GaryW11 (New York)
Posts: 19
Posts: 19
Posted:
We had a board member add one extra board position to the election this year which goes against our bylaws. This was not realized until after the votes were cast. What can be done?
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Added Board Members without 2/3 Vote
Started by GaryW11 • 20 replies • 1600 views
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RichardP13 (California)
Posts: 3,868
Posts: 3,868
Posted:
Quote:
Posted By GaryW11 on 10/11/2015 11:35 PM
We had a board member add one extra board position to the election this year which goes against our bylaws. This was not realized until after the votes were cast. What can be done?
We had a board member add one extra board position to the election this year which goes against our bylaws. This was not realized until after the votes were cast. What can be done?
The vote and the position are invalidated.
TimB4 (Tennessee)
Posts: 21,059
Posts: 21,059
Posted:
Gary,
What is the wording in your CC&Rs (if any) regarding the number of Directors?
What is the wording in your Articles of incorporation regarding the number of Directors?
What is the wording in your Bylaws regarding the number of Directors?
What is the wording in your CC&Rs (if any) regarding the number of Directors?
What is the wording in your Articles of incorporation regarding the number of Directors?
What is the wording in your Bylaws regarding the number of Directors?
TimB4 (Tennessee)
Posts: 21,059
Posts: 21,059
Posted:
TX BUSINESS ORGANIZATIONS CODE, TITLE 2. CORPORATIONS, CHAPTER 22. NONPROFIT CORPORATIONS:
Sec. 22.204. NUMBER OF DIRECTORS. (a) If the corporation has a board of directors, a corporation may not have fewer than three directors. The number of directors shall be set by, or in the manner provided by, the certificate of formation or bylaws of the corporation, except that the number of directors on the initial board of directors must be set by the certificate of formation.
(b) The number of directors may be increased or decreased by amendment to, or in the manner provided by, the certificate of formation or bylaws. A decrease in the number of directors may not shorten the term of an incumbent director.
(c) In the absence of a provision of the certificate of formation or a bylaw setting the number of directors or providing for the manner in which the number of directors shall be determined, the number of directors is the same as the number constituting the initial board of directors.
Sec. 22.103. INCONSISTENCY BETWEEN CERTIFICATE OF FORMATION AND BYLAW. (a) A provision of a certificate of formation of a corporation that is inconsistent with a bylaw controls over the bylaw, except as provided by Subsection (b).
(b) A change in the number of directors by amendment to the bylaws controls over the number stated in the certificate of formation, unless the certificate of formation provides that a change in the number of directors may be made only by amendment to the certificate.
Sec. 22.204. NUMBER OF DIRECTORS. (a) If the corporation has a board of directors, a corporation may not have fewer than three directors. The number of directors shall be set by, or in the manner provided by, the certificate of formation or bylaws of the corporation, except that the number of directors on the initial board of directors must be set by the certificate of formation.
(b) The number of directors may be increased or decreased by amendment to, or in the manner provided by, the certificate of formation or bylaws. A decrease in the number of directors may not shorten the term of an incumbent director.
(c) In the absence of a provision of the certificate of formation or a bylaw setting the number of directors or providing for the manner in which the number of directors shall be determined, the number of directors is the same as the number constituting the initial board of directors.
Sec. 22.103. INCONSISTENCY BETWEEN CERTIFICATE OF FORMATION AND BYLAW. (a) A provision of a certificate of formation of a corporation that is inconsistent with a bylaw controls over the bylaw, except as provided by Subsection (b).
(b) A change in the number of directors by amendment to the bylaws controls over the number stated in the certificate of formation, unless the certificate of formation provides that a change in the number of directors may be made only by amendment to the certificate.
GaryW11 (New York)
Posts: 19
Posts: 19
Posted:
The by-laws state in Section 5 "In the event the number of board members increases as provided by Section 4, at no time shall more than one-third (1/3) of the total number of Directors be added to the same elected term." To amend this the by-laws state a 2/3 member vote would be required.
JohnC46 (South Carolina)
Posts: 14,265
Posts: 14,265
Posted:
Gary
I am confused. You said a BOD Member added another BOD position. Please explain.
You then quoted the Bylaws that says the BOD can be increased by 1/3rd so if a BOD of 3 then it could go to 4. A BOD of 4 could go to 5. A BOD of 5 could gt to 6. A BOD of 6 could go to 8. All of this without owner approval. Is that correct?
I am confused. You said a BOD Member added another BOD position. Please explain.
You then quoted the Bylaws that says the BOD can be increased by 1/3rd so if a BOD of 3 then it could go to 4. A BOD of 4 could go to 5. A BOD of 5 could gt to 6. A BOD of 6 could go to 8. All of this without owner approval. Is that correct?
TimB4 (Tennessee)
Posts: 21,059
Posts: 21,059
Posted:
Gary,
Section 5 only specifies what the terms of a new Director (caused by an increase in the number of Directors) may be.
What does section 4 say (as this is referenced in section 5 and appears to address your question and ours about the actual increase)?
Also, what does the Certificate of Incorporation say about the increase in Directors?
Section 5 only specifies what the terms of a new Director (caused by an increase in the number of Directors) may be.
What does section 4 say (as this is referenced in section 5 and appears to address your question and ours about the actual increase)?
Also, what does the Certificate of Incorporation say about the increase in Directors?
TimB4 (Tennessee)
Posts: 21,059
Posts: 21,059
Posted:
Quote:
Posted By GaryW11 on 10/11/2015 11:35 PM
We had a board member add one extra board position to the election this year . . .
We had a board member add one extra board position to the election this year . . .
I suspect that this was the act of the entire Board and not the act of an individual Director.
A single Director may certainly propose a motion to increase but the entire Board would have had to voted on the proposal (majority vote approving it). Depending on the wording in your Governing documents, such an action may or may not be decided by the Board.
GaryW11 (New York)
Posts: 19
Posts: 19
Posted:
We had one board member contact the management company an state that the board wanted to add an additional board member this year on top of the additional position that was called for, so moving from 3 to 5. In our by-laws it states "In the event the number of board members increases as provided by Section 4, at no time shall more than one-third (1/3) of the total number of Directors be added to the same elected term." In Section 4 it states that the board will consist of initially three members and not exceed 7. Below is our amendment clause for our by-laws:
THESE BY-LAWS MAY BE AMENDED BY THE AFFIRMATIVE VOTE OR WRITTEN CONSENT, OR ANY COMBINATION THEREOF, OF A MAJORITY OF THE BOARD OF DIRECTORS AND THE CONSENT OF CLASS "B" MEMBERS, SO LONG AS SUCH MEMBERSHIP EXISTS, OR BY TWO-THIRDS (2/3) OF THE COMBINED CLASS "A" AND CLASS "B" VOTES OF THE ASSOCIATION PRESENT, IN PERSON OR BY PROXY, AT ANY REGULAR OR SPECIAL MEETING. NOTWITHSTANDING THE ABOVE, THE PERCENTAGE OF THE VOTES OR OTHER APPORVAL NECESSARY TO AMEND A SPECIAL CLAUSE SHALL NOT BE LESS THAN THE PRESCRIVED PERCENTAGE OF AFFIRMATIVE VOTES REQUIRED FOR ACTION TO BE TAKEN UNDER THAT CAUSE
Class "A" members are our residents
Class "B" residents were the Builders that owned the majority at one time but are no longer around, as they sold the last home over a year ago.
So my interpretation of this is that the residents have to vote a 2/3 majority to amend the by-laws and add an additional board member this year. Does that sound right?
THESE BY-LAWS MAY BE AMENDED BY THE AFFIRMATIVE VOTE OR WRITTEN CONSENT, OR ANY COMBINATION THEREOF, OF A MAJORITY OF THE BOARD OF DIRECTORS AND THE CONSENT OF CLASS "B" MEMBERS, SO LONG AS SUCH MEMBERSHIP EXISTS, OR BY TWO-THIRDS (2/3) OF THE COMBINED CLASS "A" AND CLASS "B" VOTES OF THE ASSOCIATION PRESENT, IN PERSON OR BY PROXY, AT ANY REGULAR OR SPECIAL MEETING. NOTWITHSTANDING THE ABOVE, THE PERCENTAGE OF THE VOTES OR OTHER APPORVAL NECESSARY TO AMEND A SPECIAL CLAUSE SHALL NOT BE LESS THAN THE PRESCRIVED PERCENTAGE OF AFFIRMATIVE VOTES REQUIRED FOR ACTION TO BE TAKEN UNDER THAT CAUSE
Class "A" members are our residents
Class "B" residents were the Builders that owned the majority at one time but are no longer around, as they sold the last home over a year ago.
So my interpretation of this is that the residents have to vote a 2/3 majority to amend the by-laws and add an additional board member this year. Does that sound right?
TimB4 (Tennessee)
Posts: 21,059
Posts: 21,059
Posted:
Gary,
Section four specifies that you need a minimum of 3 and may have no more than 7 Directors.
You would only need to amend the Bylaws if you wanted to increase the number of Directors above 7.
Section four specifies that you need a minimum of 3 and may have no more than 7 Directors.
You would only need to amend the Bylaws if you wanted to increase the number of Directors above 7.
GaryW11 (New York)
Posts: 19
Posts: 19
Posted:
Quote:
Posted By TimB4 on 10/13/2015 1:16 PM
Gary,
Section four specifies that you need a minimum of 3 and may have no more than 7 Directors.
You would only need to amend the Bylaws if you wanted to increase the number of Directors above 7.
Gary,
Section four specifies that you need a minimum of 3 and may have no more than 7 Directors.
You would only need to amend the Bylaws if you wanted to increase the number of Directors above 7.
We would also need to amend the Bylaws since we are adding 2 instead of 1 BOD member this year as that is more than the defined 1/3 percent of the current board.
TimB4 (Tennessee)
Posts: 21,059
Posts: 21,059
Posted:
No.
The 1/3% you initially referenced discusses the term (i.e. how long the Director serves) of a Director.
The 1/3% you initially referenced discusses the term (i.e. how long the Director serves) of a Director.
TimB4 (Tennessee)
Posts: 21,059
Posts: 21,059
Posted:
Quote:
Posted By TimB4 on 10/13/2015 2:07 PM
No.
The 1/3% you initially referenced discusses the term (i.e. how long the Director serves) of a Director.
No.
The 1/3% you initially referenced discusses the term (i.e. how long the Director serves) of a Director.
In other words, Expecting that you have staggered terms, one of the newly added directors could serve for 1 year and the other for 2 or 3 years.
However, that section also only mentions if you add directors as outlined in section 4. Section 4 goes into effect if the number increases beyond 7. Therefore, since section 4 isn't applicable, then section 5 isn't applicable.
Keep in mind that I am not an attorney.
If you want a legal opinion, contact a local attorney to investigate your legal options.
Be sure to bring a copy of all of your governing documents and what paperwork you were provided for the annual meeting along with copies of any communications you have had with the Board or MC.
It should cost you around $500 or so to see what your options are and perhaps another $200 or $300 for them to write a letter on your behalf challenging the election (if that is one of the legal options offered). If the issue goes to a full court battle, it will likely cost several thousand.
TimB4 (Tennessee)
Posts: 21,059
Posts: 21,059
Posted:
Gary,
Have you asked the Board or the MC under what authority did the number of Directors increase?
If you did, what did they say?
If you have not, you may want to do that.
Have you asked the Board or the MC under what authority did the number of Directors increase?
If you did, what did they say?
If you have not, you may want to do that.
RichardP13 (California)
Posts: 3,868
Posts: 3,868
Posted:
Gary
How do you determine when to increase the size of the Board, or decrease it for that matter.
Let's say, the board increased from three to five one year and the two additional candidates were either elected or appointed to two year terms. Three of the board members didn't like the two new ones and decided to eliminate their positions at the next election. Is that possible? Seems it would be, if the members don't have a say in the decision.
How do you determine when to increase the size of the Board, or decrease it for that matter.
Let's say, the board increased from three to five one year and the two additional candidates were either elected or appointed to two year terms. Three of the board members didn't like the two new ones and decided to eliminate their positions at the next election. Is that possible? Seems it would be, if the members don't have a say in the decision.
GaryW11 (New York)
Posts: 19
Posts: 19
Posted:
Quote:
Posted By TimB4 on 10/13/2015 2:33 PM
Gary,
Have you asked the Board or the MC under what authority did the number of Directors increase?
If you did, what did they say?
If you have not, you may want to do that.
Gary,
Have you asked the Board or the MC under what authority did the number of Directors increase?
If you did, what did they say?
If you have not, you may want to do that.
I spoke to the MC and they said they approved it based on a phone call from one board member claiming the board had discussed it. That never happened. It was ultimately the MCs fault. I am just trying to determine what action or steps to take next.
TimB4 (Tennessee)
Posts: 21,059
Posts: 21,059
Posted:
Gary,
Asking how it happened vs. under what authority did it happen are two different things.
A Board member informing the MC to increase the number of Directors is how it happened.
Under what authority the Board had to make such an increase would be a citation of a governing document or statute.
Asking how it happened vs. under what authority did it happen are two different things.
A Board member informing the MC to increase the number of Directors is how it happened.
Under what authority the Board had to make such an increase would be a citation of a governing document or statute.
JohnC46 (South Carolina)
Posts: 14,265
Posts: 14,265
Posted:
Gary
Reread what you said with the Class B removed:
THESE BY-LAWS MAY BE AMENDED BY THE AFFIRMATIVE VOTE OR WRITTEN CONSENT, OR ANY COMBINATION THEREOF, OF:
A MAJORITY OF THE BOARD OF DIRECTORS:
OR BY TWO-THIRDS (2/3) OF THE OF THE ASSOCIATION OWNERS PRESENT, IN PERSON OR BY PROXY, AT ANY REGULAR OR SPECIAL MEETING.:
NOTWITHSTANDING THE ABOVE, THE PERCENTAGE OF THE VOTES OR OTHER APPORVAL NECESSARY TO AMEND A SPECIAL CLAUSE SHALL NOT BE LESS THAN THE PRESCRIVED PERCENTAGE OF AFFIRMATIVE VOTES REQUIRED FOR ACTION TO BE TAKEN UNDER THAT CAUSE.
It says OR, not AND. Sounds to me like the BOD has the power.
Reread what you said with the Class B removed:
THESE BY-LAWS MAY BE AMENDED BY THE AFFIRMATIVE VOTE OR WRITTEN CONSENT, OR ANY COMBINATION THEREOF, OF:
A MAJORITY OF THE BOARD OF DIRECTORS:
OR BY TWO-THIRDS (2/3) OF THE OF THE ASSOCIATION OWNERS PRESENT, IN PERSON OR BY PROXY, AT ANY REGULAR OR SPECIAL MEETING.:
NOTWITHSTANDING THE ABOVE, THE PERCENTAGE OF THE VOTES OR OTHER APPORVAL NECESSARY TO AMEND A SPECIAL CLAUSE SHALL NOT BE LESS THAN THE PRESCRIVED PERCENTAGE OF AFFIRMATIVE VOTES REQUIRED FOR ACTION TO BE TAKEN UNDER THAT CAUSE.
It says OR, not AND. Sounds to me like the BOD has the power.
GaryW11 (New York)
Posts: 19
Posts: 19
Posted:
John,
That is where I was confused. It says "OF A MAJORITY OF THE BOARD OF DIRECTORS AND THE CONSENT OF CLASS "B" MEMBERS, SO LONG AS SUCH MEMBERSHIP EXISTS" so since the class "B" no longer exists and it says AND does it nullify this entire line and therefore go to the 2/3 member vote or does it simply go to "A majority of the board of directors". This By-law is very confusing.
That is where I was confused. It says "OF A MAJORITY OF THE BOARD OF DIRECTORS AND THE CONSENT OF CLASS "B" MEMBERS, SO LONG AS SUCH MEMBERSHIP EXISTS" so since the class "B" no longer exists and it says AND does it nullify this entire line and therefore go to the 2/3 member vote or does it simply go to "A majority of the board of directors". This By-law is very confusing.
RichardP13 (California)
Posts: 3,868
Posts: 3,868
Posted:
Quote:
Posted By GaryW11 on 10/13/2015 5:49 PM
John,
That is where I was confused. It says "OF A MAJORITY OF THE BOARD OF DIRECTORS AND THE CONSENT OF CLASS "B" MEMBERS, SO LONG AS SUCH MEMBERSHIP EXISTS" so since the class "B" no longer exists and it says AND does it nullify this entire line and therefore go to the 2/3 member vote or does it simply go to "A majority of the board of directors". This By-law is very confusing.
John,
That is where I was confused. It says "OF A MAJORITY OF THE BOARD OF DIRECTORS AND THE CONSENT OF CLASS "B" MEMBERS, SO LONG AS SUCH MEMBERSHIP EXISTS" so since the class "B" no longer exists and it says AND does it nullify this entire line and therefore go to the 2/3 member vote or does it simply go to "A majority of the board of directors". This By-law is very confusing.
Gary
What it really means is that at the beginning, amendments were controlled by the developer, now they are controlled by the members.
JohnC46 (South Carolina)
Posts: 14,265
Posts: 14,265
Posted:
Quote:
Posted By RichardP13 on 10/13/2015 6:08 PM
Posted By GaryW11 on 10/13/2015 5:49 PM
John,
That is where I was confused. It says "OF A MAJORITY OF THE BOARD OF DIRECTORS AND THE CONSENT OF CLASS "B" MEMBERS, SO LONG AS SUCH MEMBERSHIP EXISTS" so since the class "B" no longer exists and it says AND does it nullify this entire line and therefore go to the 2/3 member vote or does it simply go to "A majority of the board of directors". This By-law is very confusing.
John,
That is where I was confused. It says "OF A MAJORITY OF THE BOARD OF DIRECTORS AND THE CONSENT OF CLASS "B" MEMBERS, SO LONG AS SUCH MEMBERSHIP EXISTS" so since the class "B" no longer exists and it says AND does it nullify this entire line and therefore go to the 2/3 member vote or does it simply go to "A majority of the board of directors". This By-law is very confusing.
Gary
What it really means is that at the beginning, amendments were controlled by the developer, now they are controlled by the members.
Gary
I am leaning as Richard says. Not to play lawyer but the BOD AND Class B no longer exist as Class B is gone so any amendments are now controlled by the owners.
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