California board quorum question

While directors and officers are usually the same people, they are different roles. Typically the governing docs will specify the number of directors. That number is almost always odd, otherwise you could end up with a lot of tie votes. Often, all directors are not officers, although officers are usually directors. In your scenario if you had a 5 member board, one director would not hold an officer position but would still vote on motions and have the other rights and responsibilities of a director.

If your governing docs don't specify the number of directors that seems like a major oversight.

The requirement for Chief Executive Officer(President), Secretary and Chief Financial Officer (Treasurer) are the requirements for filing the SI-100 and SI-CID forms with the Secretary of State every two years based on your incorporation date.

Your rule would apply if they sat on the Board. Many governing documents will allow officers not to be Board members and in some cases not even an owner. Remember, officers don't vote, only Directors.

If you are supposed to have 5 Board members, your quorum is a majority of the 5, not the number of remaining directors.

Thank you for your reply Max.

I think I understand now that even without the CFO we may have a quorum of Directors, however, since neither myself or the Secretary can fulfill that role while also serving in our current capacity, are we able to still conduct business when our CFO had no authority to act in their capacity? There's a disagreement over what to do about this except that the Secretary and non owner CFO want to spend (yet again) additional HOA funds on legal consultation. The Secretary may not even be the titled owned of their condo here in the next week before this last debacle is corrected and I doubt they care much at this point as they're moving.

Personally I think it may be in our best interest to re-do our re-do election except that would be an additional expense we wouldn't have incurred if it wasn't for the primary claim of a non owner self-nominating and then being elected. I've been wondering if our non owner CFO or actions is even covered under our D&O insurance? We couldn't even afford the attorney we had to consult after the first voided election, I'm not sure how we will afford this. The CFO knew they were ineligible and I suspect the previous board also knew because they saw the escrow paperwork.

Thank you for your reply Augustin.

Our incorporation and by-laws are a mess and describe our Directors as also being Officers but says that Directors must be elected by membership. Based on the filing I would agree with Max it's probably our President, Secretary and CFO whose names are reflected on the filing are our Directors even if our governing documents are ambiguous, vague and contradictory.

Again, the documents are very out of date but it's how they are written. We have a Community Association Manager that also doesn't really know what to do (they don't think we have the authority to appoint a replacement CFO since they're a director based on our governing documents). This is the same Manager that in the recent past delayed signing any contracts with us because we did not have a duly elected board which was a written stipulation in our contract with them that I think is fairly boiler plate. I think they are concerned as well at this point but have no further advice except to spend more money that we don't have and they told us we don't have.

There is no doubt we need a CFO, we do. The only problem is the one we have has no authority to hold the position. This has become troublesome as it looks very bad for us as it's after we had updated our election rules and already spent a few thousand dollars consulting an attorney and hiring an inspector for our election.

The secretary and myself can't agree either and while a quorum isn't required for appointing a replacement officer this isn't an officer position from what I've gathered either. Neither of us can agree on whether we should re-do the election or revert back to the previous board that also wouldn't have a CFO for the reasons I've been posting about. If we put it to a vote for membership, all without having a CFO in the meantime, despite having a board quorum how can we handle our financials? I am becoming increasingly afraid that the Davis-Stirling Act doesn't have any guidance and we are dangerously going down shit's creek without a paddle with an angry mob behind us accusing us of election violations and a breach of our duties.

I wouldn't say I have a lack of command of the Davis-Stirling Act but up until this I have honestly been indifferent as our HOA was generally very quiet. I did read our governing documents when I was provided with them and also knew of and had no objections (as it's legally required) to the updates to our election rules. I also have unfortunately relied on statements made by other previous and current board members, and now when faced with the actual facts I've found what was represented to me was not true.

I'm here looking for clarification of what would be prevailing over this. We have hired an attorney and an inspector of election, this was the end result sadly. I wouldn't say they performed their duties incorrectly either but relied on false information from previous and current board members, one of whom is not an owner. I have only recently seen a copy of the deed that shows they aren't a member of our association. The 10% of membership brought this to the boards attention and the managers attention this summer which we disregarded and never responded to because the CFO said they owned the place and the membership were lying.

I can see now in retrospect why some of our membership is fed up as this is one issue after another I was not completely privy to until recently. I think the Secretary's unwillingness to want to handle this in a honest and transparent manner or even address it at all to the point we are sued is because they're rushing to close on their home sale. They've already lost previous offers after listing their home below market because we have no reserves and are facing a mountain of special assessments that make buyers turn and run. No one can currently refinance because of how bad things are either. I've tried to guide them for years whenever an infrequent meeting was held towards making more prudent financial decisions but previous boards opted to engage in conduct that may not have been completely legal either.

I forgot to add that that our governing documents surprisingly clarify we are not able to appoint a replacement if they are removed regardless if the removal is by the board, membership or court. We have a section related to vacancies which states we can fill a vacancy at a regular meeting or special meeting but does not clarify if that's for director or officer, I would assume officer as these very same documents state that that directors are elected by membership. I feel this is a very burdensome catch-22 situation we have backed ourselves into.

We were told by an attorney that the declarants lack of clarification and incorrectly using shall in place of may in our documents mixed with our failure to update or correct them over the years has put us in this position that created these types of contradictions. We cannot afford the expense of updating them currently as we have already spent money we didn't have updating the very election rules that weren't followed anyway. It will take months for us to properly conduct another legitimate election or even amendment our governing documents to undo this snafu. Should I just resign and run away myself?

Thanks again for another reply Augustin.

Our qualifications for election to the Board of Director positions are verbatim the same as the Davis-Stirling Act. We automatically must disqualify if they are not the deeded owner, otherwise disqualification would be based upon if they're delinquent in assessments (not fines), a felon, etc. Our documents also state, "that the officers of the association shall be a President, Secretary and CFO." In the very same document it also states that these are director positions. I can't tell you nor could that attorney explain the declarants sloppiness preparing our governing documents but it's how they are until we can afford to amend them.

Our By-Laws merely explain the roles that the President, Vice President, Secretary and CFO are expected to perform, it's boiler plate with nothing particularly incorrect or outdated about it, lucky us.

I had to go and dig through an old box to find the additional pages as it appears one was missing from my stack. We are required to have 3 Directors per our governing documents. The other lawful director will cease to be an owner in a few days leaving another vacancy which is also another dilemma and why I've been thinking we should hold an election as I don't want to open myself up to any further liability. The last "election" which was voided and the previous board reinstated was under the advice of an attorney that specializes in HOA law, which if we pursued a second time would put us back in the same position we are now.

Thanks again for replying.

To clarify, membership elects the directors (which are also officers per our by-laws, except for our Vice President or any other assistant to the CFO and Secretary, etc), and the directors are to be elected annually by the membership.

I personally don't think we need the kind of HOA we have but we are required to have these 3 directors per our by-laws, 2 of which are our check signers as the management company only can do so at their direction, our secretary also signs our meeting minutes and such even if they were prepared by a representative from the management company. I did review our contract with them and they are contractually bound not to make any independent decisions and their primary task, at the direction of the board, is to pay our monthly operating expenses (trash, water), quarterly (taxes), etc, act as the agent for process and obtain estimates for repair at the direction of the board. I don't find the managements actions to be outside the scope of what we are paying for (even if we can't afford it). I do understand managements concern with our on-going election issues among other things since one of the two check signers is the CFO who also is suppose to oversee our financials.

I have utilized the Davis-Stirling Act extensively and found it to provide limited clarification for our conundrum. The only thing I've found that may apply also said "unless otherwise provided in the articles or bylaws"... (see below) basically pushes us back to our contradictory governing documents filled with too many shall's and too few may's.

Vacancies Filled by Appointment. Unless otherwise provided in the articles or bylaws and except for a vacancy created by the removal of a director, vacancies on the board may be filled by approval of a majority of the remaining directors on the board. (Corp. Code § 7224(a).) This general principle is also described in Robert's Rules of Order.

Our governing documents allow our directors to enter into 1 year contracts, unless it's a management company then we can enter into longer contracts as long as they're licensed/bonded, it's surprising this was covered when the documents were drafted. Various articles in our by-laws cover the powers, roles and responsibilities of our directors and officers, but it does specifically state our directors must be members even though state law made this an automatic requirement. I'm not sure if this is commonly found in the by-laws as opposed to the covenants or articles of incorporation, but it's where ours are. I think some of the issue lies with the fact the covenants, conditions and restrictions were drafted before the homes were built and sold and also nearly a decade before the articles of incorporation and by-laws. We were not an incorporated HOA for nearly the first decade of our existence. The Covenants are silent on many issues and even more vague that they don't properly clarify homeowner vs. hoa maintenance responsibilities.

I don't recommend being in this situation to anyone and really think the previous board should've taken the HOA attorneys advice to update our documents properly where the Davis-Stirling act is silent or defaults to our governing documents in certain situations.

Max, I really wish we would've hired you years ago instead of what we got...

Megan

You are confusing some with your use of Director, Officer. Basically the BOD (in your case you say 3 members) are elected by the owners at the Annual Meeting. These 3 directors then sit down and vote among themselves only, who fills what Officer positions.

1. If you have a BOD of3 and there are at least 2 director positions filled then your have a Quorum and can conduct business.

2. If you have two directors, they can agree on a 3rd person becoming a director.

3. Even if you fell to only one director, that one director alone can appoint a person to fill a vacancy. You are now back at #2 above

In your case (3 Directors, 3 Officers) each director would be an Officer. This is not so in larger BOD's. Say a BOD of 7. Four might be Officers: Pres., VP., Treasurer, Sec. with 3 still being Members of the BOD, but not Officers. Each Director/Officer gets one vote only so a total of 7 votes.

In most association, a Director must be an owner. In some associations, according to the Bylaws, a Treasurer may not be an owner and be appointed (or even hired/paid) by the BOD.

Typical question. Are you on your association's BOD. Yes I am. Are you an Officer? No I am not.