A corporation is a business entity formed according to California state law. Furthermore, a corporation must be registered in California to be deemed an independent legal entity, which is wholly distinct from shareholders who own the company. To begin with, shareholders elect the board of directors according to the corporate bylaws. In turn, the board of directors, once elected, are responsible for business operations. In addition, the board of directors appoints corporate officers and higher directors. Lastly, the board of directors is responsible for adopting corporate bylaws that describe how the board will operate and how management decisions will be made. Under certain circumstances, a corporate officer may need to be removed from the company. Read on to learn more about how to remove a corporate officer and how A People’s Choice can help you.
Reasons To Remove a Corporate Officer in California
Corporate officers manage the day-to-day operations of a company. For example, an officer positions include president, vice president, secretary, or financial officer. The people holding these positions are also on the board of directors. Incidentally, the board of directors may also consist of other individuals who do not hold an officer position. The main purpose of the board of directors is to direct the company’s affairs. The board is also responsible for the company’s success. At the same time, they are responsible for meeting the interests of its shareholders. Accordingly, the board of directors has the legal authority to both nominate and remove an officer.
Officers have a fiduciary duty to act in good faith and exercise due diligence when making business decisions for the company. As a result, if an officer violates his/her fiduciary duty, they can be removed from office. A corporate officer can be removed for many different reasons. A few of these are:
- Officer misconduct
- Neglect of official duty
- Loss of money
- Bad business decisions
Corporate Bylaws and the Removal Process
Most corporate bylaws have a section that outlines how to remove a corporate officer. These bylaws outline the requirements to remove an officer. In addition, before removing an officer, there should be enough evidence to prove removal. For example, evidence would include statements from witnesses, receipts and contracts that show bad business decisions or neglect of an official duty. Aside from having enough evidence, the majority of shareholders must also agree with removing the officer.
Process to Remove Corporate Officer
When deciding to remove a corporate officer, keep in mind that the corporation must have the majority of shareholder votes to remove an officer. First, the officer to be removed must be provided formal written notice regarding the removal process. Secondly, a vote of the shareholders must be formally taken. The process of removing a corporate officer can be outlined as follows:
- Formal charges regarding the removal of the officer must be made in writing and submitted to the Secretary of the organization.
- Corporations Code Section 13290 requires the written request be signed by at least of 5% of the members who have agreed to have the officer removed. Note: The corporate bylaws may state a different minimum. Therefore, make sure you review the bylaws before submitting your written request.
- A vote to remove the officer must occur during a special meeting or at a regularly scheduled board meeting. Consequently, it is important to refer to the corporate bylaws to see how many votes are required to remove the corporate officer.
- The corporate officer must be informed in writing that he/she will be removed. Furthermore, he/she must also be informed that he/she will have the opportunity to be represented by counsel and present formal witnesses at a formal hearing.
Notifying Secretary of State of Officer Removal
Keep in mind, once the officer is removed, documents must be filed with the corporate secretary to officially discharge the officer of any authority. Furthermore, take steps to tell business partners and customers about the officer’s removal. This will protect the corporation from being bound to any contracts the officer signs after dismissal.
In conclusion, specific steps are required when someone wants to remove a corporation officer. Furthermore, you should use caution when removing an officer who holds a majority of corporate shares. Contact A People’s Choice for more information about how to remove a corporate officer. We can help you file all legal documents with the Secretary of State to complete the removal.