Legal Question in Business Law in California

Re: Bi-Laws and Articles

Possibly, but not automatically or necessarily. Further, your act of "calling" an action "null and void" doesn't have much force or impact; it's just a cry in the dark, without legal effect.

In general, when managers of a corporation act in violation of the bylaws, the violation is treated at law as the equivalent of a breach of contract or a breach of fiduciary duty. The managers are liable to the corporation. Whether the action voted upon is "null and void" with respect to the rights of outsiders is a "whole 'nuther issue" because outsiders have certain rights to regard corporate actions, contracts, representations, etc. as probably valid.

For example, if the bylaws of XYZ, Inc. require the president to have board authority before making any corporate commitment in excess of $500,000, and shareholder approval is required for any commitment in excess of $5 million, but he president of XYZ goes out and orchestrates a loan of $1 million without board approval, I believe the corporation is bound by the terms of the million-dollar loan on the basis that the president of a corporation has "apparent authority" to borrow. However, because the president lacked actual authority to commit to the loan, he is liable to XYZ, Inc. for any losses it occasions due to his violation of the limits placed on his actual authority by the bylaws.

In summary, you must distinguish acts that are enforceable against the corporation because an outsider had the right to rely upon an officer's apparent authority from acts that violate internal authority limits and hence give the corporation a claim against the errant officers or directors for damages.

In your particular situation, I urge you the be very cautious about taking the position that any outsider or third party lacks rights because a board decision was contrary to the bylaws. The outsider is entitled to assume that acts of your corporation's officers and directors are authorized and proper. In 96% of situations, if they are NOT indeed authorized and proper, the remedy is against your own people and not by attempting to invalidate a contact with outsiders as null and void.