What if Your Company Needs a Temporary Director?

In your business, you may have a board of directors, tasked with making some important decisions in the management and operation of your company. If you’ve planned ahead, you know that an even number of directors on your Board won’t work—you don’t want tie votes holding up important businesses. So, hopefully, you’ve made arrangements for your company to have an odd number of directors.

But life happens, and sometimes, it ends up eliminating one of your directors, at least, temporarily. Illness, or personal absence, or some other problem, may make a director permanently or temporarily, unable to show up to meetings, unable to vote, or even serve on your board.

And that one missing directors can have a huge effect: it can leave you with an even number of directors, and thus, the possibility of tie votes on important matters that need to be decided on by your board.

Asking a Court to Appoint a Director

If you are in this situation, you can ask a court to appoint a provisional, temporary director to serve on your board.

The director will get paid, usually from the company, and will have all the rights, powers and duties, as any other director. Note that this temporary member is technically an officer of the Court, and thus, will report to the Court as to what is happening in the case.

The Court won’t tell the temporary board member how to vote, but can expand or limit the temporary member’s powers, as may be necessary to ensure the proper and continuing functioning of the company.

Planning Ahead Can Help

You can avoid this problem by having provisions in your corporate documents that account for tie votes in the Board, or for temporary Board vacancies, or which provide a mechanism for appointing temporary Board members. Your corporate documents can also detail how to handle an even number of Board members. But if you haven’t done that advance, you may be looking at the necessity to go to Court.

Doing it Outside of Court

Can you just appoint a temporary director yourself, without asking for a judge’s approval? You can, but that’s only if your bylaws, management agreement, or other corporate governing document, allow for that, and have a procedure to appoint a temporary director.

If your remaining board members all agree on the new temporary board member, you may be able to appoint him or her, without going to court. But the proper first step would be to have the board amend the bylaws to allow for the procedure to appoint the new board member first, and then vote on the new member.

And if the absence of the temporarily missing board member eliminates a quorum, or if the Board cannot agree on the procedure or the new temporary Board member, you would have to go to court to have the new member appointed.

It’s tempting to handle it outside of court. But one misstep in a formality, could invalidate whatever corporate actions your company took, with the improperly installed temporary director.

Let us handle your legal matters related to your Board of Directors or corporate documents. Call our Fort Lauderdale commercial litigation and corporate lawyers at Sweeney Law P.A. at 954-440-3993 for help today.

Sources:

leg.state.fl.us/statutes/index.cfm?App_mode=Display_Statute&URL=0700-0799/0720/Sections/0720.3033.html

floridabar.org/the-florida-bar-journal/directors-fiduciary-duties-increasing-focus-on-good-faith-and-independence/