A Nifty Trick for Taking Board Action without a Meeting

To the point:  Many state statutes allow boards to take action without a meeting if all directors consent, but following the prescribed process is crucial.

If you serve on a nonprofit board long enough, a time will arise when the board will need to take action, but won’t have time to organize a meeting.  Must the board convene a meeting at such times?  Luckily, in Tennessee and most other states, the answer is “no.” 

Tennessee code section 48-58-202 expressly authorizes boards to take action without a meeting as long as all directors agree to do so.  If, however, one director objects, the action must be brought up and voted on in a meeting. 

If all directors are willing to approve the matter without a meeting, the steps are:

  1. the corporate secretary prepares and circulates a written consent document describing the action taken;
  2. each director signs the document indicating (a) their consent to address the matter without a meeting and (b) their affirmative vote;
  3. the director returns the signed form to the corporate secretary (or to whomever the secretary has delegated the duty of collecting signatures); and
  4. the secretary documents the written consents in the corporate minutes.

If these steps are followed, the action has the same effect as if the board met and voted on the matter.  It is not necessary to have all directors’ signatures on one document; rather, a written consent document may be signed by each director as a counterpart, then emailed or faxed back to the secretary.  It is essential, however, that the secretary collect all signed consent documents and record them in the minutes so that the unanimous approval can be proved.

This process should not be used for important, substantive matters.  Tennessee law imposes a fiduciary duty of care on directors, which includes on obligation to discuss important matters before voting on them.  If directors use this process to approve an important matter that should have been discussed, it could constitute a breach of this fiduciary duty.  For all other matters, however, it offers a convenient way to avoid a lot of delay and hassle.

Should you have any questions on this or any other legal issue, please do not hesitate to contact me at (615) 916-3224 or tmckee@mckenzielaird.com.

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