Boards of directors gather for meetings as often as necessary to assess the company's current and projected performance. Board meetings are also a time to assess risks and to look for opportunities to grow the business. Regular business meetings are appropriate and sufficient for most board issues.
Certain issues are of a timely nature and can't always wait for an opportune time for boards to get together. The unanimous written consent process was designed exactly for this purpose. As long as boards follow the rules for unanimous written consent, boards can approve issues without having to hold a formal, in-person board meeting.
Issues to Consider When Proceeding With Unanimous Written Consent
It's imperative that boards fully understand the laws in their state and regarding the requirements for board meetings and voting. State laws contain the standards for the board's guidelines for meetings and voting. Their company's bylaws may also have limitations, conditions or exclusions for holding official board meetings. Boards should be aware of when meetings require prior notice and whether they're allowed to meet by phone or videoconference.
In order for boards to be able to take action on an item without holding an actual board meeting, all board directors must consent to the action in writing or by electronic transmission. Depending on the bylaws, this means that board directors may be able to give their consent using a PDF, with an executed signature page sent via facsimile, using an e-signature or using an email transmission indicating their approval.
Advantages of Unanimous Written Consent
Unanimous written consents are appropriate for situations in which a company needs a time-sensitive matter approved in short order or if the company has directors working from different time zones. Unanimous written consents are a viable solution when board directors need to vote and everyone is in solid agreement, and there's no time for prior notice or planning a special board meeting. This process only works when all board directors give their approval via their signatures or electronic approvals. If even one board director abstains or fails to deliver their consent, the unanimous written consent process isn't valid.
It's not necessary to use specific wording for unanimous consent approvals on forms. Many corporations consider it in keeping with best practices to include language for unanimous consents that mirrors state laws or their bylaws so that there can be no doubt as to the intent of the board directors' votes.
Taking into consideration that written consents are required to be unanimous, third parties can be assured that boards performed their due diligence in documenting that the board solidly supported a specific action. Unanimous written consents are an efficient way to manage day-to-day matters, such as approving option grants and official contracts, where time is of the essence.
Disadvantages of Unanimous Written Consent
In the unfortunate situation that a board moves for a unanimous written consent and any board director opposes the action, it takes the board back to having to call an official meeting and follow all bylaws and other meeting procedures, including rules for prior notice, quorum and the required vote. For this reason, if there is any doubt that one board director may not offer up a 'yes' vote for a unanimous written consent, it's best to go ahead and plan for a meeting rather than waste everyone's time.
If a meeting becomes necessary, it also gives management an opportunity to be present and to go on record as supporting the action in addition to the board, which would be reflected in the board meeting minutes.
Unanimous Written Consent Via Email
In some states, unanimous written consent via email is completely legal. Just because it's legal doesn't mean that it's a safe way to conduct a legal board vote. Unless board directors are using a highly secure board management software system to cast their votes, personal or business emails are at risk of being hacked. There's no certain way to know if each board director voting is who they say they are.
If a board director's email account was hacked and all board directors voted in favor of a particular matter, it would nullify the vote. Another problem that occurs with email voting is getting vague or misleading responses. An unclear response can easily produce unintended votes, and in some cases, legal problems. Consider also how many times you may have mistyped an email address and it went either to an unintended recipient, or worse, no one at all. In addition, you have to hope that all board directors see the email, open it and respond to it.
Digital Voting: Securely Approve Items by Unanimous Written Consent
Unanimous written consents are too important to get them wrong. The only foolproof way to vote by unanimous written consent is to use the Diligent Boards secure voting tool, which integrates fully with Diligent Messenger, a secure communications platform.
Diligent's board management system eliminates any possibility of someone posing as a board director because it only allows authorized users to access the system. Strong security measures ensure that board directors are who they say they are. Using a board management system that was designed for secure voting in mind preserves the integrity of the voting process. As a matter of convenience, board directors can also vote securely and expediently using any electronic device of their choosing, and from any location or setting.
Board meetings provide a forum in which board directors and managers have an opportunity to establish rapport and enhance their relationships with each other. For this reason, it's best for boards to meet in person on a regular basis so that boards and managers have some important face-to-face contact, which is so crucial to relationship building. Most boards feel that they need to meet at least quarterly. With Diligent board management software, it's assuring that votes by unanimous consent are a fast and reliable way for board directors to cast their votes and to document their approval for timely, important board issues.