Allowing Action Without a Meeting? Ensure Compliance with Statutes and Bylaws

We are often asked to prepare or review corporate bylaws for corporations at the onset or when issues arise. Many corporations, either in their initial bylaws or by amendment to bylaws, have included a provision for action without a meeting of its members. Generally, bylaws may provide for corporate actions to be taken without a meeting of the members either by written ballot or written consent, or both. Given the differences between the two, it is wise to consider which form of action would best fit the corporation’s needs and membership desires as well as the process and approval requirements for each form of action.

Under Wisconsin law, action by written consent is permitted unless limited or otherwise provided in the articles of incorporation or bylaws, as opposed to action by written ballot, which can only be taken if permitted by the articles of incorporation or bylaws. Wisconsin Statute §181.0704 provides for written consent describing an action, required or permitted by Chapter 181 to be approved by the members without a meeting, if such consent is signed by the required number of members with each signature dated. Wisconsin Statute §181.0708 provides, if permitted by the articles or bylaws, that “any action that may be taken at an annual, regular or special meeting of members may be taken without a meeting if the corporation delivers a written ballot to every member entitled to vote on the matter” with such ballot setting forth each proposed action and the opportunity to vote for or against each proposed action. Each process differs; the action by written consent requires the signature of members on the consent while action by written ballot requires casting of vote by members by ballot.

Another significant difference between the two forms of action is membership approval requirements. An action by written consent is approved without a meeting if it is approved by members holding at least 80% of the voting power or a different percentage, not less than 50%, specified in the articles or bylaws (Wisconsin Statute §181.0704). An action by written ballot is valid only when the number of votes cast by written ballot equals or exceeds the quorum requirement for an actual meeting authorizing the action, and the number of member approvals equals or exceeds the number of votes that would be required to approve the action at a meeting at which the same total number of votes were cast (Wisconsin Statute §181.0708). Depending on the quorum and voting requirements provided in the bylaws, the approval requirements for action by written consent could result in a greater percentage of members needed to approve of an action than in the case of an action by written ballot.

Ultimately, a review of the distinguishing factors between the process and approval requirements for either or both forms of action is important. In Wisconsin, if the articles or the bylaws do not provide for action without a meeting of its members by written ballot, then the corporation is limited to an action at a meeting of its members or action by written consent pursuant to the statute subject to limitations, if any, in the bylaws. To preserve the preferred form or forms of action without a meeting of the members, the bylaws must provide for the process and approval requirements consistent with State law. Corporations would be well served by periodic review of the corporation’s articles of incorporation and bylaws to determine whether their provisions meet the needs of the corporation and its members as well as the statutory requirements.

This article is a publication of MWH Law Group LLP and is intended to provide general information regarding legal issues and developments to our clients and other friends. It should not be construed as legal advice or a legal opinion on any specific facts or situations. For further information on your own situation, we encourage you to contact the author of the article or any other member of the firm.

CONTACT ATTORNEY JENNIFER PFLUNG MURPHY

Jennifer Pflug Murphy
Partner – Milwaukee
735 N. Water Street, Suite 610, Milwaukee, WI 53202
P: (414) 436-0353 / F: (414) 436-0354
E: jennifer.pflugmurphy@mwhlawgroup.com
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