the opportunities provided by virtual meetings in a distributed environment. In this piece, we take a closer look at the regulatory environment when it comes to virtual meetings.
Even prior to the pandemic, company law in many countries had already begun dealing with the electronic compliance requirements of company administration. These amendments were driven by the video conferencing boom a few years back. Fortunately, this means that the path to legal compliance for the current environment where the likes of Microsoft Teams, Cisco Webex, and Zoom have become part of our lives has already mostly been cleared.
For example, in South Africa, the electronic responsibilities of board directors are clearly stated in the Companies Act of 2008. According to the Act, company directors’ responsibilities and accountabilities are identical, irrespective if their presence during board meetings is physical or electronic. However, this is not the case when it comes to compliance.
There are several technical changes resulting from electronic innovations for board meetings that mandate governance changes. Below are some of the areas where the companies’ law needs to exercise specific provisions for electronic compliance. Note that these are based on South African law, specifically the Companies Act 71 of 2008 (Companies Act) and the Electronic Communications and Transactions Act 25 of 2002 (ECT Act).
Impact of electronic compliance
According to the Companies Act, Board meetings can legally be held electronically or even as a hybrid event if the rules of the company in its MOI (Memorandum of Incorporation) does not specifically prohibit this. Therefore, being present at an electronic board meeting after joining with a video conferencing solution is legally the same as being physically present.
Furthermore, the notice of a board meeting can legally be delivered to directors electronically via email. This is provided that reasonable lead time is given when the email is sent. As part of the electronic communications, the Companies Act states that it is permissible for directors to electronically sign resolutions and other board documents.
The Companies Act does not specify any requirements for signature verification. This differs from the ECT Act, where an authenticated or ‘advanced electronic signature’ is defined. According to the ECT Act, this refers to a signature that is produced as part of an authentication service, ‘designed to identify the holder of an electronic signature to other persons.’
On a practical level, this means a click to confirm a vote by a user who has been properly authenticated will satisfy the requirements of both the Companies Act and the ECT Act at the level of an advanced signature. When an agenda item is presented for an electronic vote, it is acceptable for directors to vote via email or other electronic system, provided that such electronic voting is not specifically prohibited by the company’s MOI.
Virtual board meetings have become a reality for many organisations. However, business leaders must keep the regulatory requirements in mind to ensure they adhere to compliance.
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