NEW PROVISONS IN OHIO LAW FOR CORPORATE COMMUNICATIONS

By James A. Matre, Esq.

November 21, 2006

As lawyers we are frequently asked if the notice of a meeting can be sent by electronic mail. The usual lawyer-like answer is “It depends.” However with recent changes to Ohio law, it now appears we have a real answer. Recent changes in Ohio Revised Code Chapter 1702, the Nonprofit Corporation Law, have now allowed use of modern technology for corporate communications. The Revised Code now refers to “Authorized communications equipment” which means any communications equipment to which both of the following apply:

(1) The articles, regulations, or bylaws, or the regulations, constitution, or other fundamental agreement if section 1702.08 of the Revised Code applies, permit the use of the communications equipment for the purpose of giving notice of meetings or any notice required by this chapter, attending and participating in meetings, giving a copy of any document or transmitting any writing required or permitted under this chapter, or voting.

(2) The communications equipment provides a transmission, including, but not limited to, by telephone, telecopy, or any electronic means, from which it can be determined that the transmission was authorized by, and accurately reflects the intention of, the member or director involved and, with respect to meetings, allows all persons participating in the meeting to contemporaneously communicate with each other.

What this means is that communications equipment that meets the two requirements can be used for just about all aspects of corporate operations and communications. The first requirement is that the use of such equipment is permitted in the corporate documents. For a condominium association, the logical place extending permission is the bylaws. For a homeowners association, it is the code of regulations that should specify such use. Since many of these documents were drafted prior to the recent changes, current bylaws or code of regulations will probably need to be amended to take advantage of this. Unfortunately for condominium associations, an amendment to the bylaws requires the same consent as an amendment to the declaration (usually 75%) and must be recorded. Such an amendment, likewise, would not fall within the parameters of a board amendment pursuant to Section 5311.05 (E) (1). The consent required for amendment of the code of regulations for a homeowners association will be set out in the document and there is no recording requirement.

Assuming that the bylaws or code of regulations can be amended, what actions are now permitted under the new changes? Notices of meetings can now be sent by email or facsimile and also be included in a newsletter delivered to members at the address listed in the corporate records. This newsletter provision would probably not require any amendment to the documents, since most bylaws or codes of regulations require written notice delivered by US mail. Current law recognizes mailed newsletters as written notice. Telephone notice is not permitted because the notice must be in writing. The law recognizes email transmissions as a writing for notice and waiver of notice purposes. Voting and actions by written consent can now be accomplished by email transmission.

The changes also allow modern communications equipment to be used in the conduct of corporate meetings. The main requirement is that the equipment allows all persons participating in the meeting to contemporaneously communicate with each other. Clearly, a conference call among board members would qualify and the law provides that a board member is considered in attendance if using such equipment. A board meeting by email might qualify, but all email is not contemporaneous. A meeting by use of instant messaging seems a bit more contemporaneous. I suppose that the association could set up a “chat room” on its website to facilitate meetings. There is a caveat to be considered. Once logged in to a meeting, it would be important to clearly log out if leaving the meeting. In a normal person to person meeting, it is obvious if a participant walks out. This may not be as clear in electronic meetings. Remember that if you are present for a meeting and did not vote against some action, the law deems that you voted for it. Another concern is the open meeting policy that an association may have regarding board meetings. A conference call between board members is manageable, but to conference in other members would be problematic. One solution would be to designate a place where members could meet where there is at least one board member present. The conference call could be put on speaker phone to permit the members to hear the discussions.

While such modern communications equipment may work for a board or committee meeting, a meeting of the members would probably not work. The only equipment that would qualify is interactive television where the meeting is televised and all members have some remote control to communicate and vote.

Before turning on the laptops to start the board meeting, there are some other concerns. First of all, the board must establish procedures and guidelines to insure that the communications equipment meets the statutory requirements and to be able to verify that a person sending the transmission is the voting member and to be able to maintain a record of the vote. Prior to the voting, the board should identify members wishing to vote electronically and establish security measures, such as passwords or pin numbers, or some identifier that protects the voting process.

While it would be so simple to send out one email transmission to all members instead of a costly mailing, not all members may have email. The board should set up some means to confirm how the member wants to receive notices. As always, careful consideration must be given to protect the rights of the members.

Further, and as always, Matre & Matre is available to handle any and all of your real estate matters. Please refer to the Matre & Matre website, www.matrelaw.com for additional information on this issue – including complete excerpts of the referenced Ohio Revised Code sections.

jmatre@matrelaw.com

www.matrelaw.com

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