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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.

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