The Board of Directors clause in charter documents vests management authority in the board, defines the number directors, and identifies the member of the initial board, The clause has the following common and optional elements;
- Common Elements
- Vesting of authority in the Board;
- Number of Directors
- Name of the Initial Directors (and optionally different classes of directors)
- Optional Elements
- Procedures for filing vacancies
- Procedures for removing directors
- Procedures for nominations of new directors
- Voting Rights
- Less Frequent Elements
- Qualification of directors
- Meetings
- Powers
When including some of the optional or less frequent terms, care should be taken not to create inconsistencies between the Articles and Bylaws.
Standard Language
Short Form
Directors
(a) Management. The business and affairs of the Corporation shall be managed under the direction of the Board of Directors.
(b) Number. The initial board of directors shall consist of one member. The number of directors may be changed from time to time by action of the directors of the Corporation in accordance with, and subject to the limitation on the number contained in the By-Laws of the Corporation.
(c) Names. The name(s) and address(es) of the First Board of Directors are: ___________________________
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Long Form
Directors
a. Management of the Corporation. The business and affairs of the Corporation shall be managed under the direction of the Board of Directors. All powers of the Corporation may be exercised by or under the authority of the Board of Directors, except as conferred on or as reserved to the stockholders by law or by the Charter or the Bylaws of the Corporation.
b. Number, Class and Terms of Directors; Cumulative Voting.
i. Number of Directors. The number of directors constituting the Board of Directors of the Corporation shall initially be eight, which number may be increased or decreased in the manner provided in the Bylaws of the Corporation; provided, however, that such number shall never be less than the minimum number of directors required by the [STATE CORPORATION STATUTE] (the "[STATE CORPORATION LAW ABBREVIATION]") now or hereafter in force.
ii. Classes of Directors. The directors, other than those who may be elected by the holders of any series of Preferred Stock, shall be divided into three classes, as nearly equal in number as reasonably possible, with the term of office of the first class ("Class I") to expire at the conclusion of the first annual meeting of stockholders, the term of office of the second class ("Class II") to expire at the conclusion of the annual meeting of stockholders one year thereafter and the term of office of the third class ("Class III") to expire at the conclusion of the annual meeting of stockholders two years thereafter, with each director to hold office until his or her successor shall have been duly elected and qualified. At each annual meeting of stockholders, directors elected to succeed those directors whose terms expire shall be elected for a term of office to expire at the third succeeding annual meeting of stockholders after their election or for such shorter period of time as the Board of Directors may determine, with each director to hold office until his or her successor shall have been duly elected and qualified.
iii. Names of Directors. The names of the individuals who will serve as directors of the Corporation until their successors are elected and qualify are as follows:
Class I directors:
[CLASS I DIRECTORS NAME AND TERM]
Class II directors:
[CLASS II DIRECTORS NAME AND TERM]
Class III directors:
[CLASS III DIRECTORS NAME AND TERM]
iv. Cumulative Voting. Stockholders shall not be permitted to cumulate their votes in the election of directors.
c. Vacancies. Any vacancies in the Board of Directors may be filled in the manner provided in the Bylaws of the Corporation.
d. Removal. Subject to the rights of the holders of any series of Preferred Stock then outstanding, any director, or the entire Board of Directors, may be removed from office at any time, but only for cause and only by the affirmative vote of the holders of at least a majority of the voting power of all of the then-outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors (after giving effect to the provisions of Article 5 hereof) voting together as a single class.
e. Stockholder Proposals and Nominations of Directors. Advance notice of stockholder nominations for the election of directors and of business to be brought by stockholders before any meeting of the stockholders of the Corporation shall be given in the manner provided in the Bylaws of the Corporation.
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Optional and Alternative Language
The Articles of Incorporation may also include provisions regarding qualification of directors, meetings and powers.
C. There shall be no limitation on the qualification of any person to be a director or on the ability of any director to vote on any matter brought before the Board or any Board committee, except (i) as required by applicable law, (ii) as set forth in this Certificate of Incorporation or (iii) any By-Law adopted by the Board of Directors with respect to the eligibility for election as a director or the qualification for continuing service as a director upon reaching a specified age or, in the case of employee directors, with respect to the qualification for continuing service of directors upon ceasing employment from the Corporation.
D. Except as (i) required by applicable law or (ii) set forth in this Certificate of Incorporation, at all meetings of the Board of Directors, a majority of the entire Board of Directors shall constitute a quorum for the transaction of business and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board of Directors. E. The following provisions are inserted for further definition, limitation and regulation of the powers of the Corporation and of its directors and stockholders:
(1) The By-Laws of the Corporation may be adopted, altered, amended or repealed (i) by the affirmative vote of the shares representing a majority of the votes entitled to be cast by the Voting Stock; PROVIDED, HOWEVER, that any proposed alteration, amendment or repeal of, or the adoption of any By-Law inconsistent with, Section 3, 7, 10 or 11 of Article II of the By-Laws or Section 1, 2 or 11 of Article III of the By-Laws or Section 4, 5 or 12 of Article IV of the By-Laws (in each case, as in effect on the date hereof),or the alteration, amendment or the repeal of, or the adoption of any provision inconsistent with this sentence, by the stockholders shall require the affirmative vote of shares representing not less than 80% of the votes entitled to be cast by the Voting Stock; and PROVIDED, FURTHER, HOWEVER, that in the case of any such stockholder action at a special meeting of stockholders, notice of the proposed alteration, amendment, repeal or adoption of the new By-Law or By-Laws must be contained in the notice of such special meeting, or (ii) by action of the Board of Directors of the Corporation except as otherwise specified in Section 12 of Article IV of the By-Laws. (2) In addition to the powers and authority hereinbefore or by statute expressly conferred upon them, the directors are hereby empowered to exercise all such powers and do all such acts and things as may be exercised or done by the Corporation, subject, nevertheless, to the provisions of the DGCL, this Certificate of Incorporation, and any By-Laws adopted by the stockholders; PROVIDED, HOWEVER, that no By-Laws hereafter adopted by the stockholders shall invalidate any prior act of the directors which would have been valid if such By-Laws had not been adopted.
Discussion
1. Conflicting Terms between the Articles and Bylaws
Typically, provisions regarding the qualification, voting, meeting and committees are detailed in the Bylaws. In some cases, the provisions may be overlapping raising the issue which terms take precedence.
“While we recognize that a non-profit corporation's Articles of Incorporation take precedence over inconsistent provisions of its Bylaws, § 355.116; Higginsville Memorial Post 6270 v. Benton, 108 S.W.3d 28, 33 (Mo.App.W.D.2003), Articles of Incorporation and Bylaws adopted at the same time should be construed together where possible. ’Corporate articles and bylaws are to be construed according to general rules governing contracts.’ DCW Enters., Inc. v. Terre du Lac Ass'n, Inc., 953 S.W.2d 127, 130 (Mo.App.E.D.1997).
2. Resources
All About Boards of Directors (For-Profit and Nonprofit
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