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))

Unsound Mind

Under California law, an HOA board may declare vacant the office of a director who has been declared of unsound mind by a final court order. (Corp Code § 7221) The board cannot make that decision on its own. A civil lawsuit (brought by shareholders, family members, or the board) must result in a judge's formal declaration that the individual is mentally unfit to perform his/her fiduciary duties.

A "Mental Health Diversion Assessment" is not a judicial declaration that an individual is of "unsound mind." It is a pretrial criminal program used to pause prosecution for individuals whose qualifying mental health disorders contributed to a misdemeanor or felony. (Penal Code § 1001.36) It does not apply to corporate director disqualifications.

Before disqualifying a director, a court presumes the director has the capacity to make board decisions. A medical diagnosis of early-stage dementia, Alzheimer's, or a mental health condition by itself is not sufficient for a court to declare someone of unsound mind. It is not enough to show that a director has memory slips or mood swings. The evidence must show a direct link between the mental deficit and the director's ability to appreciate the consequences of his/her corporate decisions or tasks. 

There must be evidence of a deficit in at least one of the following mental functions: (i) alertness, attention, and ability to concentrate, (ii) severe deficits in short- or long-term memory, communication skills, logic, reasoning, or the ability to plan and understand regular business concepts, (iii) severe delusions, hallucinations, or highly disorganized thinking, or (iv) pervasive, severe, and recurrent emotional states, such as extreme apathy, panic, or unprovoked anger, that are highly inappropriate to the situation and block logical reasoning.

Once a court issues a final order or establishes a probate conservatorship, the board of directors can officially pass a resolution declaring the office vacant. Unless the articles or bylaws provide otherwise, the board may fill the vacancy by appointment. If the board does not fill the vacancy, the members may elect a director. (Corp Code § 7224) 

Recall Elections

The membership can remove directors through "Recall Elections."

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