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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! 

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30172DBAB0084D3A8F39D7AF0A8E79BC.ashx Keith Paul Bishop
Partner at Allen Matkins
(949) 353-6328
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