Act 37: Permitting Hawaii Nonprofit Boards to Take Actions by Ballot and Electronic Voting, Use of Electronic Notice, and Conduct of Meeting by Teleconference

Business Impact: The purpose of Act 37 is really to modernize the way Hawaii nonprofit corporation boards operate and handle their affairs.  Basically, it allows nonprofit directors to use electronic communications technology to permit member actions by ballot, conduct voting, provide notice, and conduct meetings.

Specifics of the Law:  This new law amends parts of Chapter 414D of the Hawaii Revised Statutes, the Hawaii Nonprofit Corporations Act.  Specifically, the law adds in language that allows nonprofit board to take action through the use of electronic means.  Therefore, the law is permitting the use of email, fax, teleconferencing to make a lot of the formalities necessary to carry on a nonprofit corporation easier and at the discretion of the board.

Our Nonprofit Board has been Doing this Already does that Mean Our Past Decisions were Prohibited?

Probably not, as it was noted the way the law was written prior to this change did not specifically prohibit the use of communication technologies.  However, it was the wishes of the Hawaii State Government to provide some clarity and give assurances to nonprofit corporations that if they choose to operate in this manner than they are conforming to the law.  The only past acts that may be prohibited by your Board is if you did not comply with your own bylaws or did something that was a direct conflict of interest with the goals of the nonprofit.

However, every situation is unique and if you have concerns with the use of electronic communications in your board meetings, notices, or the conduct of balloting and voting you should seek an attorney for review and advice.

Reasonable Measures to Verify a Person’s Identity

Even with the new changes the fact that you can use electronic means to communicate should make your life easier, but the only caveat is that within the law it states that “[t]he corporation shall implement reasonable measures to verify that each person deemed present and permitted to vote at the meeting by means of the Internet, teleconference, or other electronic transmission technology is a member or proxy of a member.”

Basically, only authorized people are allowed to vote and make decisions, and that would be the board of directors and officers.  If your nonprofit uses unreliable or unsecure methods of communication it would be difficult to say you took reasonable steps to verify a person’s identity when conducting a meeting.

Bottom line:  The changes in this law are meant to help nonprofit boards, especially ones with members across the islands, do their business with the security and ease of using electronic communication. However, with that being said you probably want to make sure your bylaws, articles of incorporation, and procedures are up-to-date and the way you conduct yourselves is legal.  Also you probably want to check your bylaws and make sure they do not prohibit specific types of technologies, as some types of nonprofits wanted to keep that face-to-face interaction required of meetings in the past.  Lastly, your notices and ballot measures are not simplified just because you are using email.  There are certain requirements that still need to be followed.  The means are easier, but the goal is to keep the substance the same.

Next law to be covered: For your coffee people to New Law in the Brief will be focusing on Act 49, which is meant to restrict the use of terms indicating geographic origin of Hawaii-grown coffee on coffee packaging.

*Disclaimer:  This post discusses general legal issues, but does not constitute legal advice in any respect.   No reader should act or refrain from acting based on information contained herein without seeking the advice of counsel in the relevant jurisdiction.   Ryan K. Hew, Attorney At Law, LLLC expressly disclaims all liability in respect to any actions taken or not taken based on the contents of this post.

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