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?
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).