To remove an officer, a corporation must obtain a majority vote of the shareholders. It is recommended that members show “just cause” for the removal of the officer.
As a general rule, officers have a fiduciary duty to act in good faith, and exercise due diligence when making business decisions for the company. When an officer violates this duty, there will be a just cause for his or her removal.
Since the corporate laws of each state may vary, look to the laws of the state where the company was incorporated.
What Is a “Just Cause” for Removal?
Examples of “just cause” for removal include:
- Misconduct
- Neglect of duty
- Loss of money
- Bad business decisions
- Self-Dealing
If just cause exists, document how the officer was deficient in their performance or execution of duties. This proof can come in the following forms:
- Statements from witnesses
- Receipts
- Invoices
- Contracts
- Audits
Once it has been decided that the director or officer must leave the corporation, the corporation must have a majority of the shareholders vote to remove that person. After that, the person must be informed of the removal process.
What Is the Protocol for Removal?
The protocol for removing an officer or director includes:
- Filing charges in writing against the director or corporate officer with the secretary of the corporation by any member .
- A Petition of at least 5% of the members requesting removal of the director of corporate officer.
- A vote at either a special meeting or the next regular meeting.
- Informing the director or corporate officer in writing that they are being removed. In the event that charges are being brought against them, inform them that they will have the opportunity to be represented by counsel and will be able to present witnesses at a formal meeting.
Exceptions in the Corporate By-Laws
If the corporate by-laws provide for election by districts with primary elections in each district, the petition for removal of a director must be signed by at least 20% of the members living in the district where the director was elected. Check the corporate laws of your state.
Do I Need a Lawyer for Help with Removing a Corporate Officer?
It may be necessary to hire a corporate attorney when attempting to remove a corporate officer. Your attorney can help you with the removal process, and can review any legal documents. This can help to ensure that you’re removing the corporate officer in accordance to state laws. Also, your attorney can represent you in court if you need to file a lawsuit.
