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December 1, 1993 MEMORANDUM TO CLIENTS
DIRECTORS' CONSIDERATIONS OF WHETHER TO RUN OR RESIGN At year's end many corporate directors re-evaluate whether they should continue as directors. A directorship is important. A director is under a continuing duty to act on behalf of an association. Not attending board of directors meetings may constitute a breach of a director's fiduciary duty to the corporation and its shareholders and/or members. The failure of a director to appear for meetings impacts the corporation because the full range of input contemplated by having a number of directors is lost, and obtaining a quorum may be difficult if not impossible. When directors attend meetings they have to understand the corporation's business so that votes can be intelligently cast. For many individuals the ability to serve their community and assist in preserving the value of their homes is sufficient justification to continue serving as a director of not-for-profit corporations, such as condominium and homeowner associations. On the other hand, some persons admit that they just do not want to take the time necessary to properly be a director. Others acknowledge that they are ill-suited to serve as directors. As a result of individual's self-evaluation process questions are frequently raised concerning the resignation process. Florida law allows not-for-profit corporations to replace resigned directors. Effective July 1, 1991 were the revised provisions of the Not-For-Profit Corporations Act, §617.0807 Fla. Stat. (1991) which provide:
Similar language became effective in 1990 when Florida Business Corporations Act, §607.0807 Fla. Stat. (1991) was amended concerning for-profit corporations. Because the new laws concern procedure, as opposed to substantive or vested matters, it is anticipated that the courts will rule that the new laws take precedence and supersede individual corporation's articles of incorporation and bylaws. One issue that has been raised by directors is the use of the word "may" in the resignation laws. Specifically, many directors have asked whether the term "may" in paragraph 1 of the law refers only to whether a director is allowed to resign, or whether the term "may" refers to the requirement that a written notice be provided to the corporation. Most legal commentators agree that a written notice must be received by a corporation before a director's resignation is effective. Legal commentators uniformly hold that when a corporation's Articles of Incorporation and Bylaws are silent on the issue, and when interpreting language similar to that contained in the Florida Not-For-Profit Corporations Act, then written notice is required. This conclusion is supported by the preeminent corporate law treatise Fletcher Cyclopedia of the Law of Private Corporations (1990), Section 345 et seq. Other commentators have considered this issue and also support this conclusion. See 19 Corpus Juris Secundum "Corporations" §452(b) (1990); 18B American Jurisprudence 2d "Corporations" §1421 (1985). There is one appellate decision concerning the need for a written resignation which is repeatedly relied upon by legal commentators, Dillon v. Berg, 326 F.Supp. 1214 (D.C. Del., 1971). In Dillon a corporation was governed by Delaware law which provided in part, "Any director may resign at any time upon written notice to the corporation." Id. at 1223. The Delaware law was exactly the same as the current Florida law. Though a final determination concerning the interpretation of Florida law would be a matter for the Florida courts to determine, it is appropriate to conclude that a director of a Florida corporation must submit a resignation in writing before the resignation is effective. Some directors, usually attorneys themselves, are aware that neither this law (nor the similar provision in the Florida Business Corporation Act concerning for-profit corporations) has ever been interpreted in a reported Florida appellate court decision. The lack of precedent is because Florida's corporate laws were recently revised and there has been little if any litigation concerning the law's meaning. Without Florida appellate interpretations, we have based our opinion upon recognized legal commentators and appellate decisions outside of Florida. HAPPY HOLIDAYS
The attorneys and support staff at Gelfand & Arpe, P.A. extend to our client family our best wishes for the holiday season. To allow our hard working staff time with their families the office will be closed for business on December 24, and 31, 1993. Additionally, the office will be closed for business at noon on December 8 and 17, 1993.
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