ARTICLE 2. Selection, Removal and Resignation of Directors [5220 - 5227]
( Article 2 added by Stats. 1978, Ch. 567. )
(a) Except as provided in subdivision (d), (e), or (f), directors shall be elected for terms of not longer than four years, as fixed in the articles or bylaws. However, the terms of directors of a corporation without members may be up to six years. In the absence of any provision in the articles or bylaws, the term shall be one year. The articles or bylaws may provide for staggering the terms of directors by dividing the total number of directors into groups of one or more directors. The terms of office of the several groups and the number of directors in each group need not be uniform. An amendment of the articles or bylaws may not extend the term of a director beyond that for which the director was elected, and any bylaw provision increasing
the terms of directors may not be adopted without approval of the members (Section 5034).
(b) Unless otherwise provided in the articles or bylaws, each director, including a director elected to fill a vacancy, shall hold office until the expiration of the term for which elected and until a successor has been elected and qualified, unless the director has been removed from office.
(c) The articles or bylaws may provide for the election of one or more directors by the members of any class voting as a class.
(d) For the purposes of this subdivision, “designator” means one or more designators. Notwithstanding subdivisions (a) to (c), inclusive, all or any portion of the directors authorized in the articles or bylaws of
a corporation may hold office by virtue of designation or selection by a specified designator as provided by the articles or bylaws rather than by election. Those directors shall continue in office for the term prescribed by the governing article or bylaw provision, or, if there is no term prescribed, until the governing article or bylaw provision is duly amended or repealed, except as provided in subdivision (e) of Section 5222. A bylaw provision authorized by this subdivision may be adopted, amended, or repealed only by approval of the members (Section 5034) except as provided in subdivision (d) of Section 5150. Unless otherwise provided in the articles or bylaws, the entitlement to designate or select a director or directors shall cease if any of the following circumstances exist:
(1) The specified designator of that director or directors
has died or ceased to exist.
(2) If the entitlement of the specified designator of that director or directors to designate is in the capacity of an officer, trustee, or other status and the office, trust, or status has ceased to exist.
(e) If a corporation has not issued memberships and (1) all the directors resign, die, or become incompetent, or (2) a corporation’s initial directors have not been named in the articles and all incorporators resign, die, or become incompetent before the election of the initial directors, the superior court of any county may appoint directors of the corporation upon application by any party in interest.
(f) If authorized in the articles or bylaws of a corporation, all or any portion
of the directors may hold office ex officio by virtue of occupying a specified position within the corporation or outside the corporation. The term of office of an ex officio director shall coincide with that director’s respective term of office in the specified position entitling him or her to serve on the board of directors. Upon an ex officio director’s resignation or removal from that position, or resignation or removal from the board for any reason, the term of office as a director of the corporation shall immediately cease. At that time, the successor in office shall become an ex officio director of the corporation, occupying the place of the former director.
(Amended by Stats. 2018, Ch. 322, Sec. 2. (AB 2557) Effective January 1, 2019.)
(a) The board may declare vacant the office of a director who has been declared of unsound mind by a final order of court, or convicted of a felony, or been found by a final order or judgment of any court to have breached any duty under Article 3 (commencing with Section 5230), or, if at the time a director is elected, the bylaws provide that a director may be removed for missing a specified number of board meetings, fails to attend the specified number of meetings.
(b) As provided in paragraph (3) of subdivision (c) of Section 5151, the articles or bylaws may prescribe the qualifications of directors. The board, by a majority vote of the directors who meet all of the required qualifications to be a director, may declare vacant the office of any director who fails or ceases to meet any required qualification that was in effect at the beginning of that director’s current term of office.
(Amended by Stats. 1996, Ch. 589, Sec. 7. Effective January 1, 1997.)
(a) Subject to subdivisions (b) and (f), any or all directors may be removed without cause if:
(1) In a corporation with fewer than 50 members, the removal is approved by a majority of all members (Section 5033).
(2) In a corporation with 50 or more members, the removal is approved by the members (Section 5034).
(3) In a corporation with no members, the removal is approved by a majority of the directors then in office.
(b) Except for a corporation having no members pursuant to Section 5310:
(1) In a corporation in which the articles or bylaws authorize members to cumulate their votes pursuant to subdivision (a) of Section 5616, no director may be removed (unless the entire board is removed) if the votes cast against removal, or not consenting in writing to the removal, would be sufficient to elect the director if voted cumulatively at an election at which the same total number of votes were cast (or, if the action is taken by written ballot, all memberships entitled to vote were voted) and the entire number of directors authorized at the time of the director’s most recent election were then being elected.
(2) If by the provisions of the articles or bylaws the members of any class, voting as a class, are entitled to elect one or more directors, any director so elected may be removed only by the applicable vote of the members of that class.
(3) If by the provisions of the articles or bylaws the members within a chapter or other organizational unit, or region or other geographic grouping, voting as such, are entitled to elect one or more directors, any director so elected may be removed only by the applicable vote of the members within the organizational unit or geographic grouping.
(c) Any reduction of the authorized number of directors or any amendment reducing the number of classes of directors does not remove any director prior to the expiration of the director’s term of office unless the reduction or any amendment also provides for the removal of one or more specified directors.
(d) Except as provided in this section and Sections 5221, 5223, and 5227, a director may not be removed prior to the expiration of the director’s term of office.
(e) If a director removed under this section, Section 5221, Section 5223, or Section 5227 was chosen by designation pursuant to subdivision (d) of Section 5220, then:
(1) If a different person may be designated pursuant to a governing article or bylaw provision, the new designation shall be made.
(2) If the governing article or bylaw provision contains no provision under which a different person may be designated, the governing article or bylaw provision shall be deemed repealed.
(f) For the purposes of this subdivision, “designator” means one or more designators. If by the provisions of the articles or bylaws a designator is entitled to designate one or more directors, then:
(1) Unless
otherwise provided in the articles or bylaws at the time of designation, any director so designated may be removed without cause by the designator of that director.
(2) Any director so designated may only be removed under subdivision (a) with the written consent of the designator of that director.
(3) Unless otherwise provided in the articles or bylaws, the right to remove shall not apply if any of the following circumstances exist:
(A) The designator entitled to that right has died or ceased to exist.
(B) If that right is in the capacity of an officer, trustee, or other status, and the office, trust, or status has ceased to exist.
(Amended by Stats. 2011, Ch. 442, Sec. 5. (AB 1211) Effective January 1, 2012.)
(a) The superior court of the proper county may, at the suit of a director, or twice the authorized number (Section 5036) of members or 20 members, whichever is less, remove from office any director in case of fraudulent or dishonest acts or gross abuse of authority or discretion with reference to the corporation or breach of any duty arising under Article 3 (commencing with Section 5230) of this chapter, and may bar from reelection any director so removed for a period prescribed by the court. The corporation shall be made a party to such action.
(b) The Attorney General may bring an action under subdivision (a), may intervene in such an action brought by any other party and shall be given notice of any such action brought by any other party.
(Amended by Stats. 1981, Ch. 587, Sec. 6.)
(a) Unless otherwise provided in the articles or bylaws and except for a vacancy created by the removal of a director, vacancies on the board may be filled by approval of the board (Section 5032) or, if the number of directors then in office is less than a quorum, by (1) the unanimous written consent of the directors then in office, (2) the affirmative vote of a majority of the directors then in office at a meeting held pursuant to notice or waivers of notice complying with Section 5211, or (3) a sole remaining director. Unless the articles or a bylaw approved by the members (Section 5034) provide that the board may fill vacancies occurring in the board by reason of the removal of directors, or unless the
corporation has no members pursuant to Section 5310, such vacancies may be filled only by approval of the members (Section 5034).
(b) The members may elect a director at any time to fill any vacancy not filled by the directors.
(c) Any director may resign effective upon giving written notice to the chairperson of the board, the president, the secretary or the board of directors of the corporation, unless the notice specifies a later time for the effectiveness of such resignation. If the resignation is effective at a future time, a successor may be elected to take office when the resignation becomes effective.
(Amended by Stats. 2022, Ch. 617, Sec. 49. (SB 1202) Effective January 1, 2023.)
(a) If a corporation has an even number of directors who are equally divided and cannot agree as to the management of its affairs, so that its activities can no longer be conducted to advantage or so that there is danger that its property, activities, or business will be impaired or lost, the superior court of the proper county may, notwithstanding any provisions of the articles or bylaws and whether or not an action is pending for an involuntary winding up or dissolution of the corporation, appoint a provisional director pursuant to this section. Action for such appointment may be brought by any director or by members holding not less than 331/3 percent of the voting power.
(b) If the members of a corporation are deadlocked so that they cannot elect the directors to be elected at the time prescribed therefor, the superior court of the proper county may, notwithstanding any provisions of the articles or bylaws, upon petition of members holding 50 percent of the voting power, appoint a provisional director or directors pursuant to this section or order such other equitable relief as the court deems appropriate.
(c) Any person bringing an action under subdivision (a) or (b) shall give notice to the Attorney General, who may intervene.
(d) The Attorney General may bring an action under subdivision (a) or (b).
(e) A provisional director shall be an impartial person, who is neither a member nor a creditor of the corporation, nor related by consanguinity or affinity within the third degree according to the common law to any of the other directors of the corporation or to any judge of the court by which such provisional director is appointed. A provisional director shall have all the rights and powers of a director until the deadlock in the board or among members is broken or until such provisional director is removed by order of the court or by approval of a majority of all members (Section 5033). Such person shall be entitled to such compensation as shall be fixed by the court unless otherwise agreed with the corporation.
(Amended by Stats. 1995, Ch. 154, Sec. 12. Effective January 1, 1996.)
Except upon notice to the Attorney General, no director may resign where the corporation would then be left without a duly elected director or directors in charge of its affairs.
(Added by Stats. 1978, Ch. 567.)
(a) Any other provision of this part notwithstanding, not more than 49 percent of the persons serving on the board of any corporation may be interested persons.
(b) For the purpose of this section, “interested persons” means either:
(1) Any person currently being compensated by the corporation for services rendered to it within the previous 12 months, whether as a full- or part-time employee, independent contractor, or otherwise, excluding any reasonable compensation paid to a director as director; or
(2) Any brother, sister, ancestor, descendant, spouse, brother-in-law, sister-in-law, son-in-law, daughter-in-law, mother-in-law, or father-in-law of any such person.
(c) A person with standing under Section 5142 may bring an action to correct any violation of this section. The court may enter any order which shall provide an equitable and fair remedy to the corporation, including, but not limited to, an order for the election of additional directors, an order to enlarge the size of the board, or an order for the removal of directors.
(d) The provisions of this section shall not affect the validity or enforceability of any transaction entered into by a corporation.
(Amended by Stats. 1996, Ch. 589, Sec. 8. Effective January 1, 1997.)