8.06 Directors of Incorporated Associations
A. Basic Requirements
A nonprofit corporation is required to have a board of directors.360 The articles of incorporation may authorize one or more persons to exercise some or all of the powers that would otherwise be exercised by a board,361 however, generally, corporate powers have to be exercised by or under the authority of — and the affairs of the corporation managed under — the direction of the board.362
Directors have to be natural persons, and the articles of incorporation or bylaws may impose additional qualifications.363 Thus, an association should be able to restrict membership on its board of directors to homeowners or to homeowners who reside in the community.364
The articles of incorporation or bylaws may specify the number of directors, but there may be no fewer than three.365 The number of directors may be increased or decreased by amendment to or in the manner prescribed in the articles or bylaws, but may not be decreased to fewer than three.366 Because a homeowners association has members, an amendment to the articles or bylaws changing the authorized number of directors has to be approved by those members.367
The South Carolina Nonprofit Corporation Act provides that all the directors — except the initial ones — have to be elected at the first annual meeting of members, and at each successive annual meeting, unless the articles of incorporation or bylaws provide some other time or method of election.368 In a community under construction, the development company typically reserves the right to appoint the initial and successor members of the governing board until all or a stated number of lots or units have been sold to third parties. For example, in one case the documents stated that developer would have the right to appoint and remove all members of the board, and any officer of the association, until the date as of which the last lot in the community had been conveyed to a person other than the developer or the developer surrendered the authority to appoint and remove directors and officers by an express amendment to the documents executed and recorded by developer, whichever occurred first. The court found the language of the documents to be clear and unambiguous, and because neither stated the conditions had occurred, the developer was entitled to continue to appoint and remove officers and directors of the association.369
B. Terms
The articles of incorporation or the bylaws may specify the terms of directors, but except for designated or appointed directors, terms may not exceed five years and if no term is specified in those documents, the term of each director is one year.370 Directors may be elected for successive terms. Except as provided in the articles or bylaws the term of a director filling a vacancy in the office of a director elected by members expires at the next election of directors and the term of a director filling another vacancy expires at the end of the unexpired term that the director is filling.371 Even though a director's term in office has expired, he or she continues to serve until a successor is elected, designated or appointed, and qualifies, or until there is a decrease in the number of directors.372 The articles or bylaws may provide for staggering the terms of directors by dividing the total number of directors into groups, and the terms of office of the several groups need not be uniform.373 Thus, on a five-member board, the two-year terms of three directors might expire on odd years and the terms of the remaining two would expire on even years. Experts recommend staggered terms because they provide continuity as at least some sitting board members will have experience in managing the association.374
C. Meetings of the Board of Directors
When the date,375 time, and place of a meeting of the board of directors is fixed in the bylaws or by the board it is considered a "regular meeting."376 All other meetings are special meetings. Unless the articles of incorporation or bylaws provide otherwise, a board may allow any or all directors to participate in a regular or special meeting by — or conduct the meeting through — the use of, any means of communication by which all directors participating may hear each other simultaneously during the meeting.377 Under the South Carolina Nonprofit Corporation Act, a board of directors may hold regular or special meetings in or out of the state,378 although for homeowners associations the governing documents may require that meetings be held on the property and be open to the members of the association.
Unless the articles or bylaws provide otherwise, the South Carolina Nonprofit Corporation Act allows the presiding officer of the board, the president, or at least 20% of the directors then in office to call and give notice of a meeting of the board.379 The Act allows regular meetings of the board to be held without notice to directors unless the articles of incorporation or bylaws provide otherwise,380 or a director waives notice,381 while special meetings have to be preceded by at least two days' notice to each director of the date, time, and place — but not the purpose — of the meeting unless the articles of incorporation or bylaws provide otherwise.382 These provisions clearly concern notice to directors of meetings, however, in a homeowners association the governing documents typically require notice of meetings — even regular ones held on a specific day each month — to all members of the association, which would include directors. The notice usually is sufficient if posted on the property.
The South Carolina Nonprofit Corporation Act allows a board of directors to take action without holding a meeting. It provides that, unless the articles of incorporation or bylaws provide otherwise, action required or permitted by the Act to be taken at a meeting of the board of directors may be taken without a meeting if that action is taken by all members of the board and evidenced by one or more written consents describing the action taken, signed by each director, and included in the minutes filed with the corporate records reflecting the action taken.383 The action is effective when the last director signs the consent, unless the consent specifies a different effective date.384 Action without a meeting is generally prohibited in homeowners associations. The governing documents typically require the board of directors to hold meetings open to the members of the association and to take action only in an open meeting. Usually, there is an exception for emergencies, in which case the board action is ratified at a subsequent open meeting. A frequent complaint by association members is that the board makes decisions surreptitiously in advance of meetings. The decisions made by a board in a homeowners association affect the homes and pocketbooks of the members, so the documents should protect their right to attend and participate in board meetings. Thus, the person drafting them should accept the invitation of the Act to limit the ability of the board to take action without a meeting.
Generally, a quorum of a board of directors is a majority of the directors in office immediately before a meeting begins, and, while the articles of incorporation or bylaws may set another figure, they may not authorize a quorum of fewer than the greater of one-third of the number of directors in office or two directors.385 If a quorum is present when a vote is taken, the affirmative vote of a majority of directors present is the act of the board unless the Act, the articles, or the bylaws require the vote of a greater number of directors.386
A director who is present at a board meeting — or a committee of the board — when corporate action is taken is considered to have assented to the action taken unless the director: objects at the beginning of the meeting, or promptly on arrival, to holding the meeting or transacting business at the meeting; votes against the action and the vote is entered in the minutes of the meeting; dissents or abstains from the action taken and that dissent or abstention is entered in the minutes of the meeting; delivers written notice of dissent or abstention to the presiding officer of the meeting before its adjournment or to the corporation immediately after adjournment of the meeting.387
D. Vacancies
Unless the articles or bylaws provide otherwise, if a vacancy occurs on a board of directors — including a vacancy that results from an increase in the number of directors — the association members may fill the vacancy, the board of directors may fill it or, if the directors remaining in office constitute fewer than a quorum of the board, they may fill the vacancy by the affirmative vote of a majority of all the directors remaining.388 A vacancy that will occur at a specific later date, by reason of a resignation effective at a later date may be filled before the vacancy occurs, but the new director may not take office until the vacancy occurs.389
E. Resignation or Removal
A director may resign at any time by delivering written notice to the Board of Directors, its presiding officer, or to the President or Secretary.390 The resignation is effective when the notice is effective unless the notice specifies a later effective date and if a resignation is made effective at a later date, the board may fill the pending vacancy before the effective date if the board provides that the successor does not take office until the effective date.391 A comment to the South Carolina Nonprofit Corporation Act says that under "appropriate circumstances a court may find that an oral resignation combined with acts or omissions evidencing an intent to resign results in an effective resignation."392
In the corporate world, attempts to remove directors are relatively rare. In homeowners associations, however, they are surprisingly common. The South Carolina Nonprofit Corporation Act provides that the members of...
