Website Heading

CALIFORNIA CORPORATE & SECURITIES LAW

When A Majority Won’t Suffice

For California corporations, the general rule is that an act or decision done or made by a majority of the directors present at a meeting duly held at which a quorum is present is the act of the board.  Cal. Corp. Code § 307(a)(8).  This general rule is not without its exceptions.  Two of these exceptions are found in the statute: Section 310 and Section 317(e).  Other exceptions take a little digging to discover.

Section 311 requires that a resolution designating a committee of the board be adopted by a majority of the authorized number of directors.  For example, the authorized number of directors may be 7.  Assuming that the default quorum rule in Section 307(a)(7) applies, a quorum is four directors.  If only a quorum of directors is present, most actions and decisions could be taken by as few a three directors.  Under Section 311, however, four directors would be required to designate a committee of the board.

Section 307(a)(8) establishes the rules for meetings at which a quorum is present.  Under Section 305(a), a vacancy (other than a vacancy created by removal) may be filled by “approval of the board”.  However, if the number of directors then in office is less than a quorum, the vacancy may be filled 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 307, or
  3. A sole remaining directors.

The SEC’s Dark Side

On Monday, the Securities and Exchange Commission announced that it had made a whistleblower award of $3.5 million.

  • Who received the award?  That information was redacted from the order.
  • What was the covered action?  That information was also redacted.
  • On whom were monetary sanctions imposed?  That information was also redacted.
  • What percentage of the monetary sanctions were awarded to the whistleblower?  That information was redacted.

Without knowing these basic facts, there is simply no accountability to the public for a government program that is handing out tens of millions of dollars to individuals.

Update, I have corrected the example to change “5” to “4”.  Thanks to an attentive reader! 

Share on:

ANY QUESTIONS REGARDING CALIFORNIA CORPORATE AND SECURITIES LAW? CONTACT US DIRECTLY

We offer expert advice with the intricacies of California law.

Our years of experience and expertise allow us to help clients navigate the business laws in California.

CONTACT US

Get the latest news and analysis about California Corporate & Securities law. Subscribe to our newsletter today!