Untangling California's Shareholder Vote Requirements For Filling Vacancies On The Board
Section 305 of the California Corporations Code sets forth the rules for filling vacancies on the board of directors. Today's post discusses the somewhat confusing requirements of the statute as it pertains to the filling of of vacancies by the shareholders. As an initial matter, the shareholders may elect a director at any time to fill any vacancy that has not been filled by the directors.
If the election occurs at a meeting, then the directors who receive the highest number of votes up to the number of vacancies to be filled will be elected. The number of votes that a shareholder may cast for a candidate will depend upon whether cumulative voting is available and, if so, whether it has been properly and timely invoked.
Matters become a bit more complicated when the shareholders fill the vacancy by written consent without a meeting. In that case, the number of votes required depends upon whether the vacancy was created by removal. If the vacancy was created by removal, then a vacancy may be filled only be the unanimous consent of all of the shares entitled to vote for the election of directors. In widely held corporations, this won't be an option as a practical matter and a meeting will be required. If the vacancy was not created by removal, then the vacancy may be filled with the consent of a majority of the shares entitled to vote.