Corporations - Directors: Statutory Requirements and Role (HEAVILY TESTED) Flashcards
Board of Directors - Statutory Requirements
Director must be human adult.
Directors need not be shareholders.
Only need 1 director on board.
Electing Directors
Initial directors are usually named in articles.
Shareholders elect directors. That’s the number one thing that shareholders do.
Staggered Board: the entire board is elected every year UNLESS there is a STAGGERED BOARD dividing it such that 1/2 or 1/3 of the board is elected each year.
Removal
Removal is possible if the votes cast in favor of removal exceed votes cast against.
On what grounds can shareholders remove a director? On any basis, with or without cause. Shareholders hire and fire directors.
Vacancies - If a director quits suddenly, usually the board or the shareholders will select a replacement. If the shareholders created the vacancy by removing a director, the shareholders generally must select the replacement.
Board Action - Board Must Act as a Group
Methods of Board Action:
1) With unanimous written consent
2) At a meeting
Board must act as a group. An individual director is not an agent of the corp. Individual directors have no authority to speak for or bind the corp. Directors must act as a group even if there’s only one director. Must take an act only in one way: 1) unanimous written agreement OR 2) at a meeting, which must satisfy quorum and voting requirements.
Board Action - Acting at a Meeting
Types of Meetings:
- if there’s a board meeting, it’s either a “regular” board meeting or “special” board meeting. For regular meetings, notice is not required. For special meetings, at least 2 days written notice of date, time, and place is required.
Failure to Give Notice - failure to give notice means whatever happened at the meeting is voidable (or even void) unless the directors who were not notified waive the notice defect. Can do this: 1) in writing anytime, or 2) by attending the meeting without objecting at the outset
Proxies - Directors CANNOT give proxies or enter voting agreements for how they will vote as directors. That’s void because directors owe the corp non-delegable fiduciary duties. This is different from shareholders who CAN vote by proxy and enter voting agreements.
Quorum - For any meeting of board, must have a quorum (that’s a majority of all directors, unless the bylaws say otherwise. A quorum can be no fewer than 1/3 of the board members). Without a quorum, the board can’t act.
Approval of Action - If a quorum is present at a meeting, passing a resolution requires only a majority vote of those PRESENT. If there are 9 directors, at least 5 must attend to make a quorum. If 5 directors attend, at least 3 must vote for it.
Broken Quorum - Quorum can be broken if people leave. Once a quorum is no longer present, board can’t act. This is DIFFERENT from shareholders.
Board Action - Action by Unanimous Written Consent
Any action required to be taken by the directors at a formal meeting may be taken by unanimous consent, in writing, without a meeting.
