Adams Stirling PLC


Right to Dissent. Board members can and should engage in vigorous debate on issues brought before the board. Diversity of opinion and talking through problems and possible solutions brings about better solutions. That does not mean everyone will ultimately agree with a particular solution but the discussion allows all sides of an issue to be examined. At some point a decision must be made. It might not be the best decision, as may be discovered once implemented. If that is the case, it can be reevaluated and adjustments made.

Business Judgment Rule. When a homeowner is elected to the board, he/she automatically becomes a fiduciary and must follow the business judgment rule. That means the actions of a director must be in good faith, in the best interests of the association, and with prudent care. (Corp. Code §7231(a).)  Disrupting operations, attacking fellow directors and undermining an agreed-upon course of action is harmful to the association and falls outside the Business Judgment Rule. When that happens, disruptive directors face potential liability.

One Voice. Once a decision is made, the board should speak with one voice. Dissenting directors are not required to be cheerleaders for the board's decision but should not undermine lawful decisions just because he/she disagrees. If a director goes rogue because he/she does not like a particular decision and behaves badly or breaches their own fiduciary duties, the board may have no choice but to censure him and, when appropriate, form an executive committee to exclude the director from sensitive issues. Any director who believes he/she must win all votes is not suited to be on the board. If needed, the board can call a membership meeting to recall the director.

Majority Breach. An exception to the rule is if a majority of directors were to vote to violate the CC&Rs, violate laws, or in some fashion breach their fiduciary duties. Under those circumstances a dissenting director is not obligated to remain silent and may, in fact, be obligated to speak up.

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

Adams Stirling PLC