Oral Resignation
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ORAL RESIGNATION

Some directors resign orally and refuse to submit a written resignation. If so, is the resignation effective?

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 are allowed to resign by giving written notice. However, it is not mandatory that they 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 case law in California 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 use of the term “may” to be permissive and not mandatory and held that directors could also resign by giveing oral notice. (Biolase v. Oracle.)

Oral Resignation. Consequently, oral resignations become irrevocable once the resignation has been accepted by the board. The board can document it's acceptance by sending a confirming written communication (email or letter) to the director accepting the resignation or it can record the resignation in the minutes of a board meeting.

Withdrawal of Resignation. A director who resigns orally may withdraw the resignation if he/she does so before the resignation is accepted by the board.

Recommendation. Some may disagree with this conclusion since there is no California case law on the subject. Accordingly, boards should rely on their association's legal counsel on this issue.

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