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Remedy for violating 2/3 majority as per Articles of Incorporation

Guest Tom

By Guest Tom
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Kim Goldsworthy

Kim Goldsworthy

Posted
Posted

If the Articles of Incorporation require a 2/3 majority affirmative vote to change the Articles of Incorporation, but the vote to change them was less than the required 2/3 what is the remedy or the penalty?

Just using logic:

If the Articles of Incorporation require a vote of threshold X, and you don't achieve threshold X, then you haven't (yet) changed anything.

Vote again. Or drop it.

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Trina

Trina

Posted
Posted

Just using logic:

If the Articles of Incorporation require a vote of threshold X, and you don't achieve threshold X, then you haven't (yet) changed anything.

Vote again. Or drop it.

Yes... but.... isn't this a case where a timely point of order would have been required?

Assuming the result of the vote was announced, and no one realized at the time that a two-thirds vote was actually required, I don't see that there is after-the-fact recourse. It's not a p. 244(a) violation, since it's not a case of a motion standing in violation of the bylaws. Part of the process was in violation of the bylaws (wrong vote margin), but that's a different matter.

Or are you saying that amendment of the bylaws plays by different rules than other motions, in terms of the timeliness requirement for catching vote margin errors?

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George Mervosh

George Mervosh

Posted
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Yes... but.... isn't this a case where a timely point of order would have been required?

Assuming the result of the vote was announced, and no one realized at the time that a two-thirds vote was actually required, I don't see that there is after-the-fact recourse. It's not a p. 244(a) violation, since it's not a case of a motion standing in violation of the bylaws. Part of the process was in violation of the bylaws (wrong vote margin), but that's a different matter.

Or are you saying that amendment of the bylaws plays by different rules than other motions, in terms of the timeliness requirement for catching vote margin errors?

I think he just forgot about OI 2006-18.

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Kim Goldsworthy

Kim Goldsworthy

Posted
Posted

I think he just forgot about OI 2006-18.

George, Official Interpretation 2006-18 won't apply to federal law, nor state law.

Article of Incorporation are not membership-driven rules. - They are state-imposed rules.

And you cannot pick and choose which state corporations code rule to suspend or to violate.

The Secretary of State won't like that.

The State Attorney General won't be too keen on the idea, either.

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Kim Goldsworthy

Kim Goldsworthy

Posted
Posted

Yes... but.... isn't this a case where a timely point of order would have been required?

No.

• If you were to violate federal I.R.S. regulations, then the fact that there was no timely point of order at the hour of the violation won't help you.

• If you were to violate the state corporations code, then the fact that there was no timely point of order at the moment the rule was violated, will not lift any state-imposed penalties.

Articles of Incorporation are "rules" imposed on an organization from a government.

Those rules cannot be suspended willy nilly, must less violated with impunity, without the State Attorney General or the Secretary of State heaving the full brunt of the law down on the guilty organization.

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Dan Honemann

Dan Honemann

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Posted

No.

• If you were to violate federal I.R.S. regulations, then the fact that there was no timely point of order at the hour of the violation won't help you.

• If you were to violate the state corporations code, then the fact that there was no timely point of order at the moment the rule was violated, will not lift any state-imposed penalties.

Articles of Incorporation are "rules" imposed on an organization from a government.

Those rules cannot be suspended willy nilly, must less violated with impunity, without the State Attorney General or the Secretary of State heaving the full brunt of the law down on the guilty organization.

But all of this manages to miss the point.

Laws against robbing banks or failure to file tax returns can't be violated with impunity either.

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Gary Novosielski

Gary Novosielski

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But all of this manages to miss the point.

Laws against robbing banks or failure to file tax returns can't be violated with impunity either.

But the Official Interpretation refers to rules that are suspendable.

Since the rule on amendment of the bylaws is in the bylaws, it is arguably not suspendable by the attendees of a given meeting. If any meeting is free to suspend the rule governing the amendment of bylaws, then of what use is the rule?

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Dan Honemann

Dan Honemann

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Posted

But the Official Interpretation refers to rules that are suspendable.

Since the rule on amendment of the bylaws is in the bylaws, it is arguably not suspendable by the attendees of a given meeting. If any meeting is free to suspend the rule governing the amendment of bylaws, then of what use is the rule?

Well, if you are talking about suspending a rule requiring previous notice for amendment of the bylaws, or (as appears may be the case here) a procedural rule contained in applicable law, such a rule cannot be suspended.

However, bylaw provisions which are clearly in the nature of rules of order may, in some instances, be suspended, and in such instances those rules are of the same use as is any rule which may be suspended. :)

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Trina

Trina

Posted
Posted

If the Articles of Incorporation require a 2/3 majority affirmative vote to change the Articles of Incorporation, but the vote to change them was less than the required 2/3 what is the remedy or the penalty?

But this may well be a 244 ( c ) violation.

....

• If you were to violate federal I.R.S. regulations, then the fact that there was no timely point of order at the hour of the violation won't help you.

• If you were to violate the state corporations code, then the fact that there was no timely point of order at the moment the rule was violated, will not lift any state-imposed penalties.

Articles of Incorporation are "rules" imposed on an organization from a government.

Those rules cannot be suspended willy nilly, must less violated with impunity, without the State Attorney General or the Secretary of State heaving the full brunt of the law down on the guilty organization.

I guess the point (in case the original poster checks back on his thread) is that, from a parliamentary point of view, if the improper amendment process applied to the Articles of Incorporation ran afoul of procedural rules prescribed by law (rules contained, for example, in state statute), then you have what's known as a continuing breach. Such an action is null and void, and can be challenged via a point of order at any time. See RONR p. 244(c), as Mr. Honemann suggests.

The wrath of the IRS, the AG, the secretary of state, etc., no matter how unpleasant or unavoidable, is not parliamentarily significant.

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Gary Novosielski

Gary Novosielski

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However, bylaw provisions which are clearly in the nature of rules of order may, in some instances, be suspended, and in such instances those rules are of the same use as is any rule which may be suspended. :)

Okay, then let's set aside the legal questions involved in a corporate charter, and consider simple bylaws of an ordinary society.

Could a bylaws provision requiring a 3/4 vote for amendment of the bylaws be suspended by a 2/3 vote at a properly noticed meeting? I submit that it cannot, even though it is in the nature of a rule of order, as it protects a minority of 1/4.

If the bylaws rule required a 2/3 vote for amendment, then it is a moot question, as it would take the same number of votes to suspend the rule as it would to simply obey it.

So in the first case, if the chair incorrectly reported the result of a vote as Adopted, would this create a continuing breach, and support sustaining a delayed point of order that would otherwise be untimely?

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George Mervosh

George Mervosh

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Gary, IMO none of the plain vanilla voting requirements can create a continuing breach in and of itself if violated.

It's when you get into a majority of the entire membership, 2/3 of the entire membership, blah blah blah, that the waters get muddy and dangerous and continuing breaches can occur.

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Dan Honemann

Dan Honemann

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Posted

Okay, then let's set aside the legal questions involved in a corporate charter, and consider simple bylaws of an ordinary society.

Could a bylaws provision requiring a 3/4 vote for amendment of the bylaws be suspended by a 2/3 vote at a properly noticed meeting? I submit that it cannot, even though it is in the nature of a rule of order, as it protects a minority of 1/4.

If the bylaws rule required a 2/3 vote for amendment, then it is a moot question, as it would take the same number of votes to suspend the rule as it would to simply obey it.

So in the first case, if the chair incorrectly reported the result of a vote as Adopted, would this create a continuing breach, and support sustaining a delayed point of order that would otherwise be untimely?

The answer to your question is no, because, although it will take a 3/4 vote to suspend a rule requiring a 3/4 vote for adoption of a motion, the rule is still a suspendible rule.

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Chris Harrison

Chris Harrison

Posted
Posted

What is a 244 © violation?

The only exceptions to the rule that a point of order must be made at the time of the breach arise in connection with breaches that are of a continuing nature, in which case a point of order can be made at any time during the continuance of the breach. Instances of this kind occur when:

...

( c )any action has been taken in violation of applicable procedural rules prescribed by federal, state, or local law

RONR p. 244

An example would be if a law governing the organization prohibited ballot voting and one was taken anyway the vote would be null and void. On the other hand if a motion was adopted to rob a bank the fact that there are laws against it would not in-of-itself render the adopted motion null and void (although the cops might be knocking on your door afterwards).

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Guest Tom

Guest Tom

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An example would be if a law governing the organization prohibited ballot voting and one was taken anyway the vote would be null and void. On the other hand if a motion was adopted to rob a bank the fact that there are laws against it would not in-of-itself render the adopted motion null and void (although the cops might be knocking on your door afterwards).

Thank you for explaining the 244 © violation. Here is the actual scenerio: The Articles of Incorporation state, "This agreement of the corporation may be amended by an affirmative vote of two-thirds majority of the members of the Board of Directors and with the approval of the Missouri Baptist Convention or the Executive Board of the Missouri Baptist Convention." The Articles state, "The Board of Directors shall be 30 in number." There is one vacancy. There was a vote to ammend the Articles to change the corporation's name. The vote was 12 for 2 against. According to RONR p. 388 two-thirds majority should be 20. In this scenerio, would the motion and/or the vote be null and void?

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hmtcastle

hmtcastle

Posted
Posted

The Articles of Incorporation state . . .

I'm afraid your bylaws, or constitution, or articles of incorporation, can only be properly interpreted in their entirety, something's that's beyond the scope and purpose of this forum.

But a two-thirds vote is the vote of two-thirds of the members present and voting. A vote of 1-0 would constitute a two-thirds vote.

God only knows what is meant by "an affirmative vote of two-thirds majority of the members of the Board of Directors and with the approval of the Missouri Baptist Convention or the Executive Board of the Missouri Baptist Convention."

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