This is the sixth post in a series about Colorado nonprofit corporate governance issues. Click here for the most recent post on corporate policies, here for Robert’s Rules of Order, here for differences between articles and bylaws, here for an earlier post on membership issues, and here for the initial post on proxy voting.
Nonprofits and their stakeholders are doing much more electronically these days, including fundraising and increasing mission awareness. And though it may be hard to believe, in this day and age, the permissibility of electronic voting through means like email has not been clearly settled under Colorado law. However, a recent change in law clarifies the issue, and will offer nonprofits more flexibility in their governance.
Background
The Colorado Revised Nonprofit Corporation Act allows nonprofit board members to meet in person and also to participate in meetings through a means where all directors can hear one another (a conference call or Skype, for example). It also allows for a written action in lieu of a meeting.
Organizations with voting members can have in-person meetings of the voting members, and the voting membership can also act through written action in lieu of a meeting or by written ballot.
Board voting. For nonprofit corporations, the statutory provision on written actions by the board of directors (C.R.S.§ 7-128-202) was updated fairly recently. It allows directors to vote in writing for or against an action, and specifies that a writing must be “in a form sufficient to inform the nonprofit corporation of the identity of the director, the vote … of the director, and the proposed action to which such vote … relates.” Additionally, it provides that all communications under the section (which would include both voting communications and notices soliciting votes) can be transmitted or received by the corporation by email or other form of wire or wireless communication (unless the bylaws provide otherwise). There is no signature requirement. This provision seems to allow for email voting, and many organizations have been comfortable conducting board written actions by email so long as they are structured to meet the requirements of this section.
Member voting. For actions by voting members, however, the statutes were less clear. The section on written actions for members (C.R.S.§ 7-127-107) requires unanimous action, and also requires a writing signed by each member describing and consenting to the action. There is no definition of writing or of signature that contemplates the use of electronic means like email. Similarly, the section on voting by written ballot (C.R.S. § 7-127-109) does not provide a definition that would clearly support electronic voting. As such, many nonprofits have been reluctant to conduct membership voting electronically.
Uniform Electronic Signatures Act. Other nonprofits and their advisers, though, have looked to the Uniform Electronic Transactions Act (“UETA”) for support in electronic member voting. UETA, which has been adopted by Colorado (C.R.S. §§ 24-71.3-101 to -121), allows, but does not require, private parties or governmental entities to use or accept e-signatures or e-records in conducting transactions, except in a few limited circumstances. It contains definitions for electronic signatures and electronic records that clearly contemplate email action and signature. However, it does only apply to transactions where the parties have agreed to act by electronic means. This left some question as to whether voting members had agreed to vote by electronic means if there was no clear agreement to that effect, and where the organization’s articles of incorporation and bylaws didn’t address the issue.
New Colorado Law
However, a recent addition to the Colorado Corporations and Associations Act (which applies to nonprofit corporations, as well as business corporations, partnerships and limited liability companies) has added definitions that bring clarity. The addition amends the statute (at C.R.S. § 7-90-102) and defines signatures and writings to include electronic signatures and electronic records as defined in UETA, unless the organization’s articles of incorporation or bylaws (or another applicable governing document) provide otherwise. So now, if an organization’s articles and bylaws are silent on this point, the statute will allow for electronic voting for both voting members and directors. But if an organization wants to disallow voting by a means like email, it can do so in its corporate documents.
This brings some much-needed clarity to the issue of email voting, and will allow boards and voting members to proceed with voting in this more flexible way. It will take effect on August 5, 2015.