Lame-Duck period between election and officer determination

Started by EdwardC4 • 23 replies • 361 views

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EdwardC4 (South Carolina)
Posts: 8

Posted:

Our 36 residence South Carolina community’s By-Laws make no mention of board succession procedures. It only states “The Directors shall be elected by plurality vote of the members present, including any proxies, at the Annual Meeting.” and “... The members of the Board so elected shall determine the offices of the Board of Directors.” The timing of the first meeting of the new board is simply not mentioned in the ByLaws. The ByLaws define the Term of Office for Directors as simply “two Years” - not two calendar years.

While the ByLaws don’t preclude the new board briefly convening immediately following the Annual Meeting in order to determine officers and thus accomplish succession, it has been Morningside’s “customary practice” that there be no board meeting until January at which time the officers would be determined. Unfortunately, this customary method creates Lame Duck officers for the remainder of the year and technically are no longer empowered to represent the Members. Previously this hasn’t been a problem, but if an urgent matter requires action during this period, such as renewal or signing a contract, then the new board’s first meeting should occur sufficiently ahead of the old contract’s expiration in December so as to permit timely execution of the next year’s contract.

South Carolina has a law ( SC Homeowners Association Act ) that specifically addresses HOAs silent on this matter . Another law, the SC Nonprofit Corporations Act partially addresses HOAs and states “Despite the expiration of a director's term, the director continues to serve until the director's successor is elected, designated or appointed, and qualifies, or until there is a decrease in the number of directors.” but does not address our Lame Duck situation where a new board has been elected but no officers determined.

I am concerned about the legality of the now ex-board President signing a contract during this Lame-Duck period.

CathyA3 (Ohio)
Posts: 6,299

Posted:

It's very common for boards to hold a brief meeting immediately following the annual meeting/election and select the new officers then. If something needs to be signed, that's the way to go.

Otherwise, if the former board president is still a director, then he should remain in his officer position until the board can meet and make any changes. Officer positions can shift around as needed - they don't need to coincide with an annual schedule, although they generally do.

So as long as the director is still a director, there's no issue that I see. He's not the ex-president - he's the president until the board meets and decides that he isn't.

EdwardC4 (South Carolina)
Posts: 8

Posted:

Thank you - I agree. Our current President's term expires and thus there is technically no President until the new board's first meeting when offices are determined.

Our dilemma is that, because previous boards traditionally operated with this Lame-Duck situation, the current President believes that he is President until January AND we have an important contract that needs execution during this Lame-Duck period.

Consensus among the board nominees is to immediately meet after the election and therefore eliminate this problem. Furthermore, I believe that we need to amend the By-Laws to clarify succession.

CathyA3 (Ohio)
Posts: 6,299

Posted:

Many bylaws contain provisions that allow a different officer (VP or Secretary) to sign contracts if the President is unable to do so. It would be unusual if your bylaws were so poorly written that you're left without the ability to do business if things don't happen like clockwork.

JohnT38 (South Carolina)
Posts: 1,631

Posted:

Quote:

Posted By EdwardC4 on 10/29/2022 5:17 AM
Our 36 residence South Carolina community’s By-Laws make no mention of board succession procedures. It only states “The Directors shall be elected by plurality vote of the members present, including any proxies, at the Annual Meeting.” and “... The members of the Board so elected shall determine the offices of the Board of Directors.” The timing of the first meeting of the new board is simply not mentioned in the ByLaws. The ByLaws define the Term of Office for Directors as simply “two Years” - not two calendar years.

While the ByLaws don’t preclude the new board briefly convening immediately following the Annual Meeting in order to determine officers and thus accomplish succession, it has been Morningside’s “customary practice” that there be no board meeting until January at which time the officers would be determined. Unfortunately, this customary method creates Lame Duck officers for the remainder of the year and technically are no longer empowered to represent the Members. Previously this hasn’t been a problem, but if an urgent matter requires action during this period, such as renewal or signing a contract, then the new board’s first meeting should occur sufficiently ahead of the old contract’s expiration in December so as to permit timely execution of the next year’s contract.

South Carolina has a law ( SC Homeowners Association Act ) that specifically addresses HOAs silent on this matter . Another law, the SC Nonprofit Corporations Act partially addresses HOAs and states “Despite the expiration of a director's term, the director continues to serve until the director's successor is elected, designated or appointed, and qualifies, or until there is a decrease in the number of directors.” but does not address our Lame Duck situation where a new board has been elected but no officers determined.

I am concerned about the legality of the now ex-board President signing a contract during this Lame-Duck period.

Unless I am missing something, the simple answer is for the newly elected Board to not follow the "customary practice" and hold the meeting to elect officers now.

EdwardC4 (South Carolina)
Posts: 8

Posted:

Our By-Laws ARE poorly written with minimal specificity. Which Director is authorized to obligate the community is simply not defined. In practice it has been the President (VP if President unavailable) and, to a limited degree, the Treasurer. However, this is by convention and it is not codified in the By-Laws.

Then there is the issue that with the election of the new board, the current officer's roles technically don't exist anymore until determined by the new board.

I feel that our By-Laws desperately need amendment to provide clarification in many gray areas.

CathyA3 (Ohio)
Posts: 6,299

Posted:

Quote:

Posted By EdwardC4 on 10/29/2022 6:29 AM
Thank you - I agree. Our current President's term expires and thus there is technically no President until the new board's first meeting when offices are determined.

Our dilemma is that, because previous boards traditionally operated with this Lame-Duck situation, the current President believes that he is President until January AND we have an important contract that needs execution during this Lame-Duck period.

Consensus among the board nominees is to immediately meet after the election and therefore eliminate this problem. Furthermore, I believe that we need to amend the By-Laws to clarify succession.

Do your bylaws specifically mention the term length for the officer positions?

People often confuse director positions (which have beginning and ending dates that coincide with the elections) with officer positions (which may not). Officers are appointed by the board - they're not elected by the homeowners unless your bylaws are very unusual.

Usually bylaws require the board president to be a director, but there may not be a similar requirement for the other officer positions. That said, I think that the large majority of boards appoint other directors to the officer positions. The one exception I've noticed is in communities where the board doesn't have the financial knowledge to handle the treasurer position, so the board may appoint a homeowner with the necessary skills.

So, as long as the president is still a director (not replaced at the last election) then he's still the president until the new board meets and says he isn't. If your bylaws don't require this to happen immediately after the election, then this can wait - although it shouldn't wait months. And of course, if he was voted off the board and your bylaws require the president to be a director, then he definitely is an ex-president as well as an ex-director, and he has no authority to sign anything.

Is this best practices? No. It's probably confusing for homeowners and can give the appearance of shady dealing.

Amending the bylaws is probably a good idea if this looks like it will be an ongoing problem and not a response to something unusual (like the covid lockdowns that messed up many associations' schedules).

AugustinD
Posts: 1,027

Posted:

Quote:

Posted By EdwardC4 on 10/29/2022 6:29 AM
Our current President's term expires and thus there is technically no President until the new board's first meeting when offices are determined.

Technically, legally and I would bet per statute on the subject of appointment of officers, I think whoever is President legally continues until he/she is replaced or he/she resigns. Any director not liking this had best ask the new board to meet immediately after the election.

JohnC46 (South Carolina)
Posts: 14,265

Posted:

Quote:

Posted By AugustinD on 10/29/2022 7:32 AM

Posted By EdwardC4 on 10/29/2022 6:29 AM
Our current President's term expires and thus there is technically no President until the new board's first meeting when offices are determined.

This is my belief.

JohnC46 (South Carolina)
Posts: 14,265

Posted:

Edward

Simply change the past procedure to where a BOD Meeting/Officer Election is held directly after the Annual Meeting. Nothing stopping you from doing such.

KerryL1 (California)
Posts: 14,550

Posted:

Are you on the Board, Edward?

With others simply call a board meeting and elect officers immediately following the Annual meeting.

Your Bylaws or SC Nonprofit Corporate Codes will say if they must be directors. They also might state how long officers' terms are. Usually one year. In fact, JohnC of SC, a long-time board member, has stated many times that the new Board can even meet online and elect officers. Presumably that decision would be memorialized in your next board meeting minutes.

If the prez IS no longer a director (that is unclear in the post), he may not execute contracts.

I do see some confusion about the difference between officers and directors. I also think it's better the avoid the word "succession" in this context as a little inaccurate.

I do not think you need to amend your Bylaws to say who signs contracts. Our HOA has a resolution for the order in which officers may sign. Prez first, if unavailable, VP, next, etc.

JohnC46 (South Carolina)
Posts: 14,265

Posted:

Our Bylaws say:

Section 6. Agreements, Contracts, Deeds, Leases, Checks, Etc. All agreements, contracts, deeds, leases, checks, and other instruments of the Association shall be executed by at least two (2) officers or by such other person or persons as may be designated by resolution of the Board of Directors.

We designate our President to sign for us.

EdwardC4 (South Carolina)
Posts: 8

Posted:

Our bylaws specify the term of Directors as two years (not specified as calendar years). Officer roles are determined by the directors. The process of that determination is not defined. Officer term is undefined. State law requires that, at a minimum, there be a President, Secretary and Treasurer. We have five directors. Which directors can sign contracts that obligate the community is not defined in the bylaws but by convention it is the President.

I agree that Directors whose term has not expired retain their Office unless changed at the first meeting of the board. In this case the President'd term does not carry over.

In our situation the best immediate solution is one of: A. Hold a meeting immediately after the election to establish Officers so that an important contract can be negotiated and executed; B. See if the contract can be extended into January, which is after the traditional early January 1st meeting of the new board. Option B would be best if it can be accommodated.

EdwardC4 (South Carolina)
Posts: 8

Posted:

I wish that our bylaws were so written. They are silent on a great many situations, including this one.

TimB4 (Tennessee)
Posts: 21,059

Posted:

Keep in mind that the position of Director and the position of Officer are two different positions.
They are often filled by the same individual - so it's like having two jobs.

If your new board hasn't appointed officers, the existing (old) Officers would continue to serve in those Officer positions until the new board appoints others to those positions or the officer resigns.

KerryL1 (California)
Posts: 14,550

Posted:

Edward wrote: "In this case the President'd term does not carry over." This seems to mean that the prez, who's a director, is not seeking reelection as a director, Right? In that case and assuming that state law is that non-profit presidents must be directors, he no longer may executive contracts.

In all HOAs that've been discussed over the years here, the word for the term of directors is not "calendar Year." In my HOA's bylaws, the two-year term begins at the annual meeting and I think most are expressed that way.

Since directors "determine" officers, the plain meaning is that directors select or vote on officers. This is how it's done in the many HOAs that have been discussed here. With others, why in the world wouldn't the new board simply hold a board meeting to "determine" officers immediately following the annual mtg. & election? Your HOA's customary practice simply is wrong.

Another term to avoid, is "lame duck." It just does' make sense in this context.

KerryL1 (California)
Posts: 14,550

Posted:

KerryL1 (California)
Posts: 14,550

Posted:

Edward wrote: "In this case the President'd term does not carry over." This seems to mean that the prez, who's a director, is not seeking reelection as a director, Right? In that case and assuming that state law is that non-profit presidents must be directors, he no longer may executive contracts.

In all HOAs that've been discussed over the years here, the word for the term of directors is not "calendar Year." In my HOA's bylaws and elsewhere, the two-year term begins at the annual meeting and I think most are expressed that way.

Since directors "determine" officers, the plain meaning is that directors select or vote on officers. This is how it's done in the many HOAs that have been discussed here. With others, why in the world wouldn't the new board simply hold a board meeting to "determine" officers immediately following the annual mtg. & election? Your HOA's customary practice simply is wrong.

Another term to avoid, is "lame duck." It just doesn't make sense in this context.

AugustinD
Posts: 1,027

Posted:

Quote:

Posted By EdwardC4 on 10/29/2022 5:17 AM
[Our Bylaws state] “The Directors shall be elected by plurality vote of the members present, including any proxies, at the Annual Meeting.” and “... The members of the Board so elected shall determine the offices of the Board of Directors.” The timing of the first meeting of the new board is simply not mentioned in the ByLaws. The ByLaws define the Term of Office for Directors as simply “two Years” - not two calendar years.

-- The South Carolina HOA statute and Nonprofit Corporation statutes have no requirement that officers be either directors or owners. Even California, Florida and Texas statutes appear to have no such requirement (that officers be directors or even members of the HOA/COA).

-- The articles of incorporation of the OP's HOA might offer some help on all this. Though I appreciate that the OP at this point feels that the argument that there are no officers until the new board appoints officers is not legally strong.

-- I do see why the OP raised this concern and continue to agree the new board should get to this quickly.

-- Googling located no other bylaws that say, word for word, what the OP's bylaws say above. Which I think is a bit unusual. Then again, I believe most (by far) HOA/COA Bylaws do say the board appoints the officers. The wording for this is just a bit unusual in the OP's case.

KerryL1 (California)
Posts: 14,550

Posted:

Here's a portion of an article that might be reassuring, Edward: " What Are Elected Officers?…The board of directors is required to nominate elected officers in South Carolina.” The three elected officers required for nonprofits in South Carolina include: President, Treasurer & Secretary.
From: How to Develop a Board of Directors for a Nonprofit in South Carolina. Last Updated: September 21, 2022 by the TRUiC Team.

Based on Aug observing that there is no requirement that an officer be a director, not even the president, the current prez can hold that office until the new Board selects officers at a board meeting.

I also urge you to read your Articles of Incorporation.

AugustinD
Posts: 1,027

Posted:

Quote:

Posted By KerryL1 on 10/29/2022 2:07 PM
Based on Aug observing that there is no requirement that an officer be a director, not even the president, the current prez can hold that office until the new Board selects officers at a board meeting.

Huh?

I disagree.

On the premise that officers remain until they are either dismissed by the board or resign, I think the "old" president remains president until he/she is dismissed by the board or resigns.

If one wants to argue that the officers' positions all terminate as soon as a new board is elected, fine whatever. But this is not my reading.

KerryL1 (California)
Posts: 14,550

Posted:

I agreed with you, Aug. I guess my writing's unclear.

MaxB4
Posts: 3,513

Posted:

The typical term for any officer is one year.

EdwardC4 (South Carolina)
Posts: 8

Posted:

Thanks to all of the input. After conferencing with those expected to be elected in Nov. as new directors a plan has been agreed to on how to move forward.

Our problem is that the Bylaws are not written for calendar year director terms yet that is historically been done, creating the aforementioned Lame-Duck problem. We have a plan on how to deal with the December contract and in 2023 amend the Bylaws to prevent a recurrence of this problem.

Thanks again!

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