A director or the entire board may be removed (aka “recalled”) from office under a number of circumstances. The removal may be performed by the board, the membership, or a court of law. Removal of a director is distinct from the resignation of a director.
Removal by Court
A superior court has the authority to remove any director in response to the director’s “fraudulent or dishonest acts or gross abuse of authority or discretion with reference to the corporation.” (Corp. Code § 7223.) In addition, where a director has been declared to be of “unsound mind by a final order of court,” or has been convicted of a felony, the board has the authority to declare the director’s seat vacant. (Corp. Code § 7221(a).)
Removal by Board
Some sets of bylaws or CC&Rs may specify circumstances under which an individual director may be removed by the majority vote of the remaining directors then in office. Those circumstances typically involve situations where the director to be removed “fails or ceases to meet any required qualification that was in effect at the beginning of the director’s current term of office.” (Corp. Code § 7221(b); See also “Director Qualifications.”)
Removal by Membership
In general, an association’s membership has the authority to remove any or all directors with or without cause. (Corp. Code § 7222(a).) The membership approval requirements applicable to such removal actions may vary greatly depending upon whether the entire board is to be removed as opposed to an individual director or directors comprising less than the entire board.
Removal of the entire board is often straightforward because any cumulative voting issues are not factored into the voting requirements. The procedural issues which must be considered are (1) the amount of members whom are entitled to vote in the recall, and (2) the size of the association.
- For small associations (those with fewer than 50 members) the removal must be approved by the affirmative vote of a majority of all members entitled to vote. (Corp. Code § 7222(a)(1).)
- For large associations (those with 50 or more members) the removal must be approved by the affirmative vote of a majority of the votes represented and voting at a duly held meeting at which a quorum is present, with the affirmative votes also constituting a majority of the required quorum. (Corp. Code § 7222(a)(2).)
Once a petition for removal has been submitted to the board, the existing board, on behalf of the association, sets the removal election date, distributes the required balloting materials, and conducts the removal meeting. (See “Special Meetings of Members” and “Balloting Requirements & Procedures.”)
Individual Director or Directors
In circumstances where an association’s CC&Rs or bylaws provide for cumulative voting, removing any number of directors comprising less than the entire board is often far more complex and difficult than removing the entire board. In such circumstances, the required process is confusing and there are differing opinions as to how it should ultimately work. One opinion is as follows:
Step 1 – Voting to Approve Removal
The membership first votes by secret ballot to remove the director. The approval requirements are governed by the size of the association and the number of members entitled to vote. (Corp. Code § 7222(a).)
Step 2 – Voting to Block Removal
If the required number of members approve the removal of the director, the cumulative voting requirement allows for the removal to still be blocked pursuant to Corporations Code Section 7222(b)(1):
“In a corporation in which the articles or bylaws authorize members to cumulate their votes…no director may be removed (unless the entire board is removed) when the votes cast against removal, or not consenting in writing to the removal, would be sufficient to elect the director if voted cumulatively at an election at which the same total number of votes were cast (or, if the action is taken by written ballot, all memberships entitled to vote were voted) and the entire number of directors authorized at the time of the director’s most recent election were then being elected.”
Though the wording of this language is poorly written, the following formula illustrates a popular interpretation of its requirements and effect:
V > (1/[D+1])*M
V = # of votes needed to block the recall
M = total # of members eligible to vote
D = total # of directors authorized in the bylaws
Members Whom Do Not Vote
An unsettled question in this area involves the extent to which those members whom do not vote in the removal election ultimately affect the formula for blocking the removal of an individual director. This question focuses around the following language in Corporations Code Section 7222(b)(1): “…no director may be removed…when the votes cast against removal, or not consenting in writing to the removal, would be sufficient to elect the director if voted cumulatively…” (Emphasis added.) To the extent that any members who do not vote are treated as “not consenting in writing to the removal,” it would make blocking the removal of a director easier.
Another unsettled question in this area involves the extent to which directors that serve staggered terms ultimately affect the formula required to block the removal of an individual director. This question surfaces around the following language in Corporations Code Section 7222(b)(1): “…no director may be removed…when the votes cast against removal…would be sufficient to elect the director if voted cumulatively at an election…and the entire number of directors authorized at the time of the director’s most recent election were then being elected.” (Emphasis added.) If the variable “D” of the above formula is based only upon the number of directors up for election at the prior election, and not the total number of directors authorized in the bylaws, it would make the blocking the removal of a director more difficult.
Replacing Removed Directors
Unless otherwise stated in the association’s articles or bylaws, the board does not have the authority to replace a director that has been removed by the membership. (Corp. Code § 7224(a); See also “Filling Vacancies on the Board.”)
Designated directors may not be recalled without the approval of the designator. (Corp. Code § 7222(f).) A “designated director” is not one appointed by the board to fill a vacancy, but rather a director who is designated in the articles or bylaws. (Corp. Code § 5220(d).) Designated directors serve until their term, as specified in the articles or bylaws, expires, or until they resign, die or are declared “to be of unsound mind” by an order of the court pursuant to Corporations Code Section 7221(a). Directors appointed to serve by a court pursuant to Corporations Code Section 5220(e) are similarly shielded from membership recall without the court’s approval.