Legal Question in Business Law in California
I'm incorporating a business that will have four share holders and five directors because my attorney says that there must be and uneven number for voting purposes. Section 302 of CA Corporate code says " The board may declare the office vacant of a director convicted of a felony." One of the share holders'/directors has a felony (prior to incorporating the business) how can this law work for me. I don't want this person to be a director this will then give us three directors and will not need a fifth director. The share holders are family members the fifth director would be outside the family. I do not want the person that is being considered as the fifth director because they will bias. Is there any case law to assist me in understanding how this law can apply to my situation and work for me? I want to understand how the law works so I will know if my attorney is verse in the section of the Ca Corporate law.
3 Answers from Attorneys
There is a difference between "must have" and "maybe oughta have". A four-shareholder corporation must have at least three directors. It CAN have three, four, five, six, etc. Having an odd number to avoid the possibility of deadlock may make sense in the reasoning of your attorney, but is not required by law. Without knowing what skills, experience, wisdom, etc. each proposed director would bring to the board, and without knowing the interest of each candidate in serving, I cannot give you good advice, but in general I would agree that an odd number of directors is conceptually somewhat superior in that it tends to prevent deadlock.
Do you have an attorney or does the corporation have an attorney? Regardless, the key word is "may." I haven't reviewed the code language, but I will rely on your language. Therefore, the Board MAY or MAY NOT declare the office vacant. As a shareholder or director, individually, you probably do not have any recourse if the shareholders and directors are of a different mindset. I assume there is a lot more to your question than you have provided.
Since no one has answered your question directly, that provision does not apply to prior convictions, only convictions subsequent to taking office as director.
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