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August 22, 2006
When a Board Member Resigns, Can He/She Take It Back?
Something totally unexpected happens at a board meeting. It takes the Board members by surprise and scares them out of their wits. A newly elected board member comes to his/her first board meeting and finds out that the Board members are catty and do a lot of name calling, or that a couple of members sit in the front row and harrass the board for the better part of the meeting. A member of the Association that has proven themselves to be very difficult, abusive, threatening or controlling comes in with a handful of proxies to the annual election (perhaps a thing of the past with the new election rules but perhaps not) and is elected to the Board. The other Board members are certain they cannot work with him/her. Resignations abound in these situations. Volunteer Board members often react to what is in front of them, without thinking about the consequences. That is one thing.
Then, perhaps some of the other Board members talk to the one, two, or more, that have resigned and ask them to stay on, promising that they will be supportive, or watch the other person's back, or other Board members or Owners who supported them in the elections beg them to reconsider saying that nothing meaningful can be accomplished without the Board member's assistance or participation. Sometimes that resigning Board member has second thoughts. He or she may decide to withdraw, withhold or take back their resignation. Can they do that?
It depends. The real question is: was the resignation effective? If not, there is no change in trying to "take it back." If it is effective then the question becomes: do the remaining Board members want to appoint that person to fill the vacancy created on the Board by their own resignation. (And can they?) The answer to that would depend on whether there was any language in the documents that prevented that - the re-appointment. There usually is not.
As to whether the resignation is effective ... there are many questions to consider. One thing to do is to check the governing documents for the Association (would normally be a subject covered in the bylaws) and California law (Corporations Code Section 7224 specifically) to find the answer to the question. The bylaws may have specific language stating either that the resignation needs to be accepted to be effective, or to the contrary, that no acceptance is necessary and the resignation is effective when it is given. Some documents say it must be given in writing. Some specify to whom and/or how it must be presented. Most bylaws say that a board member continues to serve until their successor is elected; however, those same documents usually also say that if a Board member resigns, the remaining Board members may appoint a successor that would fill assume that Board member's position for the remaining term of that Board member. In fact, if the Board is down to one person, that person may appoint directors to fill the vacant positions.
It is also very important to consider the words and/or actions involved. Perhaps the resignation is equivocal. Perhaps there is an effective date in the future provided (in which case the resignation is delayed until that date). Perhaps the Board member intended to resign from an office rather than from the Board. Maybe the Board member was intimidated into resiging or resigned under duress. Maybe the other Board members decided the Board member had to resign because he or she had his unit for sale or had sued the Board (neither of which requires of a Board member that they resign, but for many reasons may be the "right" thing to do if either causes the Board member to lose sight of what is best overall for the other members of the Association or he or she loses their long-term vision or interest). Sometimes a Board member says he or she wants "to quit" - and then the question becomes whether that equates to a resignation. Again, it depends (at least I believe that) on what is intended, what the documents say, and what the law says. California Corporations Code Section 7224 says:
"7224 (c) Any director may resign effective upon giving written notice to the chairman of the board, the president, the secretary or the board of directors of the corporation, unless the notice specifies a later time for the effectiveness of such resignation. If the resignation is effective at a future time, a successor may be elected to take office when the resignation becomes effective."
So what happens if all Board members resign? California Corporations Code Section says:
"7220(e) If a corporation has not issued memberships and (1) all the directors resign, die, or become incompetent, or (2) a corporation's initial directors have not been named in the articles and all incorporators resign, die, or become incompetent before the election of the initial directors, the superior court of any county may appoint directors of the corporation upon application by any party in interest."
Thus, any member can petition the Court to appoint directors. However, maybe that sounds easy. It's not. It requires a court petition and probably an attorney to help with the court processes. So where does the money come from for filing fees, attorney fees and expenses? The Banks holding the Association funds will not release them to a person not serving on the Board. There is no way to pay the Association bills.
And while everyone is waiting for that to happen (someone to do something like petition the court), those Board members that resigned could find themselves personally responsible for any losses that occur based on their decision to leave the ship without a captain.
So, it is wise to give thoughtful consideration to resigning ... and then to trying to renig on the resignation.
Posted by Beth Grimm at August 22, 2006 9:31 PM