California Law Regarding Nonprofit Board of Directors

By Joe Stone

In general, a nonprofit may adopt a set of written bylaws that govern the number, selection, management duties and grounds for removal of its directors, so long as the bylaws do not conflict with California law or the nonprofit's articles of incorporation. A nonprofit must have a board of directors, and all of the activities of the nonprofit are performed at the direction of the board.

Initial Directors

A nonprofit corporation is formed by filing articles of incorporation with the secretary of state. The individuals involved in the incorporation process have the option of specifying in the articles the names of the initial board of directors; however, in most cases, the initial directors are named in the bylaws adopted at the nonprofit's first organizational meeting after incorporation. The bylaws should specify the term for the initial directors, which can be a maximum of four years. If the nonprofit has no members, the maximum term can be six years. If no term is specified in the bylaws, California law provides that the term shall be one year.

Elected and Appointed Directors

Unless specified in its articles of incorporation, the nonprofit's bylaws shall provide for election of directors by the nonprofit's members entitled to vote. California law also permits a nonprofit's bylaws to appoint directors who meet certain criteria, rather than being elected. For example, a person holding the office of president or chief executive officer of the nonprofit may by virtue of his office be given a seat on the board. A nonprofit may also permit the designation of a director by a specific person, such as a large financial supporter of the nonprofit.

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Special Rules for Nonprofit Directors

California law sets forth several rules that only apply to directors of a nonprofit corporation. For example, a nonprofit board cannot have more than 49 percent of its current directors be "interested persons" as defined in Corporations Code section 5227, which includes any person receiving compensation from the nonprofit for services rendered within in the past 12 months and such a person's close family member. Also, directors must be present at a board meeting to vote and cannot vote by proxy. The directors present at a board meeting can only have one vote per issue voted on.

Removal of Directors

Any or all of the directors of a nonprofit can be removed without cause by its members. If the nonprofit has 50 members of less, a vote of the majority of the entire membership is required for removal. If there are more than 50 members, a vote of the majority of the members present and voting at a duly noticed meeting with a quorum is sufficient for removal. For nonprofits with special voting rights, such as cumulative membership voting and class membership voting, the rights to remove directors by voting must adhere to the special rights specified in the nonprofit's bylaws. If the nonprofit has no members, a director may be removed by a majority of the current directors.

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References

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