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Law Educator, Esq.
Law Educator, Esq., Attorney
Category: Business Law
Satisfied Customers: 112768
Experience:  All corporate law, including non-profits and charitable fraternal organizations.
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Regarding removal of a director, my question was more about

Customer Question

Regarding removal of a director, my question was more about action to remove a director brought by a class of members. I am trying to get insight on case law on that. I know in NC the group of members must of size of at least 10% of active members. I have
heard that courts are loathe to upset regular order. But in a case where the board has acted egregiously unlawfully I am hoping that they would be more willing to order the removal of directors.
Submitted: 1 year ago.
Category: Business Law
Expert:  Law Educator, Esq. replied 1 year ago.

Thank you for your question. I look forward to working with you to provide you the information you are seeking for educational purposes only.

The courts are not going to remove directors. If members have an issue with a director or multiple directors, there is a process in the bylaws for doing so and the members must follow those bylaws. If the members do not follow the bylaws, the courts will not intervene.

Now, if you believe they have acted "egregiously unlawfully" then you can use an attorney to file what is called a derivative action, which is an action where the members sue the directors on behalf of the corporation for the damage the board caused, but that is not to have them removed, it is an action to recover the monetary damage they caused to the corporation.

If you want them removed, you need to follow your bylaws to remove them.

Customer: replied 1 year ago.
Unfortunately our bylaws do not provide such a process.Going back to the board's lawyer. If a lawyer sees that board has acted ultra vies what should be his/her subsequent action? Should they drop the organization as a client if he/she sees that the board is acting unlawfully. Should he/she make any notifications of same to other members or maybe to the state AG?
Expert:  Law Educator, Esq. replied 1 year ago.

Thank you for your reply.

If your bylaws do not state anything, then under the corporate laws, you require a 2/3 vote of the membership for removal at a meeting called specifically for that purpose and notice given to the members

If the lawyer sees the board has acted ultra vires and they will not follow his advice, then he needs to withdraw from representation and that is it. He cannot report it to anyone with his duty of confidentiality.

Now as stated previously, if the board acted ultra vires the the members can file a derivative action against the association to seek reversal of all ultra vires action and any damages that it cased to the organization. However, removal of the board still has to be by vote of the members.

Customer: replied 1 year ago.
Going back to removal of directors, the NC statutes specifically provide for that event, http://www.ncga.state.nc.us/EnactedLegislation/Statutes/HTML/BySection/Chapter_55A/GS_55A-8-10.htmlI would like to find out if there is any relevant case law where this statute specifically was at play.
Expert:  Law Educator, Esq. replied 1 year ago.

Thank you for your reply.

The statute is not one that there would be real case law on, because that statute only says the court can remove a director, it does not really specify the grounds. The grounds for removal would be a director not complying with other bylaws or laws.

Customer: replied 1 year ago.
Right, I am wondering if some court heard such a case and developed some sort of test for plaintiffs to pass before the court will actually remove, i.e., what must a plaintiff show: objective facts, effect, intent, an attempt to remedy within the political machinery of the organization, etc.
Expert:  Law Educator, Esq. replied 1 year ago.

Thank you for your reply.

There is no court case based on that statute. The test would be the elements of the actual violation that the director is being accused of. So if they are accused of acting ultra vires, then you have to prove those elements (the bylaws and the actions of the director were outside of the scope of those bylaws).

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