How vacancies in the Board of Directors/Trustees are filled (Section 28, Revised Corporation Code)

Summary

Attorney Chris Batan Lasko's YouTube channel simplifies the law in under 10 minutes per video. This episode focuses on filling vacancies in a board of directors or trustees under the Revised Corporation Code, Section 28. It explains the causes of vacancies, the importance of understanding them to determine the filling process, and the various scenarios including death, resignation, removal, or increase in board size. The video also covers the role of quorum, the process for emergency board filling, and the temporary measures to prevent substantial corporate damage.

Takeaways

• 📚 The video is aimed at simplifying the law, specifically discussing how to fill vacancies in the board of directors or trustees.
• 🔍 The script references Section 28 of the Revised Corporation Code, which outlines the process for filling board vacancies.
• 🚫 Vacancies can occur due to various reasons, including the expiration of a term, removal, death, resignation, or selling of shares by a director.
• 🔑 The method of filling a vacancy depends on the cause and whether the remaining board can constitute a quorum.
• 🔢 A quorum is defined as one half plus one of all the board members, which is crucial for determining who can fill a vacancy.
• 👥 If the remaining board can form a quorum, they can fill the vacancy by a majority vote of the remaining directors.
• 📉 If the board cannot form a quorum due to vacancies, the stockholders or members must elect a replacement.
• 📆 Vacancies caused by term expiration must be filled by an election held on or before the day of term expiration.
• 🔄 If a director is removed, the vacancy must be filled by the stockholders or members, reflecting their power to both remove and elect directors.
• 📈 Vacancies due to an increase in the number of directors or trustees are filled through a regular or special election by the stockholders or members.
• ⏱ In urgent situations where the remaining directors cannot form a quorum, the vacancy may be temporarily filled by a unanimous vote among the remaining directors from among the corporation's officers.
• 📝 The term of an emergency director or trustee is limited to the remaining term of the director they replaced, and the corporation must notify the commission of the emergency board's creation.

Q & A

What is the purpose of the video by Attorney Chris Batan Lasko?

The purpose of the video is to simplify the law, specifically discussing the process of filling vacancies in the board of directors or the board of trustees under the Revised Corporation Code.

What are the common causes of vacancies in the board of directors or trustees?

Common causes of vacancies include the expiration of a term, removal of a director or trustee, death, resignation, selling of all shares by a director, or an increase in the number of directors or trustees.

Why is it important to determine the cause of a vacancy in the board?

Determining the cause of a vacancy is important because it dictates the method by which the vacancy should be filled, as outlined in Section 28 of the Revised Corporation Code.

How can a vacancy caused by the death or resignation of a director or trustee be filled?

A vacancy caused by death or resignation can be filled either by the remaining members of the board, provided they still constitute a quorum, or by the stockholders or members of the corporation.

What is a quorum and how does it relate to filling a vacancy in the board?

A quorum is one half plus one of all the members of the board of directors. It is important for filling a vacancy because if the remaining board constitutes a quorum, they can fill the vacancy themselves.

What happens if the remaining board members do not constitute a quorum after a vacancy?

If the remaining board members do not constitute a quorum, the vacancy must be filled by an election conducted by the stockholders or members of the corporation.

How is a vacancy caused by the term expiration of a director filled?

A vacancy due to term expiration is filled by a vote from the stakeholders or members of the corporation, following the election process previously discussed in another video.

What is the role of the stockholders or members in filling a vacancy caused by the removal of a director or trustee?

The stockholders or members must fill a vacancy caused by the removal of a director or trustee, as they are the ones with the power to remove directors or trustees and thus should also fill the resulting vacancy.

How are vacancies caused by an increase in the number of directors or trustees filled?

Vacancies due to an increase in the number of directors or trustees are filled through an election during a regular or special meeting, conducted by the stockholders or members.

What is the term of office for a replacement director or trustee?

A replacement director or trustee holds office for the remaining term of the director whom they have replaced, as per Section 28 of the Revised Corporation Code.

What can be done if there is an urgent matter that requires board action but the remaining directors do not constitute a quorum?

In such a situation, the vacancy can be temporarily filled by a unanimous vote of the remaining directors from among the officers of the corporation, limited to the emergency action necessary to prevent substantial and irreparable loss or damage to the corporation.