Let's Meet: Holding Virtual and Postponed Annual Meetings
Back in late March we blogged about NCUA Letter to Federal Credit Unions 20-FCU-02, which provided an option for FCUs to hold their annual meetings virtually, and reminded FCUs of the option to postpone their annual meetings to a later date in the 2020 calendar year. In today’s blog, I’ll take a deeper dive into some related questions that NAFCU’s compliance team has received about annual meetings recently. State-chartered credit unions will want to look to their applicable state laws for any guidance on postponing meetings or holding them virtually.
When can FCUs hold a virtual annual meeting or delay its annual meeting?
As detailed in the blog linked above, NCUA issued a letter to federal credit unions on March 20, 2020, in light of the COVID-19 pandemic and President Trump’s declaration of a National Emergency. In the letter, NCUA provided a bylaw amendment that FCUs could adopt immediately by a 2/3 vote of their board, which would allow for them to hold their annual meetings virtually rather than in-person. A footnote in the letter clarified that holding a meeting virtually includes “webcasts, teleconferences, virtual meeting rooms or similar means that permit members to listen, vote as necessary, and participate.”
Importantly, this does not appear to be a mere temporary change to address COVID-19; rather, it appears to be a permanent bylaw amendment that FCUs will be able to use in the event of future emergencies or disasters, provided it is properly adopted by the board. However – as noted in the text of the amendment – a declaration of emergency or disaster is required to trigger the virtual meeting option, meaning that this bylaw amendment will not permit FCUs to have a virtual annual meeting in future years if no such declarations are in effect.
Letter 20-FCU-02 reminded FCUs of the option to delay their annual meeting to a later date in the 2020 calendar year, noting that “a FCU could delay its 2020 annual meeting to December 2020 and still meet the annual meeting requirement.” To accomplish this delay, an FCU would need to change the “fill-in-the-blank” provision in its bylaws that states the timeframe for the annual meeting. As the letter notes, a change can be made to this “fill-in-the-blank” provision with a 2/3 majority vote of the FCU’s board. The letter goes on to state that such a change can be made permanently for all annual meetings to come, or can be made just for 2020 (in which case the FCU would return to its previous timeframe for 2021 and beyond).
Notice Requirements for Virtual and Delayed Annual Meetings
The virtual meeting bylaw amendment requires that “[m]embers receive at least seven days’ advance notice of the change to a virtual meeting format and appropriate instructions for how to join, participate, and vote during the virtual meeting.” Note that this language says “at least” seven days – longer notice could be provided. This also seems to contemplate a situation in which the format of the meeting switches from in-person to virtual, but the date of the annual meeting is not changed. But what happens if the FCU also delays the annual meeting to a different date, in addition to switching to a virtual format?
Unfortunately, the letter does not provide a direct answer to this question. The letter does say, however, “[w]hile there is no law or regulation that prohibits a FCU from postponing its annual meeting, it should provide notice of the rescheduled meeting as required in the FCU Bylaws.” This seems to imply that NCUA expects FCUs that delay their annual meeting to follow the notice requirements described in the FCU’s bylaws for annual meetings, delayed or otherwise. For FCUs that have adopted the most recent version of NCUA’s model bylaws, Article IV of the model bylaws requires FCUs to give written notice to each member 30-75 days “before the date of any annual meeting.” As for the format of the notice, the model bylaws provide:
“The secretary may deliver the notice in person, by mail to the member's address, or, for members who have opted to receive statements and notices electronically, by electronic mail. The secretary must give notice of the annual meeting by posting the notice in a conspicuous place in the office of this credit union where members may read it at least 30 days before the meeting. The secretary must also prominently display the notice on the credit union's website if such credit union maintains a website.”
It is important to note, however, that not all FCUs have adopted the most recent version of the model bylaws. Each FCU that is considering delaying their annual meeting may want to review their specific bylaws to determine what type of notice is required.
Candidates for Board Elections
As NCUA has noted in a COVID-19 FAQ, “[u]nder the Federal Credit Union Bylaws, the term of a director continues until the election and qualification of successors. Accordingly, if a federal credit union delays an annual meeting, the current directors’ terms continue until the federal credit union holds its meeting and election.” (internal quotations omitted).
But what about situations in which the FCU had already chosen its candidates before the annual meeting was delayed? If the annual meeting is postponed, will the FCU need to re-do the nominating process?
The answer will depend on the FCU’s specific bylaws. The model bylaws, for example, provide a detailed timeline for selecting nominees. For example, the nomination procedures laid out in voting option A4 (discussed further below), requires that at least 75 days before the annual meeting, the secretary shall notify voting-eligible members, in writing, that they may make a nomination by petition. The nominating petitions must be filed with the secretary at least 40 days before the annual meeting. At least 35 days before the annual meeting, the secretary will post the nominees (chosen both by the committee and via petition) in a conspicuous place in each FCU office and on the FCU’s website.
All of the timeframes described above require the events described to occur “at least” a certain number of days before the annual meeting – this appears to set a minimum amount of time between the required event and the annual meeting, which means that more time between the event and the meeting could be permissible. For example, if the bylaws require the names of the nominees to be posted “at least 35 days” before the annual meeting and the FCU has complied with that provision for a June 2020 annual meeting, those names will still have been posted “at least 35 days” before the annual meeting if the meeting is postponed to October 2020. Thus, it does not appear that the model bylaws require a whole new nominating process to be undertaken if the annual meeting is delayed.
Once again, it bears repeating that each FCU may have its own unique version of the bylaws, which may not align with the most recent version of NCUA’s model bylaws. Federal credit unions will want to review its own bylaws to determine the timeline for the nominating process and what the deadlines are for each step.
Procedures for Voting
As noted in letter 20-FCU-02, the NCUA’s model bylaws “allow four options for conducting elections.” Several of the options provided for in the model bylaws do not appear to be a good fit for a virtually-held annual meeting. For example, options A1 and A2 both require in-person elections, which would seemingly defeat the point of holding a virtual meeting as is it unclear whether a virtual presence meets the “in-person” requirement. Additionally, option A3 requires the use of a ballot box or voting machine which may require members to travel to the locations of such ballot boxes or voting machines to cast their vote.
The option that seems to align most closely with the virtual format is option A4, Election by Electronic Device (Including But Not Limited to Telephone and Electronic Mail). The model bylaws include detailed instructions for providing notice of ballots to voting-eligible members, including a requirement for the secretary to send “instructions for the electronic election procedure, including how to access and use the system and the timeframe for voting.” However, the model bylaws also note that the FCU must provide the ability to vote by a mailed printed ballot for those members that do not have access to the requisite electronic devices necessary to vote electronically. The preamble to the 2019 NCUA model bylaws notes that NCUA was concerned with disenfranchising certain members, “particularly in rural areas with lack of access to reliable internet.”
If a credit union has not adopted option A4 in their bylaws, the Letter 20-FCU-02 notes that the credit union “may amend the credit union’s bylaws with the vote of two-thirds of the directors” to adopt a different method (from the 4 provided in the model bylaws) for conducting elections.
If electronic voting is new for your credit union, you might want to browse NAFCU’s Vendor Directory, which lists companies that assist credit unions with a variety of issues, including electronic voting solutions. You could also reach out to your compliance peers using NAFCU’s Compliance, Risk and BSA network for more information on how other credit unions are meeting this requirement and which vendors they are using.
About the Author
Nick St. John, was named regulatory compliance counsel in March 2020. In this role, Nick helps credit unions with a variety of compliance issues.