Board of Directors Removal

How to – Step-by-Step

Note:  To remove a community’s Board of Directors – it really needs to be a community effort and not a small band of members.  If the members cannot agree to remove one or more board members, how are they going to vote for a new board?

Keep in mind… once a board has been removed – the voting process takes place to replace all board members.  See pages:  FAQs – Voting is Your Voice; Your Vote Matters

Authorization to Hold a Special Meeting of the Members (NCGS 55A-7-02) Sample Petition – link has been disconnected

1. • By the board of directors, or authorized persons according to the Articles of Incorporation or By-Laws or at least 10% of all the votes entitled to be cast during the proposed special meeting. Members must sign, date and deliver to the corporation’s secretary.  (Example:  189 lots are eligible to vote, 20 signatures of voting lots may call a meeting.)
   • To know the correct number of authorized votes, request a list of all eligible voters from the Secretary or Board of Directors. (NCGS 55A-7-20: The association must provide a list of eligible voters.)
   • If the Association refuses to provide a list – the validity of the list does not apply. (55A-7-20(e))
   • Special meetings of the members for any purpose may be called at any time by the president, the vice-president, the secretary or treasurer, or by any two or more members of the Board of Directors, or upon written request of 1/4 of the voting membership. (Pine Mountain By-Laws, Article XIII)

Meeting Subject:  (Only one subject – Board Removal)

Only those matters that are within the purpose or purposes described in the meeting notice required by 55A-7-05 (Notice of Meeting) may be acted upon at a special meeting of members.  (Example: If the topic/subject of the meeting is “Removal of Current Board of Directors” – the only subject matter that can be discussed is the removal of some or all board members.)

Right to Vote:  (Note:  1 Vote per Lot – if assessments are unpaid – right to vote is suspended)

Initial vote is to remove one or more board members.

• Class A Members shall have no voting rights during the Development Period, except as may be provided to the contrary by resolution of the Board of Directors of the Association, and shall be all those persons or entities as defined in Article IV, with the exception of the Developer, who have paid the Developer in full for the purchase price of a Unit of PML Property.  When more than one person holds such interest or interests in any Unit of PML Property, the vote for such Unit of PML Property shall be exercises as they shall determine; provided, however, that in no event shall more than one vote be case with respect to any such Unit of PML Property. (PM C&Rs – Part 1, Article IV, Section 3:  Voting Rights)
• With the exception of the membership held by the Developer, the membership and associate membership rights of any person or entity whose Unit of PM Property is subject to assessment by the Association, whether or not he is personally obligated to pay such assessments, may, by action of the Association, be suspended from membership during the period for which the assessments remain unpaid; upon payment of such assessments, his rights and privileges shall be automatically restored. (Pine Mountain By-Laws, Article III, Section 4)
• The right of the Association to suspend the enjoyment rights of any Member or Associate Member for any period during which any assessment, service, or use charge, remains unpaid, and for any period not to exceed 30 days for any infraction of its published rules and regulations (Pine Mountain C&Rs, Part 2, Article IV, Section 3)
• Each voting member shall receive one (1) ballot for each unit of property owned, or as described in Section 3, Article IV, to be mailed to the voting member by the Secretary, with a return envelope addressed to the President. There shall be no requirement that the ballot be signed by the voting member.  It shall be the responsibility of the Secretary to code or otherwise identify the ballots so as to prevent duplication or reproduction of the ballots.  (Pine Mountain by-Laws, Article VIII, Section 6)

Proxy Votes: Proxy Form Sample

1. • A member may vote in person or by proxy. A member may appoint one or more proxies to vote or otherwise act for the member by signing an appointment form, either personally or by the member’s attorney-in-fact.  (NCGS 55A-7-24)
   • An appointment of a proxy is effective when received by the secretary or other officer or agent authorized to tabulate votes. An appointment is valid for 11 months unless a different period is expressly provided in the appointment form. (NCGS 55A-7-24)
   • A revocable appointment of a proxy is revoked by the person appointing the proxy: (NCGS 55A-7-24)
     • Attending any meeting and voting in person; or
     • Signing and delivering to the secretary or other officer or agent authorized to tabulate proxy votes either a writing stating that the appointment of the proxy is revoked or a subsequent appointment form.

Attendance at the Meeting:  (Sample Sign In Sheet)

1. 1. • The presence at the meeting of members, personally or by proxy, entitled to cast 1/10 of the total votes of the voting membership, shall constitute a quorum for any action governed by these By-Laws. Any action governed by the Articles of Incorporation or by the Declaration shall require a quorum as therein provided. (Pine Mountain By-Laws, Article XIII)
      • After fixing a record date for a notice of a meeting, a corporation shall prepare an alphabetical list of the names of all its members who are entitled to notice of the meeting. The list shall show the address and number of votes each member is entitled to cast at the meeting.  The corporation shall prepare on a current basis through the time of the membership meeting a list of members, if any, who are entitled to vote at the meeting, but not entitled to notice of the meeting.  This list shall be prepared on the same basis as and be part of the list of members. (NCGS 55A-7-20)
      • Beginning 2 business days after notice is given of the meeting for which the list was prepared and continuing through the meeting, the list of members shall be available at the corporation’s principal office or at a reasonable place identified in the meeting notice in the city where the meeting will be held for inspection by any member for the purpose of communication with other members concerning the meeting. A member, personally or by or with his representatives, is entitled on written demand to inspect and subject to the limitations of 55A-16-02 (c), (Inspection of Records by Members) and 55A-16-05 (Limitations on use of Membership List) and at his expense, to copy the list at a reasonable time during the period it is available for inspection. (NCGS 55A-7-20)
      • The corporation shall make the list of members available at the meeting, and any member, personally or by or with his representatives, is entitled to inspect the list at any time during the meeting or any adjournment. (NCGS 55A-7-20)
      • If the corporation refuses to allow a member or his representative to inspect or copy the list of members as permitted in subsections (b) and (c) of this section, the superior court of the county where a corporation’s principal office (or, if there is none in this State its registered office) is located, on application of the member, after notice is given to the corporation and upon such further evidence, notice and opportunity to be heard, if any, as the court may deem appropriate under the circumstances, may summarily order the inspection or copying at the corporation’s expense. The court may postpone the meeting or which the list was prepared until the inspection or copying is complete and may order the corporation to pay the member’s costs, including reasonable attorneys’ fees, incurred to obtain the order. (NCGS 55A-7-20)
      • Refusal or failure to prepare or make available the members’ list does not affect the validity of action taken at the meeting. (NCGS 55A-7-20)

Quorum Requirement:

1. 1. • Unless the bylaws provide otherwise, a quorum is present throughout any meeting of the association [Members Meeting] of persons entitled to cast 10% of the votes which may be cast for election of the executive board are present in person or by proxy at the beginning of the meeting. (NCGS 47F-3-109)
      • In the event business cannot be conducted at any meeting because a quorum is not present, that meeting may be adjourned to a later date by the affirmative vote of a majority of the those present in person or by proxy. Notwithstanding any provision to the contrary in the declaration or the bylaws, the quorum requirement at the next meeting shall be one-half (1/2) of the quorum requirement applicable to the meeting adjourned for lack of a quorum.  This provision shall continue to reduce the quorum by 50% from that required at the previous meeting, as previously reduced, until such time as a quorum is present and business can be conducted.  (NCGS 47F-3-109)
      • Unless this Chapter, the articles of incorporation, or bylaws provide for a higher or lower quorum, 10% of the votes entitled to be cast on a matter shall be represented at a meeting of members to constitute a quorum on that matter. Once a member is represented for any purpose at a meeting, the member is deemed present for quorum purposes for the remainder of the meeting and for any adjournment of that meeting unless a new record date is or must be set for that adjourned meeting. (NCGS 55A-7-22)
      • If only one of the multiple owners of a lot is present at a meeting of the association, the owner who is present is entitled to cast all the votes allocated to that lot. If more than one of the multiple owners are present, the votes allocated to that lot may be cast only in accordance with the agreement of a majority of interest of the multiple owners, unless the declaration or bylaws expressly provided otherwise.  Majority agreement is conclusively presumed if any one of the multiple owners casts the votes allocated to that lot without protest being made promptly to the person presiding over the meeting by any of the other owners of the lot.  (NCGS 47F-4-110)
      • Votes allocated to a lot may be cast pursuant to a proxy duly executed by a lot owner. If a lot is owned by more than one person, each owner of the lot may vote or register protest to the casting of votes by the other owners of the lot through a duly executed proxy.  A lot owner may not revoke a proxy given pursuant to this section except by actual notice of revocation to the person presiding over a meeting of the association.  A proxy is void if it is not dated.  A proxy terminates 11 months after its date, unless it specifies a shorter term. (NCGS 47F-4-110)
      • No votes allocated to a lot owned by the association may be cast. (NCGS 47F-4-110)

Written Consent: (NCGS 55A-7-04)

1. 1. • Action required or permitted by this Chapter to be taken at a meeting of members may be taken without a meeting if the action is taken by all members entitled to vote on the action. The action shall be evidenced by one or more written consents describing the action taken, signed before or after such action by all members entitled to vote thereon, and delivered to the corporation for inclusion in the minutes or filing with the corporate records.  To the extent the corporation has agreed pursuant to 55A-1-70 (Electronic Transactions), a member’s consent to action taken without a meeting may be in electronic form and delivered by electronic means.
      • If not otherwise determined under 55A-7-03 (Court Ordered Meeting) or 55A-7-07 (Record Date), the record date for determining members entitled to take action without a meeting is the date the first member signs the consent under subsection (a) of this section.
      • A consent signed under this section has the effect of a meeting vote and may be described as such in any document.

55A-7-27. Corporation’s Acceptance of Votes.

1. • If the name signed on a vote, consent, waiver, or proxy appointment corresponds to the name of a member, the corporation if acting In good faith is entitled to accept the vote, consent, waiver, or proxy appointment and give it effect as the act of the member.
   • If the name signed on a vote, consent, waiver, or proxy appointment does not correspond to the record name of a member, the corporation if acting in good faith is nevertheless entitled to accept the vote, consent, waiver, or proxy appointment and give it effect as the act of the member if:
     • The member is an entity and the name signed purports to be that of an officer or agent of the entity;
     • The name signed purports to be that of an attorney-in-fact of the member and, if the corporation requests it, evidence acceptable to the corporation of the signatory’s authority to sign for the member is presented with respect to the vote, consent, waiver, or proxy appointment;
     • Two or more persons hold the membership as cotenants or fiduciaries and the name signed purports to be the name of at least one of the coholders and the person signing appears to be acting on behalf of all the coholders; or
     • In the case of a corporation other than a charitable or religious corporation;
       • The name signed purports to be that of an administrator, executor, guardian, or conservator representing the member and, if the corporation requests it, evidence of fiduciary status acceptable to the corporation is presented with respect to the vote, consent, waiver, or proxy appointment;
       • The name signed purports to be that of a receiver or trustee in bankruptcy or the member, and, if the corporation requests it, evidence of this status acceptable to the corporation is presented with respect to the vote, consent, waiver, or proxy appointment.
     • The corporation is entitled to reject a vote, consent, waiver, or proxy appointment if the secretary or other officer or agent authorized to tabulate votes, acting in good faith, has reasonable basis for doubt about the validity of the signature on it or about the signatory’s authority to sign for the member.
     • The corporation and its officer or agent who accepts or rejects a vote, consent, waiver, or proxy appointment in good faith and in accordance with the standards of this section are not liable in damages to the member for the consequences of the acceptance or rejection.
     • Corporate action based on the acceptance or rejection of a vote, consent, waiver, or proxy appointment under this section is valid unless a court of competent jurisdiction determines otherwise.

 55A-8-08.  Removal of Directors Elected by members or Directors.

• The members may remove one or more directors elected by them with or without cause unless the articles of incorporation provide that directors may be removed only for cause.
• If a director is elected by a class, chapter or other organizational unit, or by region or other geographic grouping, the director may be removed only by that class, chapter, unit, or grouping.
• Except as provided in subsection (i) of this section, a director may be removed under subsection (a) or (b) of this section, only if the number of votes cast to remove the director would be sufficient to elect the director at a meeting to elect directors.
• If cumulative voting is authorized, a director shall not be removed:
  • If the number of votes; or
  • If the director was elected by a class, chapter, unit, or grouping of members, the number of votes of that class, chapter, unit, or grouping

Sufficient to elect the director under cumulative voting, if an election were then being held, is voted against the director’s removal.

• A director elected by members may be removed by the members only at a meeting called for the purpose of removing the director and the meeting notice shall state that the purpose, or one of the purposes, of the meeting is removal of the director.
• In computing whether a director is protected from removal under subsection (b) through (d) of this section it should be assumed that the votes against removal are cast in an election for the number of directors of the class to which the director to be removed belonged on the date of that director’s election.
• An entire board of directors may be removed under subsections (a) through (e) of this section.
• A majority of the directors then in office or such greater number as is set forth in the articles of incorporation or bylaws may, subject to any limitation in the articles of incorporation or bylaws, remove any director elected by the board of directors; provided, however, that a director elected by the board to fill the vacancy of a director elected by the members may be removed by the members, but not the board.
• Notwithstanding any other provision of this section, if, at the beginning of a director’s term on the board of directors, the articles of incorporation or bylaws provide that the director may be removed by the board for missing a specified number of board meetings. The director may be removed only if a majority of the directors then in office vote for the removal.
• Notwithstanding any other provision of this section, the articles of incorporation or bylaws may provide that directors elected after the effective date of such provision shall be removed automatically for missing a specified number of board meetings.
• The articles of incorporation may:
  • Limit the application of this section in the case of a charitable or religious corporation; and
  • Set forth the vote and procedures by which the board of directors or any person may remove with or without cause a director elected by the members or the board.

 55A-8-10. Removal of directors by judicial proceeding. (Sample: Judicial Board Removal)

• The superior court of the county where a corporation’s principal office is located may remove any director of the corporation from office in a proceeding commenced either by the corporation or by its members holding at least 10% of the votes entitled to be cast of any class of members, if the court finds that:
  • The director engaged in fraudulent or dishonest conduct, or gross abuse of authority or discretion, with respect to the corporation, or a final judgment has been entered finding that the director has violated a duty set forth in GS 55A-8-30 (General Standards for Directors), 55A-8-31 (Director conflict of interest), 55A-8-32 (Loans to or guaranties for directors and officers), GS 55A-8-33 (Liability for unlawful loans or distribution).
  • Removal is in the best interest of the corporation.
• The court that removes a director may bar the director from serving on the board of directors for a period prescribed by the court.
• If members commence a proceeding under subsection (a) of this section, the corporation shall be made a party defendant.

Tally of all violations accrued by current board of directors.  See: Board Violations