REMOVAL BY THE BOARD. Where an association's bylaws provide for it or conditions are met as described in the Corporations Code, a director's seat can be declared vacant by the board. See "Director Removal by the Board."
REMOVAL BY THE MEMBERSHIP. The membership always has the right to remove directors from the board. If an association's governing documents provide for cumulative voting, removing less than the entire board is more complicated because a minority of voters can block the recall even if a majority of voters approve it. The process is confusing and authorities disagree on how it works.
Vote to Remove Directors. The to vote to remove directors must be done by secret ballot. 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).) Cumulative voting is not used in this step of the recall. It's a simple yes or no response for removal. If an association's governing documents do not provide for cumulative voting, the Inspector of Elections tallies the votes for recalling directors and announces the results.
Blocking Removal. If the governing documents allow cumulative voting, it is not employed if the vote is to remove the ENTIRE board. In that case, the Inspector of Elections tallies the votes and announces the results. If the vote is to remove individual directors, removal can be blocked by a minority of members. The Corporations Code provides that no director may be removed when the votes cast against removal would be sufficient to elect the director if voted cumulatively at an election where all memberships entitled to vote were voted. (Corp. Code § 7222(b).) Use the following formula to calculate the number of votes needed to block the recall of a director.
|| M x D
||V = VOTES (number of votes needed to block removal)
D = DIRECTORS (total number of directors authorized in the bylaws)
M = MEMBERS (total number of members entitled to vote)
|D + 1
Example. Assume (i) a 5-member board, (ii) a 100-member association, and (iii) 6 candidates running for the board. Assume all 100 members vote and they cast one vote for each of five of the six directors. The formula produces the following result:
|| 100 x 5
||+ 1 = 84.3
||Therefore, the number of votes needed to guarantee the election of one dirctor is 84, which is also the number need to block the recall of a director.
|5 + 1
One Seat Only. If only one seat had been open when the director in question was elected, cumulative voting was not used in that election. That means that once quorum was achieved, a simple majority of votes was needed to elect the director. The same would apply to his recall, i.e., cumulative voting would not apply. That means a majority of those members casting ballots would be needed to block his removal. For example, if there are 100 units in the association and if the quorum is 50% and if 50 members cast ballots, the director subject to recall would need 26 votes to defeat the recall. If, however, 26 voted in favor of his removal and only 24 voted against, the director is recalled.
Staggered Terms. There is disagreement in the legal community on the impact of staggered terms on the formula. Some argue that it has no effect and the total number of directors authorized in the bylaws are used even if only two directors were elected in the most recent election. We disagree.
The Corporations Code provides that the number of votes that elected a director is the number that can block his recall. It states that "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).)
Clearly, the number of open seats in an election affects the cumulative votes needed to elect a director. Per the statute, those votes are the same number needed to block removal. Assuming two seats were open in the most recent election, the formula produces the following result:
|| 100 x 2
||= 66.7 Therefore, the number of votes needed to guarantee the election of one director is 67.
|2 + 1
|| 100 x 3
|3 + 1
V = number of votes needed to block removal
D = total number of directors authorized at the time of the director's most recent election were then being elected
M = total number of members entitled to vote
Those Not Voting. Some in the legal community 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.
1. Written Consent. First, there are two methods for approval. One method is voting by ballot and the other is approval by written consent. In "written consent" one or more documents are circulated to the membership which allows members to sign consenting to the removal of a director or to not sign (consent) 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 homeowners associations to secret ballots for the removal of directors.
2. 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).)
Permanent Removal. The Corporations Code does not provide for the permanent removal of directors. So long as the person meets the qualifications of a director and there are no term limits, he/she can be elected to the board even if recalled by the membership. If an association has cumulative voting, almost anyone can be elected, no matter how dysfunctional they might be. To avoid this problem, associations should amend their bylaws to eliminate cumulative voting.
Recalled Directors & Replacements. Once members remove a director, his/her replacement must be elected by the membership. (Corp. Code § 7224(a).) Unless the articles or bylaws provide otherwise, if the entire board is recalled, directors remain in place until a new board is elected since a corporation cannot function without a board. As long as they meet the qualifications of a director, persons recalled from the board may nominate themselves in advance of the recall and run for open seats in the event the recall is successful. Associations can amend their bylaws to require recalled directors to remain off the board for a specified period of time. Such a restriction, however, could have unintended consequences:
1. Apathy. Sometimes apathy and misinformation can result in good directors being recalled by a small number of owners with personal agendas. Once the recall occurs, the membership may discover that the new directors are worse than the recalled directors. If bylaws imposed restrictions on recalled directors, it would prevent the membership from putting the good directors back on the board.
2. Cumulative Voting. Another problem with the prohibition is that HOAs with cumulative voting sometimes need to recall an entire board to remove one bad director. Restricting recalled directors would make good directors ineligible along with the actual target of the recall.
SENDING BALLOTS. There are a number of factors for boards to consider when sending ballots to recall and elect directors.
Recommendation: Associations should seek legal counsel when faced with a petition to recall one or more directors. Because there is disagreement in the legal community on how cumulative voting affects recall elections, boards should adopt recall procedures. In addition, they should amend their governing documents to (i) eliminate cumulative voting, (ii) limit abusive recall petitions, (iii) eliminate proxies, and (iv) drop quorum requirements for the election of directors.
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