Former Board Member D&O Liabilities Actions After Resignation

Started by FabianV1 • 13 replies • 1947 views

💬 Join us to post & get advice from 50,000 HOA & Condo leaders.

⚡ Takes 30 seconds

Already a member? Log in

FabianV1 (California)
Posts: 6

Posted:

Does D&O coverages protect former directors and officers after a new board is elected, especially if the current board requests a former officer to sign financial documents for a presently elected board due to issue of ownership of accounts.

SusanW1 (Michigan)
Posts: 5,202

Posted:

Please be more specific. WHY would a former board member now have to sign anything?

SteveM9 (Massachusetts)
Posts: 3,699

Posted:

Sounds like it was the treasurer and no one else is designated on the account.

FabianV1 (California)
Posts: 6

Posted:

shouldn't the new BOD be able to take the articles of incorporation and new election results and change the signors and ownership for their accounts without having to get a former officer to sign something that he/she could later be held liable for if fraud, miss-appropriation, etc.?

RogerB (Colorado)
Posts: 5,067

Posted:

Fabian, Not quite sure about what exactly is your concern.
D&O insurance should cover previous directors against suits for 3 years.
For signatures on financial accounts banks require a current signer in order to add signatures for new Board members.
Theft insurance, rather than D&O, is needed to protect funds in the financial accounts.

FabianV1 (California)
Posts: 6

Posted:

the current BOD is trying to consolidate accounts with property management companies current financial institutions which entails closing accounts held in another institution. apparantly bank states that previous officer is the owner of the accounts for some reason. current BOD is requesting that former officer sign document releasing funds held in various accounts. former officer doesn't want to be held liable for any actions, lack of actions, fraud, theft or otherwise done by another party if document is signed releasing monies. current BOD should be able to obtain necessary documents to change signors and close these accounts. indemnification for signing document for release of funds?

MaryA1 (Arizona)
Posts: 7,043

Posted:

Fabian,

Inform the previous officer that as long as his name is on the bank account he will be held liably accountable, so it would be in his best interests to sign the bank document. Tell him the monies are only being released to be deposited into an account with a different bank. Also remind him that,as a former officer, he is still covered by the assn's D&O insurance.

I can't imagine why the bank is showing this previous officer as the owner of the account; the HOA should be the owner. How do the bank statements read? Are they made out to this person or to the HOA? At any rate, with your new account, make certain it's in the name of the HOA. BOD members (usually Pres and Treas) should only be shown as signatories, not owners of the account.

SusanW1 (Michigan)
Posts: 5,202

Posted:

Take minutees of the meeting to the bank and show them the passed motion that states WHO is the treasurer NOW and give permission to establish any kind of account directed by the Board.

Why aren't there two or three signees on the account you want to close? The former treasurer does not have any power after being replaced. I can't imagine WHY the accounts are in his/her name, anyway.

MicheleD (Kentucky)
Posts: 4,491

Posted:

Mary, our bank is the same way.

Whomever created the account must sign off on any new signees and also is the only one who can remove him/herself from the account.

We ran into this conundrum a few years back when our former treasurer (the one who created the account) not only no longer served on the board, but moved away.

We finally just closed the account at $0 balance and put all the money into a new account at another bank.

But that account required that we provide them with a copy of the board minutes that gave us the authority to open the account.

MicheleD (Kentucky)
Posts: 4,491

Posted:

I'm sorry, I meant, "But that BANK required that we provide them. . ."

MaryA1 (Arizona)
Posts: 7,043

Posted:

Thx Michele,

So now I see that the previous officer was not the "owner" of the account he was just the person that opened the account. I'm sure different banks have different policies. But, they should be willing to bend the rules a bit in certain circumstances.

SusanW1 (Michigan)
Posts: 5,202

Posted:

Make sure your next account has a couple of names on it so that business can get conducted if that person should move, die or just fade away. (It's often the VP and treasurer)

In my past experience, people could be added if minutes of the meeting were shown to the bank officer. It was not necessary to delete any signee, they did not have access to the checking account anymore anyway.

The bank is not going to "bend" rules, they want proof who is authroized by the board to transact business using that checking account.

RogerB (Colorado)
Posts: 5,067

Posted:

We suggest adding new Board members as signees on all accounts every year and deleting signees who are no longer Board members.

JohnB26 (South Carolina)
Posts: 1,569

Posted:

Quote:

Posted By FabianV1 on 06/28/2010 3:48 PM
shouldn't the new BOD be able to take the articles of incorporation and new election results and change the signors and ownership for their accounts without having to get a former officer to sign something that he/she could later be held liable for if fraud, miss-appropriation, etc.?

Yes they should providing the account in question was properly set-up as a corporate type BUSINESS account, not merely an ordinary personal type with a DBA.

This is a common issue with volunteer run corporations.

Good luck ... you may nedd a court order to 'release' the account.

🎯 You've read this entire discussion

Join the conversation with 50,000 HOA & Condo Leaders:

✓ Ask follow-up questions
✓ Share your experience
✓ Get expert advice
✓ Access 350,000 discussions

Create Free Account →

⚡ Takes 30 seconds

Already a member? Log in here