Alaska Legislature Allows Corporations to Conduct Business by Remote Communication

The Alaska Legislature has passed Senate Bill 24, which allows business entities to hold meetings and conduct business by “remote communication.” On March 22, it initiated sending the Bill to the Governor, who is expected to quickly sign it into law.

The purpose of the Bill is to allow for-profit and nonprofit corporations, business and industrial development corporations, and Alaska Native corporations to hold meetings and conduct business by “remote communication.”¹ Remote communication means “communication by means of electronic communication, conference telephone, videoconference, the Internet, electronic transmission, or other means by which persons not physically present in the same location may communicate with and hear² each other on a substantially simultaneous basis.” AS 10.06.990(51) (added by SB 24). Sections 1–14 of the Bill specifically address for-profit corporations, sections 15–17 relate to Alaska Native corporations, sections 19–20 address entities organized under the Business and Industrial Development Corporations Act, sections 21–28 focus on nonprofit corporations, and sections 29–31 implement the Bill with a retroactive effective date of March 11, 2020.

For-profit corporations:

The Bill allows for all types of corporate meetings to be held by remote communication if authorized by a corporation’s bylaws. This includes organizational meetings, regular or special meetings of the board and of board committees, and shareholder meetings, including annual meetings. See AS 10.06.223; AS 10.06.230(e); AS 10.06.405(a)–(b) (all as amended by SB 24).³ Meetings may be held (1) at a designated place, (2) by remote communication, or (3) at a designated place and by remote communication. The designated place may be inside or outside of Alaska.

The Bill contains several provisions specifically addressing remote attendance and participation at shareholder meetings. These begin with notice requirements. Importantly, “[i]f attendance of the [annual shareholder] meeting by remote communication is permitted, the notice must state the method of remote communication by which a shareholder or a proxy holder is considered present in person at the meeting and by which the shareholder or proxy holder may vote.” See AS 10.06.410(a) (as amended by SB 24). The Bill explicitly allows for shareholders present at a meeting by remote communication to vote their shares by remote communication. AS 10.06.420(c) (as amended by SB 24). Also, the Bill provides that shareholders and directors attending a meeting by remote communication are considered present for the purposes of a quorum at a meeting that allows remote communication. AS 10.06.415(a); AS 10.06.420; AS 10.06.470(a) (all as amended by SB 24).

The Bill provides that prior to each shareholder meeting that allows attendance via remote communication, the list of shareholders entitled to vote at the meeting must be made available on a reasonably accessible electronic network where the information required to gain access to the list is provided with the notice of the meeting. AS 10.06.413(a) (as amended by SB 24).

Nonprofit corporations:

The Bill makes changes to the Nonprofit Corporations Act that parallel those it makes to the Corporations Act. The Bill authorizes nonprofit corporation members to vote by remote communication or by proxy executed by electronic transmission by the member. See AS 10.20.071(b) (as amended by SB 24). It requires that notice must be provided of the manner in which member meetings will be held. AS 10.20.066 (as amended by SB 24). The Bill also adds remote communication as one avenue the bylaws may prescribe for establishing that a quorum for member voting exists. See AS 10.20.076 (as amended by SB 24). And, finally, the Bill allows regular or special meetings of the board of directors to be held via remote communication. AS 10.20.116(a) (as amended by SB 24).

Alaska Native corporations:

Three sections of the Bill relate specifically to corporations organized under the Alaska Native Claims Settlement Act (ANCSA). The first change is to AS 10.06.470(a) to allow ANCSA corporations to amend their articles of incorporation—via voting by remote communication—to add a provision relating to personal liability of a director for monetary damages to the corporation or stockholders. The second change is to AS 10.06.960(n) to allow village corporations to amend their articles of incorporation—via voting by remote communication—to add a provision authorizing the classification of directors under AS 10.06.455. The final change is to AS 10.06.960(p) to allow ANCSA corporations incorporated under former 10.05 prior to July 1, 1989, to vote to modify quorum requirements via remote communication.

Things to think about:

The allowance for meetings and voting by remote communication, while advantageous for many reasons, will present new issues directors and shareholders will need to consider. For example, how will boards ensure that board members are protecting confidential board communications, such as in executive session, while they are participating by videoconference from potentially insecure locations? How will board chairs ensure that all board members have an appropriate opportunity to be heard and to engage in productive debate? While remote participation may increase access for some shareholders, what obligations does a corporation have to ensure all shareholders have access to the electronic equipment they need to meaningfully participate in and vote at remote meetings?

It will be important that these issues and others that may arise from conducting corporate business remotely are addressed carefully when crafting bylaws to allow remote communication.

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¹ In 2020, the Electric and Telephone Cooperative Act was amended to allow cooperatives to hold meetings as provided in their bylaws. Language was also added allowing meetings to be held via teleconference or other remote communication if not prohibited by the bylaws. Senate Bill 24 does not change laws governing Alaska’s cooperatives.

² The words “and hear” were added by the House to the Bill language initially proposed by the Senate to clarify that voting over email would be insufficient to constitute being present via remote communication.

³ The Bill also changes notice requirements for organizational meetings of for-profit corporations, providing that notice must be given if the meetings are to be held by remote communication. See AS 10.06.223 (as amended by SB 24).