Guest Post by Weissman, Nowack, Curry & Wilco, P.C.
Elections to the board of directors of a community association typically occur at an annual meeting of the members. Georgia law and the bylaws of most community associations provide that a minimum number of members must be present at the beginning of the meeting in order for the meeting to be called to order. The minimum number of members that must be present is a quorum. If a quorum is not reached, then the meeting cannot be called to order and the association cannot conduct any business at the meeting, including the election of directors. In such an event, the following two questions are often asked.
1. If a director’s term expires at the annual meeting, and there is no quorum at the annual meeting, does the director continue to serve on the board?
The answer is yes. Since there must be a board of directors in place to control the affairs of the association, the Georgia Nonprofit Corporation Code, as well as most community association bylaws, provides that a director whose term has expired at the annual meeting will continue to serve as a director until his or her successor is elected. Therefore, if a quorum is not reached at the annual meeting, any director whose term has expired should continue to serve as a director until that director’s successor is elected. Such an election should be at the next meeting of the association members at which there is a quorum. That will generally be the next year’s annual meeting, although some bylaws require an earlier meeting to be called by the board.
So, for example, if a director was elected at an annual meeting in May 2001 for a one year term, and there was no quorum at the annual meeting in May 2002, then the director continues to serve as a director until the next membership meeting at which there is a quorum. That would very possibly be at the next annual meeting in May 2003.
2. If such a director resigns after the annual meeting, can the remaining board members appoint a new director to fill the vacancy?
The answer again is yes. The Georgia Nonprofit Corporation Code and the bylaws of most community associations provide that vacancies on the board of directors shall be filled for the director’s unexpired term by a majority vote of the remaining directors. Turning back to the above example, assume the director who continued to serve on the board following the May 2002 meeting (at which there was no quorum) resigns in June 2002. In such an event, the remaining directors on the board could appoint someone to fill that director’s vacant board position. The new director who is appointed by the remaining board members would then serve the unexpired term of the director who resigned until a successor is elected by the members of the association.
There is a 1998 case from Louisiana that does a good job illustrating the power of a board to fill vacancies after the initial terms of the directors expire. Similar to the bylaws provisions discussed above, the bylaws for the corporation in the Louisiana case provided that the directors of a corporation were to be elected at the annual meeting for a term of one year and serve until their successors were elected, and that vacancies on the board were to be filled for the unexpired term by a majority vote of the remaining directors. The Louisiana corporation’s original directors served for several years on the board. No annual meetings were held, and no new directors were elected to succeed the original directors. Eventually, all of the original directors, except two, apparently resigned or died. Well after the expiration of the initial terms of those two remaining directors, those two directors appointed new directors to the board in order to fill the vacancies that had occurred over the past years. In upholding that action, the Louisiana Court of Appeals concluded that the appointment of the new directors by the two original directors beyond the year in which the vacancies occurred was “legally sufficient” and that a contrary interpretation of the bylaws would “stymie” the corporation and that “any other interpretation would paralyze corporate activity pending a shareholder [member] meeting.”
Similarly, if a director of a community association in Georgia resigns from the board after an annual meeting at which there was not a quorum, the remaining directors on the board should have full authority to appoint a replacement. The contrary conclusion would be that only the membership of the association could fill the vacancy created by the resignation, and if the members could not organize themselves at a meeting to reach a quorum, the association would be stymied and paralyzed until a quorum of the members is eventually achieved. That is not an acceptable conclusion, of course, because a board must be in place to control the affairs of the association. Accordingly, if your association is faced with the inability to conduct elections for directors at the annual meeting due to a failure to establish a quorum, the association will nevertheless be able to continue functioning.