Board members hold the heavy responsibility of overseeing crucial business decisions and activities, a responsibility that grants them a great deal of influence on key decisions that may impact the company’s future. For this reason, the advisory committee takes great care when electing board members, and acts with great caution when it decides that, ultimately, a member is not a good fit for the company. Though the reasons for removing a board member vary, other board members and the advisory committee must act with extreme caution and in compliance with Texas law when deciding to remove a director.
Section 21.409 of the Texas Business Organizations Code outlines what other key decision makers must do to legally remove a director. The statute starts off by noting that the certificate of formation or bylaws of a corporation supersedes this section. If your corporation’s bylaws detail the proper way to remove a board member, refer to those.
In all other instances, the law states that a corporation may remove one member or an entire board, with or without cause, during a meeting called for that purpose. The decision requires the vote of the majority of shareholders who are entitled to a vote regarding the election of board members.
If the bylaws or certificate of formation entitle individuals who possess a certain number of shares or who fall within a class or series to elect one or more directors, only those members may vote on the removal of directors who fall within the same grouping. If the bylaws allow cumulative voting, and if less than the entire board is up for removal, the board may not remove a director if the number of votes cast in favor of the removal is less than the number necessary to vote in a member.
If the directors of a corporation serve staggered terms, the law does not allow the removal of directors, save for in certain and extreme circumstances. Again, however, the bylaws or certificate of formation of an organization supersede this section.
This article is for educational purposes only. You should not use this content as legal advice.