Priorty of filling Board Vacancies

Started by KevinK7 • 18 replies • 1318 views

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KevinK7 (Florida)
Posts: 1,343

Posted:

Last year two board members resigned. Their positions were never filled. In December, the annual meeting occurred and an election was held but nobody new was elected.

According to my association's by-laws, the board is to be made up of 9 people with a minimum of 7 board members who are "members in good standing".

Currently my board has 7 people. Two of the board members do not meet membership requirements (they are not homeowners and one does not live in the neighborhood). That leaves only 5 board members as "members in good standing".

In this situation, can a BOD still conduct business or must they fill the vacancies first(the by-laws do state that a minimum of 5 board members are required to conduct business)?

Can the remaining board members amend the by-laws to allow a lower number if vacancies cannot be filled, or must the board wait until they meet the 7 board member minimum to amend the documents?

BenJ (Florida)
Posts: 21

Posted:

Kevin,

I believe you have to look at what the quorum requirement for the Board of Directors is for the conducting of business. Below is what "Florida Statutes Chapter 617-Corporations Not For Profit" states about quorum requirements:

617.0824 Quorum and voting.--

(1) Unless the articles of incorporation or the bylaws require a different number, a quorum of a board of directors consists of a majority of the number of directors prescribed by the articles of incorporation or the bylaws.

(2) The articles of incorporation may authorize a quorum of a board of directors to consist of less than a majority but no fewer than one-third of the prescribed number of directors determined under the articles of incorporation or the bylaws.

(3) If a quorum is present when a vote is taken, the affirmative vote of a majority of directors present is the act of the board of directors unless the articles of incorporation or the bylaws require the vote of a greater number of directors.

So, based on my understanding of the above, the five members in "Good Standing" should meet the quorum requirement for a 7/9 member BOD. Some of the more experienced members will probably be able to provide you with additional info.

Ben

KevinK7 (Florida)
Posts: 1,343

Posted:

The only thing I wonder is that if the by-laws require 7 members in good standing, but the board only has 5... what should become of the two remaining board members who are not in good standing?

I understand they may hold a quorum to hold a meeting... I checked the articles of incorporation and they do state that they must have 9 members.

Here is an excerpt from the by-laws:

B. Organization – The official functions of the Association will be performed by a Board of Directors composed of 9 members: Four (4) officers of the Association: President, Vice-President, Secretary, and Treasurer; and five (5) members-atlarge, as specified in the Articles of Incorporation. A minimum of seven (7) members of the Board must be members of the Association in goods standing (as defined below). The members of the Board of Directors will perform their responsibilities without remuneration in any form, i.e. gifts, salary, or wages.

Must they change the by-laws or should those other board members be removed?

I see this as not being an issue before because there were 9 members and 7 members were in good standing... leaving the other two members to fill out the board.

JohnK3 (Pennsylvania)
Posts: 967

Posted:

Kevin asks:

>>>Can the remaining board members amend the by-laws to allow a lower number if vacancies cannot be filled, or must the board wait until they meet the 7 board member minimum to amend the documents?<<<

It would be unusual for docs to allow the BOD to change the ByLaws. Typically, that needs a majority or more of Membership to decide. Have you checked into this angle?

MaryA1 (Arizona)
Posts: 7,043

Posted:

John,

Ah, but that's not true for all assn's! The bylaws of my assn and my former assn can be amended by a vote of the BOD; a vote of the members is only required to amend the Articles of Inc. and the CCRs.

JohnK3 (Pennsylvania)
Posts: 967

Posted:

Mary,

I said unusual (not unheard of) to alert Kevin to that possibility.

And as you may have gathered, I am very pro-BOD and generally support giving BODs broad powers. But even I'd take pause at a BOD having that much juice. A wrong gang could use that option for very nefarious purposes such as, oh, say eliminating elections, raising dues to pay themselves big annual bonuses and cracking down on any Member they chose to for questionable reasons?

N'est-ce pas?

SusanW1 (Michigan)
Posts: 5,202

Posted:

Kevin - how did the 2 get on your board? Were they ELECTED? Are you saying they do not vote on issues?

Do you have positions where being a "member in good standing" is not required? (Some HOAs bring in an outside person for Secretary position)

Your board needs to get to 7 voting members or work with the 5, the majority of 7. The 5 IS a quorum.

MicheleD (Kentucky)
Posts: 4,491

Posted:

I could be wrong, but in reading that I don't see that a 9-member board is mandated.

I see where it allows for 9 members, but is that the same thing as saying 9 the board MUST be composed of 9 members?

KevinK7 (Florida)
Posts: 1,343

Posted:

The By-Laws state "composed of 9 members"...

The Articles of Incorporation state "The affairs of the corporation shall be managed by a Board of Directors consisting of nine persons". It states vacancies will be filled in accordance with the By-Laws.

The way the Board has had these two members who are not "members in good standing" is that while the By-Laws and Articles require 9 people, the BOD collected proxies and had amended the By-Laws a few years ago to only specify that 7 have to be members in good standing, leaving the other two to be anything. The articles of incorporation do not specify any home ownership requirement, except for the general membership.

According to the By-Laws, "any amendments to the Articles of Incorporation or By-Laws will take a simple majority (50% + 1) of the voting Association members present physically or by proxy. A quorum is considered fifteen percent (15%) of the membership." That would make the amount required roughly 40-50 votes to change but the By-Laws do not specify a quorum for the BOD other than that 5 are required to conduct business.

The current Board Members who are not in good standing are the President and the Treasurer. The President lives in the neighborhood (with the Secretary) but does not own a home. The Treasurer does not own a home in the neighborhood and does not live in the neighborhood (she lives in an adjoining subdivision).

The By-Laws require elections to be determined by a majority vote cast by hand but at the last meeting, they had collected an undetermined amount of online proxies. Another homeowner who was allowed to attend the meeting stated that even though votes were taken from the floor, the results were unknown because of unreported proxies. The same 7 BOD remain as did before.

I just think that the by-laws are very clear stating that a minimum of 7 in good standing are required... but the statutes Ben posted state that unless otherwise mentioned, a majority of the number prescribed by the articles of incorporation would consist a quorum (which would be 5).

MaryA1 (Arizona)
Posts: 7,043

Posted:

Kevin,

To be in compliance with the amended bylaws, IMO, the board needs to make 2 appointments to the board and these 2 new board members must be in good standing. Until those appointments are made, they can still conduct business, unless the bylaws say otherwise (which I doubt). Some bylaws say the board must be comprised of xxx to xxx number of positions, but not less than XXX. However, since yours are definite on the number, I would say the appointments should be made as soon as possible. The fact that the bylaws were amended with the use of proxies is not unusual. If proxies are allowed then the election was legal.

GeorgerwilliamsW (Indiana)
Posts: 975

Posted:

You have not indicated if the board has made a good faith effort to find individuals willing to serve, but found none. If an election was held and no members stood for election for the two vacant seats, it could be argued that the board has fulfilled its duty. Further, I think that with a showing of a good faith effort to fill the vacant slots, the board, as it is currently constituted, can legally act. I agree with Mary.

DonnaS (Tennessee)
Posts: 5,671

Posted:

Kevin,

The Board members that are in good standing need to appoint members to fill the vacancies. The 2 Not In Good Standing need to be removed and their positions filled by appointments. Removal of voting privledges because of failure to pay dues is in the Statutes.

617.0809 Vacancy on board.--

(1) Any vacancy occurring on the board of directors may be filled by the affirmative vote of the majority of the remaining directors, even though the remaining directors constitute less than a quorum, or by the sole remaining director, as the case may be, or, if the vacancy is not so filled or if no director remains, by the members or, on the application of any person, by the circuit court of the county where the registered office of the corporation is located.

KevinK7 (Florida)
Posts: 1,343

Posted:

The only question about the election is the wording in the By-Laws. In regards to to electing Board Members, "Board members will be elected by a majority vote cast by hand."

In regards to regular voting it states "Voting privileges of members in good standing shall be limited to one vote per lot. A vote may be cast in person or by proxy. Only members of the Board of Directors can be designated to act as proxies."

The Board issues their proxies through an online form.

The question homeowners had was whether the use of proxies could be used in a board election... from reading the By-Laws, I see they could collect the necessary proxies to amend the by-laws but electing a Board member would be different.... that is what they have done in the past... I think the main question is the status of the two board members who are not in good standing (since the By-Laws haven't been amended yet and the vacancies haven't been filled).

I agree that filling those vacancies would be a priority, and since I do not see a By-Law or article that addresses vacancies, can the BOD just appoint someone or must they hold another election?

The two other people who resigned did so before the election. The board put an online form for voting and allowed people to either choose them or fill in the blank, or allow the board to choose for the homeowner. Votes were also taken on the floor.

MaryA1 (Arizona)
Posts: 7,043

Posted:

Quote:

Posted By DonnaS on 03/01/2009 8:07 AM

Kevin,

The Board members that are in good standing need to appoint members to fill the vacancies. The 2 Not In Good Standing need to be removed and their positions filled by appointments. Removal of voting privledges because of failure to pay dues is in the Statutes.

617.0809 Vacancy on board.--

(1) Any vacancy occurring on the board of directors may be filled by the affirmative vote of the majority of the remaining directors, even though the remaining directors constitute less than a quorum, or by the sole remaining director, as the case may be, or, if the vacancy is not so filled or if no director remains, by the members or, on the application of any person, by the circuit court of the county where the registered office of the corporation is located.

Donna,

Why do you say "The 2 Not In Good Standing need to be removed and their positions filled by appointments"? From what I recall, Kevin said they were elected by the members after the bylaws were changed to allow members not in good standing to hold 2 board positions. They are NOT in that class because they have not paid their assessments, but rather because they are nonmembers.

MaryA1 (Arizona)
Posts: 7,043

Posted:

Kevin,

Now you've really got me confused. You state: "I think the main question is the status of the two board members who are not in good standing (since the By-Laws haven't been amended yet and the vacancies haven't been filled)." However, in an earlier message you stated: "The way the Board has had these two members who are not "members in good standing" is that while the By-Laws and Articles require 9 people, the BOD collected proxies and had amended the By-Laws a few years ago to only specify that 7 have to be members in good standing, leaving the other two to be anything."

So which is it, have the bylaws been amended to allow for 2 members not in good standing or not? Since that seem to be the crux of your problem, we need to know exactly what the case is.

In order to make a determination as to when proxies are allowed it would be helpful to post, word for word, the bylaws articles addressing this.

BTW, are we talking about the voluntary assn or the mandatory assn of which you are not a member?

KevinK7 (Florida)
Posts: 1,343

Posted:

The only mention of it is in the By-Laws are what I posted above:

B. Organization – The official functions of the Association will be performed by a Board of Directors composed of 9 members: Four (4) officers of the Association: President, Vice-President, Secretary, and Treasurer; and five (5) members-atlarge, as specified in the Articles of Incorporation. A minimum of seven (7) members of the Board must be members of the Association in goods standing (as defined below). The members of the Board of Directors will perform their responsibilities without remuneration in any form, i.e. gifts, salary, or wages.

The Articles of Incorporation only state that the Board must consist of 9 people and the Covenants and Restrictions have no requirements.

In the By-Laws, this is where it states that the board must have 9 people but 7 in good standing... it does not clearly define the requirements of the other two people and because of that absence of language, the two board members who are not homeowners have remained on the board. It had not been an issue before because the BOD met the requirements because they had sufficient people serving.

As for mandatory or voluntary status, the HOA states they are voluntary, but are in the transition of trying to become a mandatory master association... not all sections of my neighborhood have adopted their amended covenants (that require homeowners to join in certain circumstances).

RogerB (Colorado)
Posts: 5,067

Posted:

Quote:

Posted By MicheleD on 02/28/2009 8:17 PM
I could be wrong, but in reading that I don't see that a 9-member board is mandated.

I see where it allows for 9 members, but is that the same thing as saying 9 the board MUST be composed of 9 members?

I agree with you Michele. There is a major difference between the words "will" and "shall". Shall would mandate 9; will does not. I thing the Board can operate with less than 9 until the positions are filled. Those members of the Board of Directors who are not in good standing either need to get into good standing immediately or be disqualified from serving; and the vacancies need to be filled asap.

MaryA1 (Arizona)
Posts: 7,043

Posted:

Roger,

I'm not sure that you are correct in your interpretation of the word "will". According to Webster's Dictionary, will and shall are used interchangeably, meaning either word can be used and both words have the same meaning.

The bylaws provision that Kevin posted says "the board "will" have 9 members" and "a minimum of 7 must be members in good standing". IMO, this is the same as saying "the board "shall" have 9 members. . . .". Therefore, as I stated in my message of 3/1, the board should appoint 2 members who are in good standing as soon as possible. The 2 members who are not in good standing may remain on the board.

GeorgerwilliamsW (Indiana)
Posts: 975

Posted:

Shall versus will was discussed extensively here http://www.hoatalk.com/Forum/tabid/55/view/topic/forumid/1/postid/65855/Default.aspx in January

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