You give your business your all and pour your heart and soul into it, so naturally you want to keep it running in excellent shape. Part of the ingredients to ensuring business success is to elect the proper board of directors at the outset. This is because your company’s board of directors plays a critical role in overseeing the business, with responsibilities such as approving budgets and setting out strategic objectives. Thus, electing the right directors is something that you want to take seriously.
To that end, while many business owners are tempted to recommend a family member or friend for one of the various director positions – as more of a figurehead than anything else – such a move is rarely in the best interests of your corporation. And even if you hired the proper directors after a rigorous decision-making process, one of the elected directors may of course end up not working out the way you had hoped. Therefore, whatever the reason for the wrong fit, it is always a good idea to have a working understanding of the process involved in removing a director so that if and when that day finally comes, you’ll know how to proceed.
First Things First: Electing a Director
A corporation’s bylaws will usually outline that the director is to be elected at the annual shareholder’s meeting, and that the director will hold the office until a successor is elected and qualified at a subsequent annual shareholder’s meeting (unless the director is removed before that meeting). When it comes time to review your board of directors each year – in advance of the annual meeting – it is important to take the time to carefully consider whether your director is continuing to meet the corporation’s needs. It is helpful to keep in mind that it is easier to elect a new director at the annual meeting than it is to remove a director in the interim.
Removing a Director
If you have to remove a director in the interim, the corporate bylaws will typically outline this process (as with most other details of the corporation). But like many other provisions of the corporate bylaws, the California Corporations Code supplements it – the code provides that directors can be removed for cause, some examples of which include felony convictions, findings of incompetence, or by way of a court order. Beyond removing a director for cause, your corporation’s shareholders can remove the director by voting that director off of the board. While these examples may seem straightforward enough, removing a director – no matter how you go about it – is likely to be fraught with complexities. Indeed, corporate law can be quite complicated in general, so seeking experienced legal counsel to ensure removal is carried out properly is the recommended option.
If You’re Considering Removing a Director, Consult with an Experienced Silicon Valley Corporate Attorney
The board of directors is elemental to the success of your business, and if you are considering removing a director, contact an experienced corporate attorney to make sure the removal is carried out properly. Corporate law is complicated and often vexing, but the skilled legal team at Startup Company Counsel in Silicon Valley is here to help. Our experienced corporate lawyers have the knowledge and dedication to help you maintain and grow your robust business, even when that includes removing a director. Contact us online, email us at admin@startupcompanycounsel.com, or call us at 408-441-7500 to set up a consultation today. Startup Company Counsel helps corporations like yours to maximize their business potential
