Have you had trouble reaching quorum for your election of directors? Has your association been in the tough position of trying to elect a board, but the number of ballots returned by the election date does not meet the minimum quorum requirements set forth in the governing documents? If you answered “yes” to both these questions, then your association most likely has a high quorum requirement for director elections.
So how do associations proceed with the important task of corporate governance if they cannot meet the quorum necessary to elect a board? In 2023, Assembly Bill 1458 amended Civil Code Section 5115 and Corporations Code 7512 to reduce quorum requirements to 20% in certain circumstances. This new law took effect on January 1, 2024.
Under the new law, if at the time of the meeting, an association with a quorum requirement over 20% has not received enough ballots to establish quorum, the meeting to elect directors may be adjourned to a date at least 20 days after the adjourned meeting. At the subsequent meeting, the quorum will be 20% of the association’s voting members present in person, by proxy, or by the number of secret written ballots returned.
In order to take advantage of this 20% reduced quorum:
- The association must first provide notice that the board may call a subsequent meeting for 20 days after the adjourned meeting and this meeting will have a 20% approval requirement. This first notice must be contained in the “pre-ballot notice,” which is sent at least 30 days before the ballots.
- Notice of the subsequent meeting must be provided to the members after the adjourned meeting, and not less than 15 days before the subsequent meeting. This “15-day notice” must set forth: 1) the date, time, and location of the meeting, 2) the list of all candidates, and a statement that 20 percent of the association present or voting by proxy or secret ballot will satisfy the quorum requirements for the election of directors and that the ballots will be counted if a quorum is reached.
If these notice requirements in the pre-ballot notice and the 15-day notice are not met, the association cannot avail itself of the 20% reduced quorum at the subsequent meeting.
It is important to note that this law only helps associations that have a quorum requirement (or preexisting reduced quorum requirement) over 20%. If an association’s quorum requirement (or reduced quorum requirement) for the election of directors is already 20%, this law will not provide relief.
While this bill may provide some relief to associations with higher approval requirements, we recommend associations take a look at their current quorum requirements for elections of directors and consider amending their documents to reduce the quorum requirement to the number of ballots received by the deadline to return ballots. Such an amendment would allow an association to proceed with its director election without having to schedule another meeting, provide a “15-day” notice, or continue to be concerned with reaching quorum for the subsequent meeting, even if it is reduced to 20%.
Contact your favorite HGCT attorney with questions, if you’d like to review the quorum requirements in your current documents, or to receive a proposal to reduce your quorum requirements.