Without the presence of at least a quorum, the activities of those present are not that of the board.  Therefore, they may not be binding upon the corporation.

There are many other prerequisites for holding a valid board meeting.  They include proper notice, written agenda, taking formal action by motion or resolution, and otherwise operating in accordance with the corporation's articles of incorporation and bylaws.  Let's focus on quorum requirements.

How is a quorum determined?  May it be changed?  In the event a board wishes to rely upon the limited meeting exception, does the quorum requirement still apply?

Answers to these questions for an Alaska corporation center on the requirements of the Alaska statutes under which the entity was incorporated.  For example, an Alaska business or "for-profit" corporation is organized under the Alaska Corporations Code (ACC).  An Alaska nonprofit corporation is organized under the Alaska Nonprofit Corporation Act (ANCA). 

Nonprofit corporations may be formed under ANCA for any of a number of lawful purposes.  These include charitable, religious, benevolent, educational, social, and fraternal purposes.  You may have come in contact with such organizations, either through your place of business or through an organization of which you are a member or for which you serve as an officer or director.

The ACC provides, with limited exception, that a majority of the number of directors fixed by the corporation's articles (or bylaws) constitutes a quorum for transacting business.  As an example, should that document provide for a five member board, at least three directors must be present to conduct business.  In this instance, a quorum is determined based not upon the number of directors in office but rather the number specified in the controlling document. 

Continuing the example, in the event two of the five positions on that board are vacant, the minimum quorum requirement remains at three.  It does not become two. 

The limited ACC exception occurs when the articles (or bylaws) require a greater number of directors to constitute a quorum.  In this instance, the quorum provision of that document controls. 

With limited exception, ANCA provides that a quorum is defined as a majority of directors fixed by the bylaws.  However, in the absence of such a bylaw, ANCA provides that the quorum requirement stated in the articles controls. 

The limited ANCA exception occurs when the articles (or bylaws) specify a quorum as greater than a majority of the director positions.  In this instance, that higher quorum requirement controls. 

Both ACC and ANCA provide, with limited exception, that the act of a majority of the directors present at a meeting at which at least a quorum is present is the act of the board.  The limited exception occurs when the act of a greater number is required by the articles (or bylaws).  In this instance, the higher voting provision controls. 

The ACC provides two limited exceptions to the requirement that a board must convene a meeting with directors present in one place in order to conduct business.  They are as follows.

The ACC provides that a board may, unless prohibited by the corporation's articles (or bylaws) validly conduct a meeting by its directors communicating simultaneously with each other by means of conference telephone or similar communications equipment. 

Both ACC and ANCA specifically provide that, unless prohibited by the corporation's articles (or bylaws), action required or permitted to be taken by the board may be taken without a meeting.  However, in each case all directors must execute written consents, identical in content, setting forth the action taken.  The consents must be filed with the minutes of the board meeting.  They have the same effect as a unanimous vote.

These provisions are most useful in avoiding delays caused by postponement of meetings for lack of a quorum at a given time and place.  They also accommodate a board having directors located in different regions of the state or who reside outside of Alaska.  In this way, an Alaska corporation can have access to the expertise of such persons as directors while minimizing the expense of calling in-place meetings or incurring delays to accommodate availability of a sufficient number of directors to constitute a quorum. 

A corporate quorum requirement can be changed.  However, the process to accomplish the change depends upon whether the quorum requirement is specified in the articles (or bylaws).  If the quorum requirement is specified in the bylaws, an added question arises as to who has the right to make the change. 

The ACC provides, with limited exception, that bylaws may be changed either by approval of the outstanding shares or the board.  However, ACC also provides that the articles may restrict or eliminate this power of either the board or those shares. 

The ANCA provides that the board has the power to change bylaws unless it is reserved in the articles to the corporation's members.  Where the right to amend bylaws is reserved in the articles exclusively to the shareholders (under ACC) or the members (under ANCA), that vote must be taken as a part of the process to accomplish a valid change to the document.

In the event the quorum requirement is set forth in the articles, changing it requires a vote by the shareholders (under ACC) or members (under ANCA), as well as a vote of the corresponding board.  Such an article change must be filed with the State of Alaska and does not become effective until the state issues a certificate on the amendment. 

When a board meets without a quorum present, the gathering is, at best, a work session or nonbinding discussion.  Worse yet, it can lull board members into thinking they are about the corporation's business.  The presence of a quorum is critical to a board's ability to function and to carry out its corporate responsibilities.

The ACC also sets forth quorum requirements for shareholder and board committee meetings.  Similarly, ANCA sets forth, for a nonprofit corporation having members, quorum requirements for member meetings.  These quorum provisions must be satisfied to allow shareholders, members and committees to carry out their respective critical corporate duties. 

We live in a time when even greater public scrutiny is riveted upon a board of directors for its actions or inactions.  Certainly shareholders and members are more mindful of the activities of their respective boards.  The competent director takes the time to understand the meeting requirements for boards and committees on which he or she serves, including what constitutes a quorum.

The immediate question at the start of your next corporate meeting is then – Do we have a quorum?

[1]        Julius Brecht is an attorney in private practice and shareholder with the law firm of Wohlforth, Johnson, Brecht, Cartledge & Brooking, A Professional Corporation, with offices in Anchorage. Mr. Brecht's concentration of practice is in state and federal securities law and corporate and finance law. The content of this article was not prepared as, and must not be construed as, legal or investment advice to anyone. He may be reached at jbrecht@akatty.com.