REMOVING DIRECTORS FROM THE BOARD

Removal by the Membership

A.  No Cumulative Voting. If an association has fewer than 50 members, removal is approved by the affirmative vote of a majority of all members entitled to vote. (Corp. Code § 7222(a)) If the association has 50 or more members, removal is approved by the affirmative vote of a majority of the votes represented and voting at a duly held meeting at which a quorum is present, with the affirmative votes also constituting a majority of the required quorum. (Corp. Code § 7222(a)) The inspector of elections tallies the votes and announces the results.

B.  Cumulative Voting. If an association's governing documents allow cumulative voting, the Davis-Stirling Act requires it when electing directors. (Civ. Code § 5115(e)) Cumulative voting makes it easier for a minority of owners to elect a director. It also complicates the removal of a director.

• Removing the Entire Board. Cumulative voting is not used when voting to remove the entire board. The number needed for removal is described above in "No Cumulative Voting."
   
• Removing Less than the Entire Board. Removing fewer than all the directors is more complicated because a minority of voters can block the recall of a director even if a majority of voters approve the removal. The Corporations Code provides that no director may be removed when the votes cast against removal would be sufficient to elect the director if cumulatively voted at an election in which all memberships entitled to vote were voted. (Corp. Code § 7222(b)) This provision is confusing, and authorities disagree on how it works. It calls for a calculation that involves cumulative voting, but using it results in a supermajority to block a recall rather than a minority.

The problem arises because non-cumulative voting is used to approve the recall (a simple "Yes" or "No" vote to remove a director), while cumulative voting is referenced in the statute to block the recall. The two don't mix as described in Example #1 below.

EXAMPLE #1 (Wrong Formula). Assume an association with a 5-member board and 100 members. To make the numbers easy to follow, assume every member casts a ballot. In that scenario, at least 51 "Yes" votes are needed to remove a director. If members can use cumulative votes to elect directors, a minority of "No" votes is sufficient to block the removal of a director. If the cumulative voting formula is used to elect directors, it improperly yields a supermajority needed to block a recall as follows.

This is not the result intended by the Corporations Code, since the number needed to block removal can never be achieved. If 51 members vote to remove a director, only 49 votes remain, which can never reach the 84 calculated by the formula. The statute is poorly drafted and fails to spell out how to achieve its goal of preserving minority representation. A possible reconciliation is to weight the recall Yes/No votes by multiplying them by five so that cumulative voting is on both sides of the equation. That way, they cancel each other out, and we can simplify the formula as demonstrated in Example #2.

EXAMPLE #2 (Correct Formula). If cumulative voting is used, the following formula produces the correct result:

Those Not Voting. Some argue that members who do not vote count as "no" votes. With this interpretation, recalling an individual director is virtually impossible due to voter apathy in most associations. The argument for counting non-votes as no votes relies on their interpretation of language in the Corporations Code that "no director may be removed...when the votes cast against removal, or not consenting in writing to the removal, would be sufficient to elect the director if voted cumulatively..." (Corp. Code § 7222(b)) We disagree with this interpretation. There are two arguments against the practice.

• Written Consent. First, there are two methods for approval. One method is voting by ballot; the other is approval by written consent. In "written consent," one or more documents are circulated to the membership, allowing members to sign to consent to the removal of a director, or not to sign if they oppose removal. If a sufficient number of members do not consent to removal (i.e., oppose removal), the removal fails. Approval by written consent of the membership was eliminated when California changed voting procedures for homeowner associations to secret ballots for the removal of directors.
   
• Ballots Only. Since written consent no longer applies to the removal of HOA directors, only actual ballots against removal may be counted: "No director may be removed...when the votes cast against removal...would be sufficient to elect the director if voted cumulatively..." (Corp. Code § 7222(b))

No Super-Majority. The voting requirement for removing directors is set by law and cannot be raised to a super majority by an association's governing documents. The Corporations Code specifically overrides any conflicting bylaw provisions. As provided for in Corporations Code § 7222(d), "Except as provided for in this section . . . a director may not be removed before the expiration of the director's term of office." If you follow the links in Sections 5033 and 5034, you will see that the approval requirements for removing a director cannot be increased. Section 5034 defines "approved by the members" as the affirmative vote of a majority of the votes represented and voting at a duly held meeting at which a quorum is present. This same section allows bylaws to set a higher voting threshold EXCEPT for the removal of directors (see Corp. Code § 7151(e)). This is reinforced by Corp. Code § 7151(c)(2), which states that an association's bylaws may not contain any provision that conflicts with the law. The legislative notes regarding the removal of directors state that the subdivision specifies the exclusive procedure for removal of directors without cause because governing documents that require a "super-majority" improperly limit shareholders' rights to change the composition of the board between annual meetings.

No Reduced Quorum. The Davis-Stirling Act provides for a reduced quorum for the election of directors but not for recall elections. (Civ. Code § 5115(d)(2))

Removal by a Court

Unsound Mind. The board does not have the authority to decide who is mentally competent to serve as a director. As a result, boards cannot refuse to allow someone to run for the board on the basis of perceived mental incompetence. The board may declare the seat of a director vacant if the director has been declared of unsound mind by a final order of a court. (Corp. Code § 7221(a))

Gross Abuse of Authority. A court may remove from office any director in case of (i) fraudulent or dishonest acts, (ii) gross abuse of authority, or (iii) breach of any duty arising as a result of Section 7238 and may bar from reelection any director so removed for a period prescribed by the court. (Corp. Code § 7223(a))

Removal by Fellow Directors

Only under limited circumstances can directors, whether appointed or elected, be removed by fellow directors. A director's seat can be declared vacant under the following circumstances.

Unqualified Director. By a majority vote of the directors, the board may declare the office of any director vacant if that director ceases to meet the qualifications in effect at the beginning of that director's term of office. (Corp. Code § 7221(b))

•  A Non-Member. A director who ceases to be a member or who is not or no longer lawfully appointed to represent a legal entity owning a separate interest must be removed as unqualified to serve. (Civ. Code § 5105(b))
   
•  Delinquent Director. A director's seat can be declared vacant if the director becomes delinquent in paying regular and special assessments and fails to enter into a payment plan to bring the assessments current. (Civ. Code § 5105(c)(1))
   
•  Co-Owner. A director can be removed if, after being elected, the director becomes a co-owner of a property in the development with another person on the board. (Civ. Code § 5105(c)(2)) The two directors can decide between themselves which one will remain on the board. If they cannot decide, the board can select one.
   
•  Owner Less Than 1 Year. A director who has been a member of the association for less than one year may be disqualified and removed. (Civ. Code § 5105(c)(3))
   
•  Criminal Conviction. Convicted felons are not automatically precluded from serving on boards. Even though Corporations Code § 7221(a) allows a board to declare vacant the seat of a director who is convicted of a felony, the Davis-Stirling Act, which is specific to homeowner associations, does not allow an association to disqualify a person from serving on the board of directors unless a past criminal conviction would prevent the association from purchasing or maintaining a fidelity bond. (Civ. Code § 5105(c)(4))

Missed Meetings. The Corporations Code allows for the removal of a director for missing meetings if provided for in the bylaws. (Corp. Code § 7221(a)) A common bylaw provision allows the board to remove a director who misses three consecutive regular meetings or a total of four regular meetings in a 12-month period.

• Due Process. The vote to vacate a seat is not a disciplinary action — the board is not fining a director for violating a rule. Rather, it is declaring the seat vacant because the person is no longer qualified to be a director. Even so, the board should give notice to the director and hold a hearing in executive session to allow the director to cure the disqualification. If the director cannot or refuses to cure the disqualifying issue, the board can vote to vacate the seat.
   
• Removing an Appointed Director. Except for the circumstances described above, a board cannot remove a director it appointed to a vacant seat. An appointed director has the same powers and duties as other directors. An appointed director occupies a seat on the board, the same as if he/she had been elected. Accordingly, the removal of an appointed director follows the same process as used for removing an elected director. 
   
• Replacement Directors. Once a seat has been vacated, the board can appoint a replacement to fill the seat unless the bylaws state otherwise. If the removal was by the membership, the election of a new director is by the membership, not the board.

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