CCBJ January - February 2021

Page 21

It Starts with Good Governance – Reminders for the “New Normal”

For example, how much information has been flowing to

Joe Cancilla, of counsel with McNees, addresses

timely reminders of basic corporate governance issues that he recommends keeping top of mind.

those holding fiduciary duties? And through what channel has it been flowing? For larger public companies, scheduling formal Board meetings, providing a sufficient amount of information to support detailed agenda items, taking minutes of the meetings, and providing regular updates on

Hopefully, there are more months behind us rather than ahead of us in dealing with COVID-19. As the world has settled into some version of normalcy while facing this global pandemic, the volume of information pushed to companies from its advisors has diminished from the initial shutdown chaos of March/April 2020. But that does not mean that the potential issues for businesses have reduced, nor does it alter some fundamental management concepts that the persons operating and managing a business must follow. So, some simple reminders of basic corporate governance issues, perhaps with some practical advice, might be in order. As we know, the business and affairs of a corporation are managed by its directors. With that come the fiduciary duties of directors to act in the shareholders’ best interests, and, in some jurisdictions, perhaps the best interests of other constituencies as well. Most public company executives and directors are well aware of their responsibilities in this area. For many smaller private companies, the limited liability company (LLC) is a popular vehicle used to organize and manage a business. From a governance perspective, similar fiduciary duties, although perhaps a bit more flexible, apply to the persons managing the LLC and should be considered as the business adapts and responds to the current climate. Regardless of the size and structure of the business and whether it is publicly traded or privately held, the same general advice holds in thinking through and being alert to changes, both large and small, in the operation of the business in response to COVID-19.

the business in an ad-hoc manner from the CEO and CFO is commonplace. For most if not all such companies, the number of meetings and volume of information flowing to its directors has likely increased significantly in 2020. However, this practice may not be second nature to the smaller private companies. It is worth considering how the governance profile of the business would appear to someone on the outside looking in. For example, if your business is looking to refinance existing indebtedness or perhaps obtain new debt or equity financing, the number and quality of potential sources may be impacted by how well the corporate books and records have been maintained in 2020. So the practical advice is that if your business has not been very structured and formal in this area, it might be worthwhile to direct some resources to shore up this cornerstone of corporate governance. As part of this effort, consider when the corporate organizational documents were last reviewed. Now might be a good time to ensure, for example, that actually holding a Board meeting on Microsoft Teams or Zoom is permitted in your jurisdiction and by your organizational documents (State statute, Charter, Bylaws and/or LLC Operating Agreement). Similarly, consider how well each individual can at least hear and hopefully see the presentation materials during a meeting. Be sensitive to confidentiality issues, as well. If there is significant background noise on a call, it might be worthwhile from a governance perspective to dig deeper into where a director is physically sitting and CORPORATE COUNSEL BUSINESS JOURNAL

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