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BOARD OF DIRECTOR MEETINGS: WHO CAN ATTEND?
QUESTION:
A meeting of the Board
of Directors of a non public California corporation can often be a place of some
controversy with differing members of the board, who are often also
shareholders, making conflicting claims and wishing to pursue objectives
at variance with other board members or the corporation itself. Who
decides who can attend the board meeting? Can a dissident director bring
his or her own legal counsel?
ANSWER:
The California courts have left the matter to be determined
by the board of directors and
the by-laws of the corporations
regarding third party representation in meetings. The following reflects the current
state on this matter:
§10.11 Marsh’s California Corporation Law
The board of directors is entitled, as is any other
deliberative body to determine what persons will be permitted to attend
any meeting of the board.
Normally, non-director officers may be invited to attend all or
particular meeting of the board, especially the secretary of the
corporation for the purpose of keeping minutes of the proceeding. Also, outside counsel of the corporation are frequently
invited to attend. However the
board may exclude all such persons, especially if a particular matter is
to be discussed in an executive session with no outsiders present.
This decision, as to who (if anyone) other than the
directors themselves will be permitted to attend a particular meeting of
the board, is a decision to be made
by the board as a whole and not by any given individual director. It would be made like any other board
decision, by a majority vote of
those directors. Therefore, an
individual director has no right to invite any third person, for example
his or her own lawyer, to attend a board meeting over the opposition of
the other directors. In Burt v
The Irvine Company the court held that an individual director had no
right to have counsel present at a meeting of the board of directors,
where the board had refused to allow him to attend. In respect of California
law, the court stated, “This determination (as to who shall be
permitted to attend a board meeting) is to be made by the board as a
whole and not by directors individually.” (224 Cal App 2d 51).
In a recent California
decision, Burt v The Irvine Company, 224 Cal.
App. 2d 50, the court stated, “This determination is to be made by
the board of directors as a whole and not by directors individually. What circumstances may suggest the
presence of persons other than the board members is left to the sound
discretion of the corporation, acting through its board of directors.”
See also, American Center for Education, Inc v Cavnar, 145 Cal
Rptr. 736, 746, 80 Cal App3d 476, 492 (Cal.App. 2 Dist. Apr 27, 1978)
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