Online Voting at Meetings
Not-for-profits, whether incorporated associations or public companies limited by guarantee, are increasingly looking towards online or electronic voting for general meetings. With the prevalence of electronic communication, many not-for-profits would presume that their constitutions already allow members to vote electronically for meetings.
Put simply, an electronic direct vote occurs when a general meeting is held, and a member is able to cast his or her vote using an online method (or one of several online methods, such as email or fax) without actually attending the meeting.
However, in practice, it is relatively rare for a not-for-profit’s constitution to include the requisite clauses in order to allow for electronic direct voting to occur.
The reason that many not-for-profit constitutions do not cater for electronic direct voting may partly be due to confusion between electronic direct voting and other similar voting methods. We differentiate between these different methods below.
It is not uncommon to see not-for-profit’s constitution allow for “electronic ballots”, but these are different from online direct votes.
An electronic ballot occurs when the entire vote on an issue is conducted electronically, and there is no meeting. It is the electronic equivalent of the more traditional postal ballot.
Electronic ballots are distinguishable from an online direct voting, because online direct voting still requires a meeting to be held.
In some jurisdictions, electronic ballots are also included in the model rules for incorporated associations. For example, in New South Wales, electronic voting is provided for by clause 4 of the model constitution - found in Schedule 1 to the Associations Incorporation Regulation 2016 (NSW).
However, even if a not-for-profit’s constitution allows for electronic ballots, this does not necessarily allow for online direct votes at a general meeting. There are specific clauses which must be included to allow for online direct voting.
An electronic ballot will also not satisfy legislative requirements for a meeting to be held on a particular issue, whereas online direct voting can.
A proxy vote is not the same as an online vote. A proxy is used when a member wishes to designate another person, which can in some instances be the chair of the meeting, to vote on that member’s behalf. Some proxies will include directions to vote a specific way, whereas others will allow the proxy to vote as he or she pleases.
Both a proxy and an electronic direct vote allow a member who is unable to attend the meeting to ensure that a vote is cast in accordance with that member’s preferences. However, sometimes proxy voting can be less flexible, in that:
- in order for a proxy vote to be effective, the allocated proxy must actually attend the meeting; and
- although a proxy form may direct the proxy to vote in a certain way, the vote is still technically cast by the proxy, and not by the member.
Further, if the proxy is also a member, there can be legal questions over whether the proxy is permitted to cast both his or her own vote, and the proxy vote, in certain scenarios. This depends on both the wording of the constitution, and the way in which the vote is conducted. Electronic direct voting does not give rise to this uncertainty.
Online Direct Voting
Allowing for online direct voting may be beneficial for not-for-profits, especially if they have members who are interested in the governance of the organisation, but find it difficult to attend meetings.
There are several types of resolutions, applicable to both incorporated associations and public companies limited by guarantee, which must be passed by a meeting. The advantage of direct voting, when compared to electronic ballots, is that the resolution can still occur at a meeting, while allowing members who cannot attend to easily participate.
Clauses in constitutions allowing for direct online voting need to be reasonably complex. Some of the issues that must be made clear include the following:
- the acceptable online formats for the direct votes;
- the timeframe by which direct votes must be lodged;
- the effect of direct votes on any proxies who are appointed; and
- whether direct votes count towards determining whether a quorum has been reached.
If not-for-profits have decided to allow for electronic direct voting in their constitutions, or if they are unsure whether their current constitutions allow for direct electronic voting, then they should seek legal advice.
This article was written by John Vaughan-Williams, Lawyer at Mills Oakley and can be contacted on email@example.com.