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Can we act without our minimum required number of directors?

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Can we act without our minimum required number of directors?

Our non-member nonprofit corporation bylaws state that there should be no fewer than 9 and no more than 12 individuals on our board of directors.  We had 9 directors in December, but two had their terms expire on December 31 before we replaced them.  We have identified new people, but haven't brought them aboard yet.   We have several votes we would like to take as soon as possible on issues such as approving the budget and amending the bylaws.  If the current 7 members voted, would that be considered valid legal action, even though we don't have the 9 directors required in the Bylaws? 

Check your bylaws and/or your state nonprofit corporation law.  Most of them provide that a director serves for the stated term “and until a successor is elected and qualified” or contain some similar extender if successors are not elected by the official expiration date.  If your bylaws have that type of language, you probably still have 9 directors, even though you don’t realize it.  Give them notice of your meeting and even if they don’t show up, assuming that 7 constitutes a quorum when there are 9 incumbents, you can take action on the budget.  Whether you can amend the bylaws may depend on whether there are special requirements for making a fundamental change such as that.

Even if the two whose terms expired are not still on the board as a matter of law, perhaps because they formally resigned, the general law is that a corporation can continue to act so long as it has enough directors to constitute a quorum of the minimum number required to be on the board.  Again assuming that 7 would be a quorum of a 9-member board, you could take regular corporate action.  Check your state law, probably state case law, to see if this is the rule in your state. 

If you ever drop below the minimum quorum requirement, the general rule is that the remaining directors, even though less than a quorum, can fill the vacancies.  Again, confirm that your state permits this.

Tuesday, February 5, 2019

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