On January 4, 2018 the DCU released (revised) Bulletin B-17-17 and Revised Interpretive Letter I-17-04, regarding virtual and hybrid annual or special membership meetings. The Bulletin and Interpretive Letter were originally released on November 20, 2017, and then immediately pulled from the DCU’s website. The new releases amend the information regarding these types of meetings, and should be referred to.
The releases are reprinted below, but do not include all references cited in the originals. The originals linked above should be used to fully understand and update, if necessary, any board policies referencing hybrid meetings.
Division of Credit Unions Interpretive Letter I-17-04
TO: All State Credit Unions
FROM: Linda Jekel, Director of Division of Credit Unions
RE: Virtual Membership Meetings
1. May a Washington state-chartered credit union conduct an annual membership meeting or a special membership meeting exclusively as a virtual meeting, without a simultaneous in-person meeting?
Short Answer: No
2. May a Washington state-chartered credit union conduct an annual membership meeting or a special membership meeting as a virtual meeting concurrent with a physical meeting (hybrid model)?
Short Answer: Yes
For the purpose of this letter, the phrase “virtual meeting” refers to an event involving people who are interacting through the use of online technology without a corresponding in-person
meeting. During research, we also found the terms “online” and “remote” used to describe a virtual meeting. Some articles also described a “hybrid” meeting as one held at a physical
location and combining a “live” in-person event with a virtual online component.
Because we found few articles about credit unions holding virtual membership meetings, we researched virtual stockholder meetings. Due to advances in Internet communications, some
corporations in the United States are now conducting virtual and hybrid annual stockholder meetings. Corporations have listed the benefits of conducting a virtual meeting as follows:
- Saving on costs;
- Taking advantage of emerging or social technologies;
- Avoiding traffic congestion and travel in inclement weather;
- Experiencing less disruption to the organization’s daily routine;
- Reducing environmental impact; and
- Expecting greater participation by members due to the convenience of virtual meetings.
Critics of virtual meetings have listed potential detrimental effects as follows:
- The lack of face-to-face contact with management and board of directors leading to reduced effectiveness of member communications;
- The process of filtering, rephrasing or ignoring questions which are submitted prior to the meeting resulting in hard questions being avoided at meetings; and
- Members lacking access to a computer or smart phone being excluded from participation (unless a physical venue is also available at the same time as the virtual meeting).
Relevant Law and Analysis: Place for Annual or Special Membership Meeting
A credit union is a nonprofit corporation and, as guided by the Division of Credit Unions, complies with the Washington Nonprofit Corporate Act where the Washington Credit Union
Act is silent. However, the Washington Credit Union Act is not silent.
Annual Meetings. Under the Washington Credit Union Act, a credit union’s bylaws must address the time and place of annual membership meetings, and provide notice as stated in the
Special Meetings. Under the Washington Credit Union Act, the special membership meeting “must be held at a reasonable location within the county in which the principal place of
business of the credit union is located, unless provided otherwise by the bylaws.” (Emphasis added.) Special membership meetings must be conducted according to the rules of procedure
approved by the board.
Long-standing principles of corporation law have led to a universal agreement among corporate law practitioners that “place,” as used in a statute conferring the authority of a corporation,
necessarily means a physical or geographic location. Similarly, the Washington Credit Union Act, which provides for the chartering and governance of nonprofit corporations known as
credit unions, uses the word “place” or “location” in connection with a membership meeting.
Therefore, the present language of the Washington Credit Union Act, read in the light of longstanding principles of corporation law, does not permit a credit union to conduct a virtual
annual meeting or virtual special membership meeting, unless such meeting is held concurrently at a physical location (i.e., a hybrid virtual meeting.)
Credit unions may not hold virtual annual meetings or virtual special meetings without holding a simultaneous physical meeting. Credit unions may amend their bylaws to allow for hybrid
virtual membership meetings, including annual and special meetings. Please see Bulletin B-17-17 for guidance on hybrid virtual membership meetings.
Revised Guidance: Hybrid Membership Meetings
A cornerstone of sound corporate governance for a cooperative business is membership participation at a successful annual membership meeting. With advances of Internet
communication technologies, a credit union has more options on how to host a meeting and typically what method is best for meeting with its members.
For purposes of this Bulletin, the phase “hybrid virtual” meeting is one held at a physical location which combines a “live” in-person event, simultaneously with a virtual online
component. The virtual online component refers to an event involving people interacting through the use of online technology. During research, we also found the terms “online” and
“remote” used to describe a virtual meeting. Based on research, we found a Washington credit union may conduct a hybrid virtual membership meeting but not a virtual-only membership
meeting. The Washington Credit Union Act will need to be amended to authorize a virtual-only membership meeting; see the Revised Interpretive Letter I-17-04 for the legal analysis.
The guidance for a hybrid virtual membership meeting is as follows:
- Credit unions may conduct a hybrid virtual membership meeting. The credit union should review the Revised Interpretive Letter I-17-04 for more information about hybrid virtual meeting requirements in the Washington Credit Union Act and Washington Nonprofit Corporation Act.
- If the credit union plans to hold a hybrid virtual meeting, amend your bylaws to allow the option of a hybrid virtual membership meeting. Decide if the option is for either an annual or special membership meeting. If a special membership meeting is likely to be more contentious, the credit union may not want to hold a hybrid virtual meeting where communication may be more complex or spirited.
- If contracting with a virtual meeting provider, confirm the credit union’s computer security requirements will be met.
- The meeting notice should explain that the member may participate in-person or by an online technology. The notice should specify how a member may participate in the hybrid virtual meeting, such as how to gain access for online participation. For the virtual portion, the credit union may want to provide a link for a member to do a quick system check for access before the meeting date and a contact if the member has access problems before or during the meeting.
- Procedures should ensure that persons participating in the hybrid virtual meeting are in fact members of the credit union and provide them with a reasonable opportunity to participate in the meeting, be heard by the other members, and vote on all matters requiring a vote.
- The credit union should establish reasonable guidelines for questions, such as procedures for submitting questions in advance, setting time limits for questions asked of management, and setting specific and reasonable guidelines for the display of questions and answers.
- Bylaws addressing voting at a hybrid virtual annual meeting should contain procedures consistent with the Division of Credit Unions Opinion Letter 01-4 on Electronic Voting Methods. For a copy of Letter 01-4, see https://dfi.wa.gov/sites/default/files/creditunions/interpretive-letters/O-01-4.pdf
- For voting procedures, we suggest using Option A4 to Article V of the NCUA’s model Federal Credit Union Bylaws; see https://www.ecfr.gov/cgi-bin/textidx?SID=ac13b36c9e2e35001576da9e357ab733&mc=true&node=pt12.7.701&rgn=div5 #ap12.7.701_139.a
- The results of the voting must be verified and announced at the annual meeting, and no sooner.
- Archive a recording of a hybrid virtual meeting on a public or member accessible website for a specific and reasonable period of time.
As the virtual component of a hybrid virtual membership meeting may be more complicated, we suggest reading the following:
- Harvard Law School Forum on Corporate Governance and Financial Regulation: Annual Shareholder Meeting: Selected Considerations for a Virtual-Only Meeting.,
- Broadridge.com: Guidelines for protecting and enhancing online shareholder participation in annual meetings, https://www.broadridge.com/_assets/pdf/broadridgeguidelines-for-protecting-and-enhancing-online-shareholder-participation-in-annualmeetings.pdf
- Lexology: Is It Time to Implement a Virtual Annual Meeting?, Forbes: How to Fix What’s Wrong with Virtual Meetings, https://www.lexology.com/library/detail.aspx?g=2553266a-2508-4b1e-a82f98bd67a1c158
If you would like help updating your board policies to allow hybrid membership meetings, please contact us.