Changing Directors and Officers of Corporations

Reasons for changing directors or officers of the corporation should be stated in the Bylaws, and include the following:

• Death
• Resignation
• Removal (with or without cause)
• Disqualification
• Expiration of term of office (Director)
• Expiration of term of Employment Agreement (Officer)

Changing directors. Shareholders may vote to remove directors, with or without cause, unless the Articles of Incorporation or Bylaws require otherwise. The process for removal of directors is included in the Bylaws. Be sure to include in the Bylaws the reasons and conduct for which a director will be removed.

If there is a vacancy on the Board, a director may be appointed to fill the remainder of the term, after which the vacancy will be filled by election. Directors may resign at any time.

When a director resigns or is removed from office, the Bylaws or Articles of Incorporation give the Board of Directors the power to appoint an individual to fill the remaining term of that director. Once the remaining term ends, a new director can then be elected according to the corporation’s Bylaws.

Cumulative voting. Some corporations provide for cumulative voting for the election of directors, which allows shareholders to cumulate their votes when electing directors. Minority shareholders’ voting strength is increased because the stockholder may cast all of his or her votes for one or more but fewer than all the directors up for election. Cumulative voting is required in some states, and permitted in most states. Check your state’s corporation statute to determine which applies.

Changing officers. Officers serve at the pleasure of the Board of Directors, unless the Articles of Incorporation or Bylaws state otherwise. The Board may terminate an officer at any time, subject only to any rights the officer might have under an Employment Agreement. Similarly, an officer may resign at any time, subject to notice or other requirements set forth in an Employment Agreement.

An officer’s resignation does not affect any contractual obligations of the corporation for documents that were signed by the officer on behalf of the corporation while he or she was an officer.

For more information on the subject of replacing corporate directors, read Choosing Wisely.