December 29, 1998
C. Stephen Trimmier, Esquire
Trimmier Law Firm
P.O. Box 1885
Birmingham, Alabama 35201
You have written asking for clarification of Article XIX, Section
3 of the Federal Credit Union (FCU) Bylaws regarding the removal
of directors from office by the members pursuant to a special
meeting. Specifically, you ask for guidance on or examples of
legally sufficient reasons for members to remove a director.
As discussed below, the FCU Bylaws set out certain procedural
requirements but do not require that members have "legally
sufficient reasons" for removal. The Office of General Counsel
has issued its opinion regarding setting aside an election and,
in that context, stated that the members must have sufficient
justification to set aside an election.
The FCU Bylaws set out the legal requirements for removal of a
director by the membership. Article XIX, Section 3 provides that
members may remove a director by an affirmative vote at a special
meeting called specifically for the purpose of removal but only
after the director has an opportunity to be heard. Article V,
Sections 2 and 3 require that the executive officer call a special
meeting if the required number of members request one, that the
notice of the special meeting state the purpose for which it is
called, and that no other business be transacted at the special
meeting.
When read together, these bylaw provisions require that a members'
petition for removal: state that the members are requesting a
special meeting to vote on removal; identify the directors whose
removal the members are seeking; and specify the reasons for removal.
This information is necessary for the directors to have an opportunity
to prepare a response prior to the vote. The notice of special
meeting that is sent to members must also state the purpose of
the meeting, identify the directors whose removal is sought, and
specify the reasons for removal.
It is important to distinguish between a petition to remove directors and a petition to set aside an election. I am unaware of any General Counsel opinion stating that the members must have legally sufficient reasons to remove a director. The attached letters from James J. Engel to Lydia Schneider, dated January 19,
Page Two
1979, and from Hattie M. Ulan to Robert Bascom, dated September
28, 1989, discuss removal of directors by the members. In one
case, the grounds discussed were bankruptcy and, in the other,
although the grounds were not stated, the vote for removal was
allowed to proceed because the charges were so serious and the
board members were willing to proceed.
Regarding setting aside an election, I note two previous letters for your attention. The attached letter from Hattie M. Ulan to Duke Strosser, dated September 16, 1991, states that the members must have legally sufficient reasons to set aside an election. That letter is consistent with the attached letter from John Ostby to D.J. O'Brien, dated June 11, 1980.
I also note that the Model Business Corporation Act allows shareholders
to remove directors with or without cause, unless the articles
of incorporation provide that directors may only be removed for
cause. Model Business Corporation Act (1984), §8.08. Unlike
removal of directors, there is no specific authority in the FCU
Bylaws and no specific authority in corporate law for the membership
to void an election without cause.
Sincerely,
Sheila A. Albin
Associate General Counsel
GC/MFR:bhs
SSIC 3700
98-0950
Enclosures
cc: Region III