Boards of Directors	Board Meetings
Committees	Management

Authority & Duties	Fiduciary Duties	Ethics	Censure
Provisional Directors	Director Resignations	Director Appointments	Officers

ELECTING OFFICERS

Required and Optional Officers

Required Officers. Incorporated associations are required to have the following officers: President, Secretary, and Treasurer. (Corp. Code § 7213(a))

Vice President. Unless required by an association's bylaws, the office of vice president is optional.

Member at Large. There is no officer position called "director at large" or "member at large" in the Corporations Code § 7213(a) or in Robert's Rules of Order. (RONR (12th ed.) 47) Even so, many in the HOA industry use the term to describe a director who is not an officer. A director at large has the same voting rights as all other directors, but without the extra duties associated with being an officer. In non-HOA corporations, the title refers to a director who does not participate in the company's day-to-day management and is sometimes referred to as an independent or outside director.

Officers Selected by the Board

Unless the bylaws provide otherwise, the board chooses officers, not the membership. (Corp. Code § 7213(b)) No one person on the board, such as the president, has the right to select the remaining officers. A majority vote of the board determines officers. Selecting officers is normally done at an organizational meeting immediately following the annual meeting. Still, it may be done later, subject to any time requirements in the governing documents. The selection of officers is conducted at an open meeting because it does not qualify as an executive session. Accordingly, members can attend the meeting and observe the process. Suppose the organizational meeting is not held at the annual meeting. In that case, notice of the organizational meeting must be given to the membership in the same manner as any other open meeting.

Partial Change in Board. A partial change in the board from a membership election triggers a new election of officers if the board so chooses. At the board's discretion, it can keep existing officers in place or change one or more of them. 

Qualifications. Unless required by the governing documents, officers need not be members of the board or members of the association. Officer qualifications are normally found in the bylaws.

Nominations. Nominations for each office (president, vice president, secretary, and treasurer) are made by board members, not the membership. No second is needed for nominations. (RONR (12th ed.) 46:6) Directors may nominate themselves if they wish. Since the Davis-Stirling Act allows members to nominate themselves to run for the board, it would be reasonable to allow self-nomination as officers. (Civ. Code § 5105(a)(3)) The board, not the membership, votes on each nomination.

Conducting the Vote. The vote is frequently done by voice vote, but may be done by secret ballot if one or more directors request it. If done by secret ballot, each director writes the name of the person they are voting for on a slip of paper. Election Inspectors are not required for counting these ballots. Each director can hand their ballot to the manager (or another person) to open and read aloud. The person with the most votes wins the office. The process is repeated for each officer until all positions are filled.

Voting for Oneself. All directors may participate in the voting for officers, including those directors who are nominees for the office at issue. "The rule on abstaining from voting on a question of direct personal interest does not mean that a member should not vote for himself for an office . . ." (RONR (12th ed.) 45:5) It does not qualify as a conflict of interest. 

Differences Between Directors and Officers

Officers are required by statute, but being an officer does not give one the power to vote. In many sets of bylaws, officers need not be directors. When directors cast votes, they may be officers, but when they vote, they vote as directors, not as officers. The president, vice president, secretary, and treasurer may vote as directors, not as officers. Following are the differences between directors and officers 

DIRECTORS		OFFICERS
1. Elected by the membership. 2. Serve terms described in the bylaws. 3. Qualifications described in the Election Rules.  4. Can be removed by the membership.            5. Have voting rights.		1. Appointed by the board. 2. Serve at the pleasure of the board. 3. Qualifications described in the bylaws. 4. Can be removed by the board. 5. Have no voting rights.

Multiple Offices. For nonprofit mutual-benefit corporations (the form of incorporation for most associations), any number of offices may be held by the same person unless the articles or bylaws provide otherwise. (Corp. Code § 7213(a)) Accordingly, one director may hold multiple offices, such as President-Secretary, Secretary-Treasurer, or Vice President-Treasurer, but cannot hold multiple director seats. Boards should check their governing documents to see if there are restrictions on directors holding multiple offices.

One Vote Per Director. It does not matter that a director is also an officer--it does not give him/her an extra vote. If the board consists of five directors, it has one for each director. Officers cannot vote twice, once as a member and then again as an officer. (RONR (12th ed.) 44:12)

Term of Office

Officers serve at the board's pleasure, most often for one-year terms, i.e., until the next annual meeting or until changed by the board mid-term. This is true even if only part of the board is elected each year.

Staggered Terms. A growing number of associations now have staggered two- or three-year terms for directors (depending on the size of the board). As a result, a portion of the board, rather than the entire board, is elected each year. A director who has a two-year or three-year term can serve as president, secretary, or treasurer for their entire term as a director, but not necessarily. Unless the bylaws state otherwise, all offices (president, secretary, treasurer) automatically end with the election of new directors at the annual meeting, even if the change on the board is partial. The new board can confirm existing officers or name new ones.

EFFECT OF PERIODIC PARTIAL CHANGE IN BOARD MEMBERSHIP. In cases where a board is constituted so that a specified portion of its membership is chosen periodically (as, for example, where one-third of the board is elected annually for three-year terms), it becomes, in effect, a new board each time such a group assumes board membership. ... it chooses new officers and committees as soon as the new board members have taken up their duties, just as if the entire board membership had changed. The individual replacement of persons who may occasionally vacate board membership at other times, however, does not have these effects. (RONR (12th ed.) 49:22)

Officer Resignations

Any officer may resign at any time upon written notice to the board. (Corp. Code § 7213(b)) The resigning officer remains a director on the board unless he/she also resigns from the board. 

Board's Right to Change Officers

Officers are required by statute, but because the board appoints them, they serve at the pleasure of the board. (Corp. Code § 7213(b)) As a result, boards can change officers at any time, with or without cause. If a board decides that a director serving as president, secretary, or treasurer has become disruptive or is no longer effective, the board can remove the person from office and appoint another to fill the position. No warnings need be given and no hearings held, since changing an officer does not fall under the umbrella of rules violations and monetary penalties. To be clear, the board is not removing the director; they are removing him/her only as an officer.

Agenda Item. The appointment of new officers takes place at a duly noticed open-session board meeting. However, discussion may take place privately in executive session if the matter involves potential legal issues. Depending on the circumstances, the change in officers can be made at a regular board meeting, a special meeting, or an emergency meeting.

Removed Officers. Removing a director from an office is not the same as the board declaring a seat vacant or the membership removing a director. Directors who are removed as officers (President, Secretary, Treasurer) continue to serve on the board with all of the rights and privileges of a director.

Filling Vacancies

Unless otherwise provided in the articles or bylaws, a vacancy created by the resignation, removal, or death of an officer is filled by board approval. (Corp. Code § 7213(b)) This general principle is also described in Robert's Rules of Order: "The power to appoint or elect persons to any office or board carries with it the power to accept their resignations, and also the power to fill any vacancy occurring in it, unless the bylaws expressly provide otherwise.: (RONR (12th ed.) 47:57) The remaining directors fill officer vacancies by a majority vote. The president may participate in the process, but does not have the power to be the sole determiner in selecting replacement officers.

No Officer Election Required. The individual replacement of persons who may occasionally vacate the board membership does not trigger a new election of officers. (RONR (12th ed.) 49:22)

OFFICER DUTIES

HOA President

President of the Association. Unless an association's governing documents state otherwise, the president is elected by fellow directors, not by the membership, and serves at the board's pleasure. (Corp. Code § 7213) More often than not, the president is referred to as the "Board President" or "President of the Board." There is no harm in using the term, although technically most governing documents define the office as "President of the Association." Unless otherwise provided in the bylaws, a president's duties generally include:

• preside over board and membership meetings,
• serve as the liaison between management and the board,
• serve as liaison between the association's attorney and the board,
• serve as general manager and oversee day-to-day matters, such as meeting with vendors, soliciting bids, etc. (unless a manager has been hired to handle those duties),
• co-sign checks with the treasurer or secretary,
• serve as an ex officio member of committees. (“Ex officio” is a Latin term meaning “by virtue of office or position.” An ex officio member of a committee is a person serving on a committee by virtue of their position rather than by appointment. An association's bylaws may sometimes state that the president is an ex officio member of all committees. If that is the case, the president "has the right, but not the obligation, to participate in the proceedings of the committees." (RONR (12th ed.) 47:20)

Small Associations. In small associations, it is not unusual for the president to oversee day-to-day operations. That means handling calls, meeting vendors, and authorizing small expenditures. Boards can pre-authorize the president to spend up to $100, $200, $500, etc., on HOA matters at the president's discretion. The amount authorized varies from board to board and depends on the association's budget. Once a limit has been established, the president's expenditures must be reported to fellow directors. Reporting can be done as costs are incurred and then noted in the board's monthly financial report.

Board's Duty to Monitor the President. Boards have a duty to monitor the president's actions. If the president fails to abide by spending limits set by the board, fails to timely report matters affecting the association or exceeds other limitations set by the board, fellow directors can immediately appoint a new president.

Voting Rights. Under Robert's Rules of Order, the president is not required to abstain from making motions or voting on motions. Unless an association's governing documents prohibit the president from voting, he/she may actively participate in board meetings and vote on all matters brought before the board, whether in open or executive sessions.

PROCEDURE IN SMALL BOARDS. In a board meeting where there are not more than about a dozen members present, some of the formality that is necessary in a large assembly would hinder business. The rules governing such meetings are different from the rules that hold in other assemblies, in the the following respects: . . . the chairman [may] . . . vote on all questions. (RONR (12th ed.) 49:21)

The exception to voting is when the president has a conflict of interest and needs to recuse him/herself from the vote.

No Veto Power by the President. The president cannot veto board decisions.  If the president refuses to implement a lawful decision of the board, he/she can be removed as president and a new one appointed by the board.

Vice-President

Unless required by an association's bylaws, the office of vice president is optional. Even so, most association boards appoint a vice president to perform the president's duties in the president's absence or when, for any reason, the president vacates the chair. (RONR (12th ed.) 47:23)

Secretary

Unless the governing documents provide otherwise, a secretary's duties are as follows:

• oversee giving notice of board and membership meetings;
• ensure that minutes of meetings are taken and approved;
• sign approved meeting minutes;
• oversee the preparation of the membership list;
• file appropriate documents with the Secretary of State;
• ensure that the association's records are maintained; and
• frequently co-signs checks with the president or treasurer.

Secretary Absent. If the secretary is absent from a meeting, the president should appoint someone to take the minutes so there is a record of the board's actions. (RONR (12th ed.) 47:34)

Assistant Secretary. If minutes are taken by someone other than the secretary, that person may be designated in the minutes as the "assistant secretary" or "recording secretary" so the person is covered by the association's Directors and Officers ("D&O") liability insurance. Boards should verify coverage with their association's insurance broker.

Signing Minutes. Corporate minutes are the official records of the association. Once approved by the board, the minutes are signed by the secretary. Minutes constitute prima facie evidence of the matters contained in them. (Corp. Code § 7215) By signing the minutes, the secretary indicates that the board of directors has approved them. It does not mean the secretary personally agrees with the decisions made by the board contained in the minutes. The secretary cannot refuse to sign the minutes because he/she disagrees with a particular board decision. The secretary is simply affirming that the board of directors approved the minutes.  If a secretary refuses to carry out his/her duties, the president can sign the minutes. (RONR (12th ed.) 48:7) In addition, the board may replace the secretary and have the minutes signed by the new secretary.

Approved by the Board May 2, 2024

____________________________________________                       
Jane Smith, Secretary

Treasurer
 

Treasurer. Beginning January 1, 2019, boards of directors must review their association's financial records every month. (Civ. Code § 5500) Boards can delegate the task to the treasurer and other board members. The review requirements of Section 5500 may be met when every individual member of the board, or a subcommittee of the board consisting of the treasurer and at least one other board member, reviews the documents and statements described in Section 5500 independent of a board meeting, so long as the review is ratified at the board meeting after the review and that ratification is reflected in the minutes of that meeting. (Civ. Code § 5501)

Non-Director Treasurer. Civil Code § 5501 implies that treasurers should be board members. The conservative approach is to elect directors to that position. However, if an association’s bylaws allow non-directors to be treasurers, the statute does not preclude a board from appointing a non-director to that office.

Authority of the Treasurer. Treasurers do not have unlimited authority over the association's monies. Unless the governing documents provide otherwise, a treasurer's duties are as follows:

• oversee the association's operating and reserve accounts,
• keep and maintain the association's financial documents,
• oversee the deposits,
• oversee investments,
• ensure that bills are paid,
• oversee the preparation of the budget,
• ensure that a report of financial transactions is made to the board,
• ensure that a reserve study is prepared,
• serve as the board's liaison with the association's auditor,
• review monthly financial statements,
• implement safeguards to protect the association's financial assets,
• ensure that tax returns are filed on time, and
• sign bank cards and co-sign checks with the president or secretary.

Treasurer's Report. It is industry practice for the treasurer to give a report at regular board meetings. The "Treasurer's Report" may be written or may consist simply of a verbal statement of the cash balance on hand--or of this balance less outstanding obligations. "The report does not require any action by the board, unless it is of sufficient importance, as an annual report, to be referred to auditors. (RONR (12th ed.) 48:20, 24) The general practice is to have minutes reflect that "A monthly financial report was submitted to the Board," or "The Treasurer's report was given," or "An interim financial statement was received by the Board along with the Treasurer's report."

Assistant Treasurer. If the treasurer needs assistance with their duties, the board can appoint someone, such as a homeowner with budgeting and accounting experience, as "Assistant Treasurer." This should be done by a motion in the minutes. 

Delegating Authority. When it comes to paying bills, the board can empower the treasurer to pay routine, recurring expenses such as utility bills and insurance premiums. As a safeguard, the board can set a dollar limit on the treasurer's payment authority. However, the board is still responsible for overseeing the treasurer's actions. Accordingly, the board should establish internal controls and regularly review the treasurer's activities and the association's finances. Otherwise, the association will be vulnerable to the improper handling of association finances up to and including embezzlement, and the board could be held in breach of its fiduciary duties.

Bank Signature Cards. See bank signature cards and two signature requirement. 

Managing Agent. When documents are silent on check signing, many associations allow their managing agent to pay routine operational expenses, such as utility bills, insurance premiums, and contracted services (pool cleaning, elevator maintenance, cable TV, etc.), without directors' signatures. To limit their agent's check-signing authority, boards require that any unusual expenses or expenses above a certain dollar amount first receive board president authorization, full board authorization, or the signature of at least one director. The procedures vary from association to association.

Recommendation: The authority to transfer funds, whether given to managing agents or limited to directors, creates potential for unauthorized transfers. To protect the association's funds against embezzlement, boards must (i) be diligent in reviewing bank statements and reconciliations, (ii) establish internal controls, (iii) carry a fidelity bond, and (iv) conduct annual independent reviews.

ASSISTANCE: Associations needing legal assistance can contact us. To stay current with community association issues, subscribe to the Davis-Stirling Newsletter.