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REMOVAL OF DIRECTORS

REMOVAL BY 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 "Declaring a Seat Vacant."

REMOVAL BY 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, the statute is badly written and authorities disagree on how it works.

Step #1. Approving The Removal. The first step is for the membership to vote by secret ballot to remove a director. If an association has fewer than 50 members, the 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).)

Step #2. Blocking Removal. Once members approve the recall of a director, the removal can be blocked. 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).) Various formulas for calculating the number of votes needed to block removal have been developed by different authors. Following is an example:
V = trunc ({    1    x M}
+ 1)
  [trunc = truncate if the result is fractional]
D + 1   
Recommended. We recommend the following formula because it is easier to understand:
V >
   1    x M
   
V = number of votes needed to block removal
D = total number of directors authorized in the bylaws
M = total number of members entitled to vote
D + 1  
Example. Assume the following: (i) the association has 100 members eligible to vote, (ii) quorum requirements were met, and (iii) there is a five-member board. The formula produces the following result:
V >
   1   
x 100
= 16.6
 
 
 Therefore, the number of votes needed to block the recall is greater than 16.6, i.e., 17.
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:

Example #1
Votes >
   1    x 100
= 33.33
2 + 1
Example #2
Votes >     1    x 100 = 25
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
In Example #1 with two open seats out of five, the number of votes needed to block the recall of an individual director would be greater than 33.33, i.e., 34 votes. In Example #2 with three open seats, the number of votes to block the recall is greater than 25, i.e., 26 votes. Both examples give results in keeping with the language of the statute since they match the number of cumulative votes needed to elect the directors.

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 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.

2. Ballots Only. 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. Accordingly, written consent no longer applies to the removal of HOA directors. Reading the relevant portion of the Corporations Code, 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).)

Replacement Director. Once members remove a director, his replacement must be elected by the membership not appointed by the board. (Corp. Code §7224(a).)

Recommendation: 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.

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

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