|
Board of Directors
Duties
Powers and Duties of Board of Directors
PREPARED BY THE LAW OFFICES OF:
RAPKIN, GITLIN & MOSER
(SEE END OF DOCUMENT FOR ADDRESS AND TELEPHONE NUMBER.)
The association's CC&Rs and Bylaws set forth the general
powers and duties of the Board and the specific limitations
upon the Board's powers. Boards of Directors generally have
the power to:
-
Adopt and publish "Rules and Regulations" (R&Rs)
to protect the interests of the homeowners by governing
the use of the common area and facilities and also regulating
the personal conduct of the members, family, guests and
tenants and to establish penalties for violation of the
association's Rules and Regulations.
-
Suspend the voting rights and right to use of the recreational
facilities of a Member during any period in which such
Member shall be in default in the payment of any assessment
levied by the Association. Such rights may also be suspended
after notice and hearings, for a period not to exceed
thirty (30) days for infraction of published rules and
regulations;
-
Exercise for the Association all powers, duties, and
authority vested in or delegated to this Association and
not reserved to the Membership by other provisions of
these By-Laws, the Articles of Incorporation or the Declaration;
-
Declare the office of a Member of the Board of Directors
to be vacant in the event such Member shall be absent
from three (3) consecutive regular meetings of the Board
of Directors;
-
Employ a manager, independent contractor or such employees
as they deem necessary, and to prescribe their duties;
-
Contract and pay for maintenance, gardening, utilities,
materials and supplies and services relating to the Common
Area and/or facility, and to employ personnel reasonably
necessary for the operation of the same, including lawyers
and accountants where appropriate; provided, however,
that no contract shall be for a period longer than one
(1) year, unless it contains a thirty (30) day right of
cancellation on behalf of the Association, in which event
it may be for a longer period of time;
-
Pay taxes and special assessments which are or would
become a lien on the Project or Common Area;
-
Where appropriate (and subject to the terms of the Declaration
regarding destruction) , to pay for reconstruction of
any portion or portions of the Project damaged or destroyed
which are to be rebuilt; and
-
Enter into any Unit when necessary in connection with
maintenance or construction for which, the Board of Directors
is responsible.
Section 2. Duties of the Board of Directors It is
generally the duty of the Board of Directors to:
-
Keep complete minutes and records of all Board actions
and corporate matters and present them to the members
of the association at the annual meetings.
-
Supervise the officers, agents and employees of the
Association and to see that their duties are properly
performed;
-
Set the amount of the annual assessment (dues) against
each unit and to collect the assessmnet(s)
-
Purchase and maintain adequate liability and hazard
insurance on property owned by the association;
-
Maintain the common areas
OFFICES OF THE BOARD OF DIRECTORS AND THEIR DUTIES
The officers of the Board of Directors are generally a president,
vice-president, secretary, treasurer and member at large.
1. Election of Officers The election of officers generally
takes place at the first meeting of the Board of Directors
following each annual meeting of the Members.
2. Term of Office for Board Members Officers of an association
are generally elected for one term of one year.
3. Special Appointments The Board may appoint other officers
as the affairs of the association may require. Each person
appopinted will hold the office until the task is completed
or released by the Board. Said person will have limited authority
and perform duties as the Board may, from time to time, determine.
4. Resignation and Removal Any officer may generally be removed
from office at any time with or without cause by the Board.
Also, any officer may resign at any time by giving written
notice to the Board, the president or the secretary. This
resignation takes effect on the date indicated or at any later
time as specified on the notice. Acceptance of such resignation
is not necessary to make it effective.
5. Vacancies. A vacancy in any office may be filled by appointment
by the Board. The officer appointed to fill this vacancy will
serve for the remainder of the term of the officer he replaces
(unexpired term).
6. Multiple Offices The offices of secretary and treasurer
are often held by the same person. except for very small associations,
however, this practice is not recommended.
DUTIES OF OFFICERS
1. President- The president of the Board presides at
all meetings of the Board of Directors. The president is ultimatly
responsible to see that orders and resolutions of the Board
of Directors are carried out. The president generally signs
all contracts and other written instruments and co-signs all
checks and promissory notes.
2. Vice-President- The vice-president acts in the place
and stead of the president in the event of his absence and
exercises other duties as may be required of him by the Board.
3. Secretary -The secretary record the votes and keeps
the minutes of all meetings and proceedings of the Board and
of the Members. The secretary also signs all contracts and
other instruments executed in the name of or on behalf of
the association. The secretary is keeper of the corporate
seal of the Association and affix it on all papers requiring
the seal. The secretary also serves or causes to be served,
notice of meetings of the Board and of the Members; keeps
appropriate current records showing the Members of the Association
together with their address, and performs other duties as
required by the Board.
4. Treasurer- The treasurer receives and deposits in
appropriate bank accounts all monies of the Association and
disburses such funds as directed by resolution of the Board
of Directors. The treasurer signs all checks of the association;
is keeper of the books of account; cause an annual audit of
the Association books to be made by a public accountant at
the completion of each fiscal year; and prepares an annual
budget and a statement of income and expenditures to be presented
to the membership in compliance with the civil code, and delivers
a copy of each to the Members.
5. Member at Large- The member at large is the fifth
member of the Board of Directors and is a voting member of
the board. The member at large fulfills duties as assigned
by the President or by the board.
MISCELLANEOUS POWERS AND DUTIES
The CC&Rs and Bylaws generally provide that the Board
cannot enter into contracts which have a term in excess of
one year, sell association property, incur aggregate expenditures
exceeding a specific limit (for example 5% of the estimated
common expenses), pay Board members, and may also include
instructions pertaining to filling a vacancy on the Board.
Members must vote on amending theCC&Rs and By-Laws, pledging
assessment rights, and deciding to reconstruct the common
area after damage or destruction. The Bylaws generally give
the directors the right to make all decisions, except those
specifically reserved to members by the CC&Rs, Bylaws,
Articles, and California Nonprofit Law. unless specifically
reserved to the owners, all day-to-day decisions are made
by the Board, just as the officers (and not the shareholders)
of a business would make the daily decisions for the business.
Further support for the above is set forth in Civil Code Section
1363.05, which part of the Davis Sterling Common Interest
Development Act, gives the Board the right to convene to executive
litigation, contracts, personnel (property managers, contractors,
etc.), and violations by individual owners (member discipline).
The Board alone determines if litigation should occur. A copy
of that Section is enclosed.
Additionally, the California Corporations Code Section 7210
provides that the activities and affairs of a corporation
shall be conducted by or under the direction of the Board.
A copy of that Section is enclosed.
Also enclosed are excerpts from legal reference books which
state some of the basic functions which the Board performs.
one article was taken from the California condominium Handbook
2d. written by John Paul Hanna. The other article was taken
from Corporations, "California Practice Guide",
by C. Hugh Friedman.
With respect to adoption and enforcement of rules and regulations,
the CC&Rs generally give the Board of Directors the power
to:
"adopt, amend and repeal such rules and regulations as
it deems reasonable . . . which may include a system of fines'
and penalties enforceable as Special Assessments. The Association
Rules shall govern matters in furtherance of the purposes
of the Association and other matters specified in this Declaration,
including, without limitation, the conduct of persons within
the Project and the use of the Common Area; provided, however,
that the Association Rules may not discriminate among Owners
. . . and shall not be inconsistent with this Declaration,
the Articles or Bylaws. . . .11
The Rules and Regulations, as well as any amendment made to
them, must be delivered to all owners in order to be able
to enforce them. The same is true of a system of fines. The
Bylaws generally provide the guidelines relating to a system
of fines and notices and hearing procedures. If the Rules
and Regulations are reasonably related to furthering the best
interests of the Association Members and they are properly
distributed to all owners, they are as binding as the CCaRs.
OPEN MEETING ACT
CIVIL CODE SECTION 1363.05 (NEW SECTION)
1363-05. (a) This section shall be known and may be cited
as the Common Interest Development Open Meeting Act.
(b) Any member of the association may attend meetings of the
board of directors of the association, except when the board
relating to the formation of contracts with third parties,
member discipline, or Personnel matters. The board of directors
by a member who may be subject to a fine, penalty, or other
form of discipline, and the member shall be entitled to attend
noted in the minutes of the board of directors.
(d) The minutes, minutes proposed for adoption that are marked
to indicate draft status, or a summary of the minutes, of
any meeting of the board of directors of an association, other
30 days of the meeting. The minutes, proposed minutes, or
summary minutes shall be distributed to any member of the
association upon request and upon reimbursement of the association's
costs for making that distribution.
(e) Members of the association shall be notified in writing
at the time that the pro forma budget required in Section
1365 is distributed, or at the time of any general mailing
to the entire membership of the association, of their right
to have copies of the minutes of meetings of the board of
directors, and how and where those minutes may be obtained.
(f) As used in this section, "meeting" includes
any congregation of a majority of the members of the board
at the same time and place to hear, discuss, or deliberate
upon any item of business scheduled to be heard by the board,
(g) Unless the time and place of meeting is fixed by the bylaws,
or unless by bylaws provide for a longer period of notice,
members shall be given notice of the time and place of a meeting
as defined in subdivision (f), except for an emergency meeting,
at least four days prior to the meeting. Notice may be given
by posting the notice in a prominent place or places within
the common area, by man or delivery of the notice to each
unit in the development or by newsletter or similar means
of communication. (h) An emergency meeting of the board may
be called by the president of the association, or by any two
members of the governing body other than the president, if
there are circumstances that could not have been reasonably
foreseen which require immediate attention and possible action
by the board, and which of necessity make it impracticable
to provide notice as required by this section.
CORPORATIONS CODE
Chapter 2 Directors and Management
Article 1 General Provisions
§7210 Exercise of corporate powers; Delegation of management
§7211 Notice and calling of meeting §7212Creation
of committees; Umits
§7213 Corporate officers
§7214 Unauthorized acts of officers
§7215 Bylaws and minutes as evidence
§7210 Exercise of corporate power, Delegation of management:
Subject to the provisions of this part and any limitations
in the articles or bylaws relating to action required to be
approvedby the members (Section 5034), or by a majority of
all members (Section 5033), the activities and affairs of
a corporation shall be conducted and all corporate powers
shall be exercised by or under the direction of the board.
The board may delegate the management of the activities of
the corporation to any person or persons, management company,
or committee however composed, provided that the activities
and affairs of the corporation shall be managed and all corporate
powers shall be exercised under the ultimate direction of
the board.
CALIFORNIA CONDOMINIUM HANDBOOK
§ 14.11. Management of Association After Turnover of
Control When the association assumes management control of
the project, and the board of directors is no longer controlled
by developer, the directors must first organize matters so
that they can properly carry out their duties. If the project
is small, the directors can work together as a body in managing
the affairs of the association. In a larger project the board
will establish an executive committee and certain other committees
which will have responsibility for carrying out certain functions.
The basic functions which the board must perform, some or
all of which may be delegated to committees, are as follows:
-
Preparing annual budget (see § 14.13);
-
Setting assessments (see § 14.21);
-
Obtaining insurance (see § 14.79);
-
Maintening common areas (see § 14.94);
-
Hiring personnel;
-
Implementing maintenance contract (see §§
14.88-89, 14.94);
-
Establishing house rules;
-
Planning social events;
-
Managing fiscal affairs;
-
Preparing periodic and annual reports (see § 13.39).
§ 1 1. Obtaining legal and accounting services.
14.12. Committees
The board may by resolution adopted by a majority of the number
of directors then in office, provided a quorum is present,
create committees to serve at the pleasure of the board. The
committees shall consist of two or more directors to serve
at the pleasure of the board. The bylaws may authorize one
or more committees, each consisting of two or more directors.
Any such committees, to the extent provided in the resolution
of the board or in the bylaws, shall have the full authority
of the board except with respect to certain matters. See §
14.85. The board may also appoint committees composed of directors,
or nondirectors, or both, provided the bylaws so allow.
Corp. Code §§ 7210, 7212. See Form 6 (condominium
bylaws), Article IX.
c.[2:40] Management and control:
Normally, management and control is vested in the board of
directors, elected by the shareholders of the corporation.
The directors generally make policy and major decisions but
do not individually represent the corporation in dealing with
third persons. Rather, such dealings are conducted through
officers and employees. to whom authority is delegated by
the directors.
(1) [2:41) The same persons may be stockholders, directors
and officers of the corporation (and usually are in small
corporations). Although the shareholders elect the board of
directors, they do not directly control the board's activities
or decisions.
d. [2:42) Formalities:
A corporation can be created only by substantial compliance
with the General Corporation Law, which requires filing of
articles of incorporation containing certain essential provisions,
prepayment of certain fees, etc. (See $4:1 ff.)
e. [2:431 Duration:
As a separate legal entity the corporation is capable of
continuing indefinitely. Its existence is not affected by
death or incapacity of its shareholders, officers or directors,
or by transfer of its shares from one person to another.
f. [2:43-1) Constitutional protections
Corporationsmay exercise some-but not all--of the constitutional
protections granted to natural persons.
B. SHAREHOLDER MEETINGS AND ACTIONS
[6:6] Corporations normally function through their
boards odirectors rather than their shareholders. But there
are a number matters upon which shareholder action or approval
is required or permitted (see below).
1 .[6:7] What Constitutes Shareholder Action:
On matters as to which share holder action is either"required"or"permitted,"the
applicable statutes require "approval by share holders"
or "approval by the outstanding shares." These are
important terms and have different statutory definitions:
b. [6:18] Election to fill vacancy on board:
Vacancies on the board of directors resulting from resignation,
death, etc. are normally filled by appointments by the
remaining directors. But if they fail to act, the shareholders
are empowered to fill such vacancies on the board. [Corps-C.
§305(b)] In such cases, shareholders may act by majority
vote at a duly held meeting, or by written consent of a majority
of the outstanding voting shares. [Corps.C. §305(b)]
(1) 16:18.1) Compare-vacancies resulting from removal of
directors:
Vacancies on the board resulting from removal of one or
more directors during their term (seeT6:234) cannot be
filled by the remaining directors, unless the articles or
bylaws adopted by the shareholders specifically authorize
them to do so. Such vacancies can only be filled by "approval
of the shareholders" (116:8) or by unanimous written
consent of all outstanding shares entitled to vote. [Corps.C.
§§305, 603(d)]
(2) [6:19] Special election if majority of board appointed
If the number of vacancies occurring during a year is so
large that a majority in office at any time was appointed
by the other directors, rather than elected by the shareholders,
the holders of 5% or more of the shares have the right to
call a special meeting of shareholders to elect a new
board of directors. (Alternatively, such shareholders may
apply to the superior court for an order calling a special
shareholders'meeting for this purpose.) [Corps.C. §305(c)]
c. [6:20] Removal of directors:
The shareholders also have the power to remove any or all
of the directors from office at any time - with or without
cause. Such removal requires "approval by outstanding
shares; i.e., not simply a majority of those present at
a shareholders'meeting, but a majority of all shares outstanding
entitled to vote for directors (Corps.C. §1 52, above).
[Corps.C. §303(a); see 116:235]
(1) [6:21] Limitation to protect cumulative voting rights:
But the majority cannot oust from office a director who is
supported by shareholders entitled to representation on the
board under cumulative voting: i.e., unless the entire
board is removed (necessitating election of a new board),
no individual director can be removed if the shares voting
against removal would have been sufficient to elect him or
her using cumulative voting. [Corps.C. §303(a)(1); and
see T16:14 1] This is so even in the case of "listed"
corporations that have eliminated cumulative voting and established
staggered terms for directors. [Corps.C. §303(a)(3);
and see $3:148-148.2]
(2) [6:221 Limitation to protect class voting rights:
Likewise, where there is 'class voting" (i.e., a class
or series of shares entitled to elect one or more directors;
see 13:155),a director representing a particular class
or series cannot be removed except by the applicable vote
of shares of that class or series. [Corps.C. §303(a)(2)]
d. [6:23] Amendment of articles:
"Approval by the outstanding shares" (Corps.C.
§1 52, @6:9) is required to amend the articles
of incorporation. [Corps.C. §902(a); see 18:54]
(1) [6:24) Classorseriesaffectedbyamendment:
In addition, if any class or series of shares would be affected
thereby, the proposed amendment must be approved by a majority
of that class or series. (This applies whether the
change is for better or worse, and even if the class or series
is not otherwise entitled to vote!) (Corps.C. §903; see
118:56]
(2) [6:25] Statutes requiring supermajority approval:
By statute, more than a simple majority approval is required
for certain article amendments:
-
[6:26] Except for mutual water companies, unanimous
approval by the holders of all classes of shares outstanding
is required to convert to close corporation or nonprofit
status; or to make the shares assessable. [Corps.C. §§158(b),
904, 91 1; see 118:59]
-
[6:26] Approval by two-thirds of each class of
shares is required for articles amendments that would
revoke close corporation status, or change the authorized
maximum shareholders in a close corporation. (The articles,
however, may deny a vote to any class or authorize amendments
by a lesser percentage, but not less than a majority of
the outstanding shares.) [Corps.C. § 1 58@c); see
118:62]
-
[6:27.1) If the amendment imposes supermajority approval
requirements for a corporation with 100 or more
shareholders (subject to exemption for certain "nonreporting"corporations
with multiple classes of stock), it must be approved by
such supermajority, [Corps.C. §71 0; see `114:1
15.2 ff I
e. [6:28) Adoption, amendment or repeal of bylaws:
Usually, the original bylaws are adopted by the incorporators
or directors before any shares are issued. Once shares are
issued, bylaws can be adopted, amended or repealed either
by the board of directors or by 'approval of the outstanding
shares" (Corps.C. §1 52, 116:9). [Corps.C. §21
1, see '114:177]
(1) [6:29) Limitation--changing size of board:
Where the number of directors is not specified in the articles,
it will have to be specified in the bylaws (Corps.C. §212(a);
see '114:179). After shares are issued, such bylaws
cannot be changed by the directors alone. i.e., amendments
changing the number of directors require approval of the outstanding
shares."[Corps.C. §212(a); see '114:182]
[6:30] Further, to preserve the cumulative voting rights of
minority shareholders, a bylaw reducing the number
of directors to less than 5 requires more than a simple
majority approval: Approval is required by at least 83 113%
of the outstanding voting shares. (Thus, shareholders with
more than 16213% of the voting shares are protected
from losing representation on the board.) [Corps.C. §212(a)]
(2) [6:31) Compare-shareholder amendments vs.amendments
by directors:
Other than the limitation against reducing the size of the
board (above), there are virtually no restrictions on
the shareholders'power to adopt or change the bylaws. In contrast,
the power of the board of directors to change the bylaws may
be limited by the articles or bylaws themselves; see 114:181.
[Corps.C. §21 1]
f. [6:32) Other fundamental changes in corporate structure:
Approval by the outstanding shares" (Corps.C. §1
52, Tt6:9) is required to effect certain other fundamental
changes in the corporate structure, including:
· [6:33] Sale or othertransfer of all or substantially
all of the corporation's assets other than in the ordinary
course of business; [Corps.C. §1 001; see '118:425]
· [6:34] Mergers or reorganizations of corporation;
[Corps.C. §§1 200, 1201; see $8.264]
· [6:35) Voluntarydissolutions.[Corps.C.§1900;see
$8.477]
(1) [6:36] Compare-close corporations:
By written agreement, the shareholders of a close corporation
may generally confer upon its management the power to effect
such transactions without approval by the directors
or shareholders. [Corps.C. §300(b), (c);
But there are specified circumstances under which shareholder
approval may be required. (E.g., dissolution, reorganization;
see 13.259.)
g. [6:37] Transactions between corporation and officers
or directors:
To limit potential breaches of fiduciary duty to the shareholders,
their approval is required for various transactions in which
the directors or officers have financial interests:
a.[6:8) "Approval by shareholders":
When the Code uses this term, it means the matter must be
approved or ratified by vote of a majority (or any greater
percentage required by the articles or particular statutes)
of the shares represented and voting at a shareholders'meeting
at which a quorum is present. The shares voting for approval
must also constitute a majority of the quorum (see 116:116).
[Corps. C. § 1 53]
b.[6:9] "Approval by outstanding shares":
When the Code uses this term, it means approval at a shareholders'
meeting by a majority (or any greater percentage required
by the articles or particular statutes) of all outstanding
shares in each class or series entitled to vote-which, of
course, may be greater than those present and voting at the
meeting. [Corps.C. §152]
(1) (6:10] Compare-ratification?
While §-153 "aproval by shareholders" (above)
expressly includes after-the-fact ratification, §152"
approval byoutstanding shares" does not. There is no
apparent reason for this distinction and, presumably, §
1 52'approval" should be construed to include ratification
as well.
c. [6:11] Compare-action by written consent:
Corporate action may also be 'approved by the shareholders'or
.approved by the outstanding shares'by written consent. In
other words, shareholders can act without a meeting (see
116:154). However, shareholder action by written consent always
requires approval by a majority (or greater percentage required
by the articles or statutes) of all shares entitled
to vote. (Corps. C. § 1 94- . vote' includes 'written
consent'; Corps.C. §§ 1 53, 603(a); see 116:154
ff.)
(1) [6:11a] Limitation---election of directors:
Shareholders cannot elect directors without a meeting except
by unanimous written consent (unless to fill a vacancy
not resulting from removal, in which case the written consent
of a majority of the outstanding shares suff ices; see
'116:18 ff.). [Corps.C. §§305(b), 603(d);see
116:158 ff. ]
d. [6:11.1] Shares disqualified from voting:
Whenever shares are disqualified from voting on any matter,
they are not counted in determining a quorum and may not vote
at any meeting to approve such matter. [Corps.C. §1 121]
2. [6:121 Matters involving Shareholder Action:
The only action required to be taken by the shareholders
on a regular basis is the annual election of directors
(Corps.C. §600(b); below).
Otherwise, shareholder action is relatively infrequent. Shareholders
may initiate action without prior board action (e.g., removal
of directors, or adopting or amending bylaws). But, normally,
shareholder action occurs only after the board of directors
has taken or proposed certain major actions for which shareholder
approval is required as a matter of law.
a. [6:13] Annual election of directors:
By statute, shareholders are required to meet annually
for the election of directors, on a date and at a time specified
in the bylaws. [Corps.C. §600(b); see 16:48] (Exception:
The articles may provide for less than one-year director terms
to permit an interim election pursuant to a 'voting
shift"; see 13:114 ff., 4:65.)
All directors stand for election at each annual meeting; i.e.,
there are no staggered terms. (Exception:'Listed" corporations
may provide for staggered terms in their articles or bylaws;
Corps. C. §301.5, see 14:77a ff.) But the articles
may provide for "class voting"-one or more directors
elected exclusively by holders of shares of a certain class
or series. [Corps.C. §301; see '113:155]
Such election normally takes place at a formal meeting; but
as discussed below, it may also be accomplished without a
meeting, by unanimous written consent of all shareholders
entitled to vote for directors. [Corps.C. §603(a),(d))
(1)[6:13.1] Director qualifications:
While California corporate law imposes no qualifications
for directors, the bylaws may do so (e.g., requirement that
director also be shareholder; see '114:78, 4:278). [Cf.
Corps.C. §318- Secretary of State registry of 'distinguished
women and minorities"available to serve on corporate
boards of directors]
(2)(6:14) Election at shareholders' meeting:
The election of directors at a shareholders'meeting requires
,"approval by shareholders"; i.e., the vote of a
majority of the shares represented and voting at the
meeting (Corps.C. § 1 53, above).
(a) [6:15] Cumulative voting limitation:
If cumulative voting for directors is requested, election
requires whatever number of shares is derived using the cumulative
voting formula. [Corps.C. §708(b@ see $3:151]
(However, 'listed" corporations may eliminate cumulative
voting for directors; see '114:88.13 ff.)
(3)(6:161) Election by written consent:
Unless prohibited by the articles, directors can also be
elected without any meeting, by shareholder written
consents. But this method of election requires the unanimous
written consent of all shares entitled to vote for directors.
[Corps.C. §603(d); see 16:158]
(1) [6:381 Loans or guarantees:
Corporate loans, or corporate guarantees of loans made by
third parties, require approval by a "majority of shareholders
entitled to act" where they are made to:
-
Any officer or director (or of its "parent
corporation," as defined in Corps.C. §1 75);
[Corps.C. §315(a),(c); see 16.,473 ff.]
-
Any other borrower, where the loan is nonrecourseand
securedbyshares of thecorporation or its parent
... unless the loan is "otherwise adequately secured,"
or is made pursuant to an employee stock purchase or option
plan (see below). [Corps- C. §315(c),(f)(1); see
16:483]
(a) [6:39]Shareholder approval requirements: See 6:473
ff.
(b) [6:40] Exceptions: There are several statutory
exceptions to these requirements:
· Advances for expenses: See Corps.C. §315(d);
discussed 116:478.
· Employee stock purchase loans: See Corps.C.
§§315(f)(1), 408; discussed 16:475.
-
Loans from other employee benefit plans: See Corps.C.
§315(a); discussed 16:475. 1.
-
Certain other loan transactions: See Corps.C. §315(f)(1),(3);
discussed 16.478. 1. [6:411 Reserved.
(c) [6:42] Compare-corporations having at least 100 shareholders:
Greater flexibility is allowed to corporations having 100
or more shareholders: Shareholder approval for loans or loan
guarantees to officers and directors is not required if:
-
A duly adopted bylaw authorizes the board alone to make
such loans and guarantees; and
-
The board does so without counting the vote of the interested
officer ordirector; and · The board determines that
the loan or guarantee can reasonably be expected to benefit
the corporation. [Corps.C. §315(b); 16:4761
(2) [6:43] "Interested" director contracts:
Contracts or transactions in which a director has a material,
financial interest (direct or indirect) may be validated either
by:
-
Full disclosure to and approval by a disinterested board
of directors (see 16:296); or
-
"Approvalof theshareholders" (Corps.C.§153,
16.8) excluding any shares held by the interested
director (16:294). [Corps.C. §310(a)(1)]
(a) [6:44] Application: Thisappliestosalaryand other compensation
arrangements for the officers and directors for their services
on behalf of the corporation. It also applies to the adoption
of corporate stock purchase plans, stock option plans, and
other employee benefit plans covering the officers
and di rectors. (See 16:432.)
Cross-refer"Interested"directortrinsactions are
discussed in greater detail at 16:285 ff. [6:45] Reserved.
3) [6:46] indemnification of officers, directors:
An employee or agent of the corporation may be indemnified
for liability and expenses incurred in litigation based on
his or her performance of duties for the corporation. Such
indemnification may be made either by the board of
directors, or by "approval of the shareholders"
(Corps.C. §153, 16.8), excluding any shares
owned by the person to be indemnified. (Alternatively, indemnification
may be ordered by the court in which a proceeding against
such agent or employee is pending; see 16:463.) [Corps.C.
§317(e))
· Cross-refer Indemnification is discussed in greater
detail at 16:436 ff.
3. Shareholder Action at Meetings
a. [6:47] When meetings required:
A shareholders' meetIng is required once a year for the election
of directors (annual meetings); and at any other time a meeting
has been properly called (special meetings).
(1)[6:48] Annual meeting for election of directors:
Every California corporation is required to hold an annual
meeting of shareholders to elect directors. Such meeting must
be held on a date and at a time '.stated in -or fixed in accordance
with the bylaws ...[Corps.C. §600(b)]
· [6:48.1 Joint shareholder/board meeting:
If the shareholders and directors are one and the same (or
nearly so), it may be convenient for them to notice and hold
ajoint annual meeting.
LAW OFFICES
RAPKIN, GITLIN & MOSER
"This Article is intended as a summary
and for informational purposes only. The article is based
upon California Law. It should not be construed as legal advice
or reprinted without the permission of Rapkin, Gitlin &
Moser."
|
