Director Resignations
A director may resign at any time by submitting his/her resignation. Whenever a vacancy is created on the board, whether through resignation, death, removal, or otherwise, the vacancy should be recorded in the minutes. Meeting minutes should always record any changes in the board's membership and its officers.
Email Resignation. An email satisfies the written notice requirement. As provided for in California's Uniform Electronic Transactions Act, an electronic document, such as an email, is an enforceable writing between parties. Emails are just as legal and enforceable as traditional letters signed in ink. Under the Act, a "digital signature" is defined as an electronic identifier created by a computer that the party intends to have the same force and effect as a manual signature. Accordingly, the director's resignation via email is effective and cannot be withdrawn unless the board accepts the retraction.
Oral Resignation. Oral resignations are treated differently. Some directors resign orally and refuse to submit a written resignation. Oral resignations become irrevocable once accepted by the board. The board can document its acceptance by sending a written confirmation (email or letter) to the director, or by recording the resignation in the minutes of a board meeting.
Corporations Code. The Corporations Code states that "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..." (Corp. Code § 7224(c)) Because "may" is permissive (Corp. Code § 15), directors may resign by giving written notice. However, they don't need to do so. If the statute had intended that resignations were effective only when done in writing, the Corporations Code would have used the word “shall” instead of "may."
Case Law. There is no California case law on this issue. Other states, however, have addressed it. While not binding, a Delaware case examined a similar statute: “Any director may resign at any time upon notice given in writing or by electronic transmission to the corporation.” The Delaware Supreme Court found the term “may” to be permissive, not mandatory, and held that directors could also resign by giving oral notice. (Biolase v. Oracle)
Future Date Resignations
A resigning director controls the date and time of his/her departure from the board. Resigning directors may set the effective dates and times of their resignations. (Corp. Code § 7224(c)) Directors remain in office and continue to function as directors until their resignations take effect. This issue was addressed by the Court of Appeal. The court held that a director who has tendered their resignation to take effect upon the election and qualification of their successor does not cease to be a director until the resignation is accepted and the successor is elected. Consequently, the director remains eligible to participate in board meetings, be counted for quorum purposes, and vote on the election of their successor. (Mayo v. Interment Properties (1942) 53 Cal.App.2d 654, 659)
Sample Resignation Letter
If a director wishes to resign from the board of directors, something similar to the following may be used:
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[Date]
Dear Board [or Dear Fellow Directors]:
Please accept my resignation from the Board of Directors and as an officer of the Association [if an office is held]. My resignation takes effect immediately.
OR
Please accept my resignation from the Board of Directors and as an officer of the Association [if an office is held]. My resignation will take effect upon the appointment of my successor. [This allows the resigning director to participate in the selection of his/her successor.]
- signature: _______________________
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Withdrawal of Resignation
Future Date Resignation. A resignation that takes effect at a future date may be withdrawn or postponed at any time before that date. The board cannot alter the date and time of another director's resignation by "accepting" it before it takes effect.
Oral Resignation Withdrawn Before Acceptance. A director who resigns orally may withdraw the resignation if he/she does so before the board accepts the resignation.
Written Resignation Withdrawn Before Acceptance. There is a split of opinion on whether a written resignation can be withdrawn.
Opinion #1. A written resignation transmitted to the board can be withdrawn if it is submitted before the board accepts it. If, however, the board does not formally accept the resignation but instead informally accepts it by appointing a replacement director, the resignation cannot be withdrawn.
Opinion #2. A director’s resignation is effective upon giving written notice to the board and cannot be withdrawn without the board's permission.
Recommendation: Because there is a split in opinion on the issue, boards should seek legal counsel if this situation should arise.
It is not uncommon for a director to vacate his/her seat before the end of their term. A heavy workload at the office, family issues, or health problems make it difficult for the person to remain on the board. If there is more than one vacancy and the remaining directors are fewer than a quorum, the board cannot conduct any business except to appoint additional directors until they have enough to meet the quorum. (Corp. Code § 7224(a))
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