Board Elections /  Appointments

When are elections for Board members required to be held?

• MCA 35-2-417. Election, designation and appointment of directors. (1) If the corporation has members, all the directors except the initial directors must be elected at the first annual meeting of members and at each annual meeting thereafter unless the articles or bylaws provide some other time or method of election or provide that some of the directors are appointed by some other person or are designated.

This would require the HOA to elect or appoint all directors at the annual meeting.  But already you can see that this law allows for the articles or bylaws to provide for some other method.  We must now check what the article or bylaws say about elections.

• Covenants - Article II Section 2 - …thereafter, the Directors shall consist of 3 Lot Owners, who shall be elected at the annual meeting by a simple majority of the members of the Association....

Fortunately, our article agree with the state laws that directors SHALL be elected at the annual meeting.  Unfortunately, it is never this simple.  The articles and bylaws have other regulations on what happens when we are not simply electing a new member at the end of an existing board members term.  More on this later.

• Covenants Article III - …At the annual meeting, the members shall review and approve a budget for the next year, shall elect Directors to fill any expired term or vacant position,...

This covenant further agrees that at the annual meeting the members shall elect directors.

 

The overall theme is that all board members must be voted on at the annual meeting anytime their term is up or a position is considered to be vacant.  Please keep in mind that it is possible for a position to be vacant and still have a director serving in the vacant position.

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How are elections required to be conducted?

The covenants and bylaws do not explain anywhere if the elections should be conducted by a simple yea or nay voice vote, by secret ballot, or any other means  This leaves it open to the board to decided how to conduct the elections. 

An election can only take place at an annual or special meeting if a quorum is present either in person or by proxy.

One Montana law does specifically outline how to conduct a vote.

• MCA 35-2-533. Action by written ballot. (1) Unless prohibited or limited by the articles or bylaws, any action that may be taken at any annual, regular, or special meeting of members may be taken without a meeting if the corporation delivers a written ballot to every member entitled to vote on the matter.

This would allow the HOA to conduct the election of board members (that is required to occur at the annual meeting) by means of a written ballot.  The law continues to outline exactly how the written ballot is required to be sent out and collected.

(3) A written ballot must:

(a) set forth each proposed action; and

(b) provide an opportunity to vote for or against each proposed action.

(4) Approval by written ballot pursuant to this section is valid only when:

(a) the number of votes cast by ballot equals or exceeds the quorum required to be present at a meeting authorizing the action; and

(b) the number of approvals equals or exceeds the number of votes that would be required to approve the matter at a meeting at which the total number of votes cast was the same as the number of votes cast by ballot.

(5) All solicitations for votes by written ballot must:

(a) indicate the number of responses needed to meet the quorum requirements;

(b) state the percentage of approvals necessary to approve each matter other than election of directors; and

(c) specify the time by which a ballot must be received by the corporation in order to be counted.

This is the best case scenario when the HOA can do an election and gets a quorum either at the annual meeting or by the written ballot.  However, different requirements must be met when the annual meeting does not have a quorum or the vote for directors by written ballot does not receive a quorum vote.

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How are board members elected if the annual meeting does not have a quorum?

Montana state law only directs that elections must be elected at the annual meeting, but MCA 35-2-417 allows for "the articles or bylaws provide some other time or method of election".  The HOA's bylaws do outline a method to vote on directors if an when a position becomes vacant.  If the annual meeting does not have a quorum or the ballot does not receive enough votes to constitute a quorum then no election took place and no one was elected.  This would leave the position vacant.

Covenants Article XVI - ...At any time and for any reason that a vacancy occurs on the Board and an agreement cannot be reached on a successor, then such vacancy shall be filled by the membership interest at large at a special meeting held for that purpose. At such election, any membership interest may nominate candidates from the floor and voting shall be by ballot and each membership interest shall have one (I) vote. In the event the membership should nominate more than three (3) individuals to fill a vacancy, the three individuals receiving the highest number of votes shall become candidates to fill the vacancy and a second vote shall be taken to select one of the three (3). The person receiving the highest number of votes shall be deemed to be elected to fill the vacant position on the Board of Directors.

This outlines that if a vacancy occurs on the board (a director's term ended) then a special meeting shall be called.  It is true that the vote at this meeting is not restricted from being conducted by a written ballot outlined in MCA 35-2-533 .  But it would be impossible to conduct the rest of the meeting as outlined in Article XVI by said written ballot.  But the only way to comply with allowing members to be nominated from the floor would be to have an actual meeting.

No regulations currently exist to regulate elections if and when this subsequent special meeting does not have a quorum.  The position would remain vacant and would have to fall on the board's appointment powers.

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Who can fill vacancies on the board?

We must first look at Montana Law.

MCA 35-2-424. Vacancy on board. (1) Unless the articles or bylaws provide otherwise and except as provided in subsections (2) and (3), if a vacancy occurs on a board of directors, including a vacancy resulting from an increase in the number of directors:

(a) (i) the members, if any, may fill the vacancy; or

(ii) if the vacant office was held by a director elected by a class, chapter, organizational unit or by region or other geographic grouping, only members of the class, chapter, unit, or grouping are entitled to vote to fill the vacancy if it is filled by the members;

(b) the board of directors may fill the vacancy; or

(c) if the directors remaining in office constitute fewer than a quorum of the board, they may fill the vacancy by the affirmative vote of a majority of all the directors remaining in office.

This would allow the members or the board of directors to appoint a new board member.  This would also allow 1 board member to appoint 2 board members if 2 positions were vacant.  However, one very important detail to emphasize is the first line of this law,  "Unless the articles or bylaws provide otherwise".  We must therefore examine what the bylaws say.

Covenants - Article II Section 7 - A vacancy in any office of the Association shall be filled by appointment by the

Board of Directors until the next annual meeting or his/her successor is duly appointed or elected.

This requires that the board shall appoint a replacement to any vacancies on the board, but further directs that the appointed board member shall only serve until the next annual meeting when the HOA is required to vote.

Bylaws - Article VIII K. - To fill vacancies on the Board by agreement of the two remaining members, should the vacancy not, however, be filled by the Board, it may be filled by an election at an annual or special meeting wherein each membership interest shall have one (I) vote.

Article VIII K goes on to agree that the board shall fill the vacancy, but the appointment must be by the two remaining board members.  So if two board seats are vacant then the board cannot appoint a replacement, since it takes a vote of the two remaining board members.

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