Board of Directors Resignation

Imagine this scenario: your association’s entire board of directors decides they are fed up with being board members, and all resign at the same time, leaving your association with no board at all. Or, imagine that, one by one, each board member resigned over time and was never replaced, so that when the last board member resigns, the board had no members. Can members of the board simply resign, or does the law constrain their ability to do so?

An association’s board of directors has many legal obligations to the association. Possibly the most important of these obligations is that the board of directors, and each of its members, has duty of care to the association. (For details about this duty of care, such as how it is different for elected or appointed board members, or for board members of COAs or HOAs, see our previous post Standard of Care for Boards.)

Some courts have held that this duty of care constrains a director’s ability to resign. Particularly in the case where resignation would leave the board with no leadership at all, such as the resignation of the entire board or of its last remaining member, resignation could violate a director’s duty of care because the association would be left with no leadership, potentially to the association’s detriment.

In fact, if an association is incorporated as a nonprofit corporation – like many associations in Washington – then the applicable statutes require that members of its board of directors shall hold office for their entire term, and until the director’s successor has been elected or appointed. (See RCW 24.03.100 or RCW 24.06.130.) This language, together with the board member’s duty of care, may impose constraints on the ability of board members to resign.

On the other hand, one Washington case has held that despite this language, directors cannot be required to remain in office after they have resigned. In King County Dept. of Community and Human Services v. Northwest Defenders Assn., 118 Wn. App. 117 (2003), a nonprofit corporation’s entire board of directors resigned one by one until no board members were left. The court held that despite the language of the nonprofit corporation statutes, the directors could not be required to remain in office for their entire terms or until successors were chosen. This was true even though the association was left with no board members at all.

Because the law surrounding issues of board member resignation is not clear, we recommend that board members, association members, managers, and others confronting issues arising out of board member resignation consult with their association’s counsel to determine what the rights and obligations of all parties are.

If you have any questions we can answer, please feel free to leave a comment or contact us directly.  We look forward to continuing this conversation with you in our future posts!

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3 Responses to Board of Directors Resignation
  1. Chris
    November 5, 2012 | 11:31 pm

    Our situation is this: 3 of the six units are currently in some process of foreclosure and are vacant. One unit is occupied by a renter, one by a homeowner that lives off site and the final one is my family. I am in the process of abandoning my home and hope to be out in the next month or so, however I do not know how to turn over the paperwork/finances to the remaining members.

    The remaining two owners have essentially been feuding for over 20 years and have not spoken to each other in years. One of them is the landlord of the renter, and they have refused to keep the renter from abusing the rules and other tenants, and is one of the main reasons we are leaving. He currently has 6 vehicles, and is occupying vacant units assigned parking and has threatened me if I have them towed. I have called the police but they would not intervene in any meaningful way.

    We are the adoptive parents of the 10 year old girl that was our foster child who from years of abuse and neglect suffers from Post Traumatic Stress Disorder and other Trauma related special needs. This situation is seriously detrimental to the well being of our child and we need out. Since we are seriously underwater, the only option is to abandon ship…there is no way a short sale would work with the number of foreclosures and rental units, as no one would be able to get financing on them.

    I don’t know how I can get the remaining owners to work together, and the bank will not let me take my name off of the account without documentation stating there is a new treasurer. I have no idea what to do in this situation, the banks that hold mortgages do not seem interested in helping, so I found you. Is there any advise you can give me? What I would like to do is turn everything over to a neutral 3rd party that will mediate/negotiate a working relationship with the remaining owners until some of the units sell and a board can be reestablished. Is this even feasible

  2. Valerie Farris Oman
    November 7, 2012 | 8:29 pm

    Hello Chris,

    It sounds like you are dealing with a very complicated and difficult situation. Unfortunately, the questions you are asking require legal advice in response, and we cannot give legal advice in this forum and/or to non-clients. Given your circumstances, we believe you should consider consulting with an attorney.

    Best wishes,

    Valerie

  3. MICHAEL STORA
    March 18, 2014 | 8:27 pm

    Can the Business Manager assume responsibility when the Board of Directors have resigned after organization has failed to complete closure/sale of existing assets?

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