As we approach AGM season for many clubs, with the Scottish Cycling AGM this year being held virutal (more details here) we wanted to share the following information from Harper Macleod LLP to support clubs at this time
Sports clubs may be wondering how to deal with governance issues, including the requirements to convene general meetings, during the current coronavirus (Covid-19) pandemic. While clubs incorporated as SCIOs have specific legislation working through the Parliament at present to allow them to hold general meetings virtually, many clubs are unincorporated and are governed solely by their constitution.
It may be possible to hold general meetings virtually where this is envisaged under your constitution. For example, this will apply if your constitution makes reference to general meetings be held “in any manner which permits those attending to communicate with each other” or expressly references to attendance by teleconference or video.
However, it is more likely that your constitution is silent on the issue or requires that attendance must be “in person”. In both of these cases, the sports club does not have the power to hold a virtual general meeting as to do so would fall outside the scope of the constitution. The risk here is that any general meeting held virtually is not deemed to be a valid meeting under the constitution and so any decisions taking at that meeting would then be invalid.
If this is the case, there are two options:
1. seek the members’ approval to hold the general meeting virtually
2. postpone the general meeting.
1. Proceed with virtual general meeting with members’ approval
If a club wanted to go ahead with a general meeting then the members’ approval should be sought to hold that general meeting virtually if this is not provided for within the constitution. The difficulty is, how do you obtain the members’ approval if you cannot hold a meeting?
We would suggest that the club issues a communication to members directly (either by email or post) with the proposal to hold the general meeting virtually under explanation that this is not permitted by the current constitution.
Accordingly, the communication would invite members to join the general meeting virtually and explain that their retrospective approval to the deviation from the constitution will be sought when the club is able to convene a general meeting in person. The same communication would invite members to raise any objections / comments by a specific deadline.
This would allow the club to see if proceeding to convene a general meeting virtually would be challenged by any of the members. If any members did raise objections then the club would have an opportunity consider these, and take appropriate advice, before making the final decision to issue a notice convening the general meeting virtually.
In the event that no objections were raised, the club could then proceed to call a general meeting virtually. We would recommend that the agenda is limited to the decisions requiring immediate action. Clubs will also need to consider the practicalities of allowing members to participate in virtual general meetings.
Despite the format that clubs choose for their virtual meeting, we would recommend that all procedures and options are clearly communicated to members so they understand what they can and cannot do in attendance and how they are able to exercise their vote. Providing options for voting in advance may make the general meeting easier to manage for the club.
While this is an option for clubs during the current circumstances, it is not without the risk that the validity
of the meeting could subsequently be challenged. So what happens if a virtual general meeting is subsequently challenged?
As there is no overarching governing law for unincorporated clubs, they are governed by their constitution and any actions that technically fall outside the scope of the constitution are potentially subject to challenge – this includes convening a general meeting virtually where this is not provided for in the constitution.
Our proposed process above aims to weed out any potential objections to try and prevent a challenge being raised after the meeting has been held. Further, seeking the members’ retrospective approval for the meeting in person will also seek to prevent any challenge to the meeting’s validity being successful.
If a club’s general meeting is challenged then we would suggest that you take advice on the specific terms of the challenge in order to deal with this. It may be the case that the challenge has been raising by one member but that the majority of members are content to approve the meeting’s validity. However, this will need to be considered on a case by case basis by each club in the event that such a challenge is raised.
Where there is no viable alternative to holding a general meeting due to challenges surrounding Covid-19, you may need to consider whether the best approach is for the meeting to be postponed and convened at a later time.
There are unlikely to be any provisions within your constitution that would make provision for the postponement of a general meeting, particularly an annual general meeting. However, these are exceptional
circumstances. Public health and safety will need to take precedence and clubs should be mindful of guidance coming from the Scottish Government regarding special measures.
In the event that a general meeting is to be postponed, we would recommend that all members are issued with a notice informing them of such postponement and the reasons for this – i.e as a result of Covid-19 measures. In that notice, members should be advised of any associated implications, such as that any officers due to step down or be re-elected will remain in office until the postponed meeting is convened.
We would also recommend that a members’ resolution is proposed for the general meeting when it is convened seeking their retrospective approval of the decision to postpone the meeting. This will allow any members’ objections to be raised now so that you can consider how to handle these.
Many sports clubs will have provisions for the appointment of proxies within their constitutions. If so, it may be an option to hold a quorate general meeting with only one or two attendees and the rest of the members in attendance by proxy. This will only be an option for a club, which has a constitution either providing that the quorum for general meetings includes those in attendance by proxy or where the quorum does not expressly refer to attendance “in person”, unless this is clarified elsewhere in the constitution as to include proxies.
Where a club’s constitution does not allow for virtual general meetings but does allow for proxies to be included in the number required for a quorum, this option may be more suitable as it will remove the risk of the meeting being deemed to be invalid as described above.
Clubs seeking to use proxies to call a quorate general meeting while the Regulations remain in force may wish to follow these suggested steps:
- the club issues the general meeting notice with an accompanying note to members explaining the current restrictions and how these create challenges for holding the general meeting
- in the note, there is a strong recommendation that members do not attend the meeting but instead appoint a proxy to attend and vote on their behalf – the proxy form included within the notice should have a list of all decisions for members’ approval and allow each member to select how they wish to vote
- the club can facilitate the proxy voting process and explain this clearly within the note to clarify who will be appointed as proxies and that members may only appoint one proxy each – the names of the proxies should already be populated within the proxy forms, which should be the members of two households who will actually attend in person, for example, the chair / president and another committee member
- those nominated as proxies would then attend the general meeting and, provided they have been appointed as proxy for a sufficient number of members to meet the quorum set out in the constitution, could vote to pass the relevant resolutions.
The key aspect of the above approach is that the club nominates two individuals to physically attend the general meeting and it will only be those two individuals who can be appointed as proxies.
Decisions required during this time
If there are any particular decisions required in the interim period before a general meeting can be convened, you will need to consider if these decisions would normally require approval of the members.
If such decisions would ordinarily require to be approved at a general meeting and the club has opted to postpone a general meeting, we would recommend that the members are notified of any such decisions and the intention of the club’s committee to seek retrospective approval once a general meeting is able to be convened.
Again, this approach is not without the risk of challenge but the aim of providing members with advance notices is that any members who wish to raise objections or challenge the decision should be invited to do so and then the club may consider what options would be available.
Some club constitutions may allow members to pass resolutions in writing, rather than by attending a general
meeting. If a club’s constitution does have such a provision then this may be an alternative option for any decisions that need to be taken during this current time. However, this will only apply if such written resolutions are passed in accordance with the terms of the club’s constitution.
There will no doubt be many issues that clubs have had to face during the current Covid-19 pandemic that would never have previously been considered and convening general meetings may just be one of those. Generally, whenever we are amending the governance documentation for sports clubs now we always recommend including provisions to hold meetings virtually and pass written resolutions.
While clubs whose constitutions do not currently include those provisions cannot rely on these now – amendments most likely need to be approved by members at a general meeting and we would recommend waiting until a general meeting can be validly convened before proposing constitutional amendments – it is something that clubs should consider for the future.
When the lockdown restrictions have eased and clubs are able to convene a general meeting in person, we would recommend proposing amendments to the constitution to ensure that virtual general meetings can be convened in the future. It may also be helpful to have provisions for written resolutions, attendance by proxy and emergency decision procedures.