CORPORATION ELECTED TO HOA BOARD – Can An Employee hold a board seat?

CORPORATION ELECTED TO HOA BOARD – Can An Employee hold a board seat?

Below is a helpful tip from the Newsletter by ADAMS | STIRLING PLC regarding corporations on your board.

QUESTION: Our HOA has several members that operate commercial vineyards on their lots. Employees of two of these corporations hold board seats, even though they are not owners or members. Is this allowed under Davis-Stirling? ‑Kathleen C.

RESPONSE: Yes it is. Mitt Romney, in his 2011 presidential run against Barack Obama, correctly pointed out that corporations are people too. What he neglected to say is that they are not natural persons. Instead, they are “legal” persons. As such, corporations have most of the rights and privileges that natural persons have, such as owning property, entering into contracts, belonging to organizations, etc.

Person Defined. The Davis-Stirling Act defines “person” as a natural person, corporation, government or governmental subdivision or agency, business trust, estate, trust, partnership, limited liability company, association, or other entity. (Civil Code §4170.) I suspect most homeowners don’t know that their association is a person.

Spokesman Required. If a corporation owns property in a common interest development, it automatically becomes a member of the association, meaning it can vote and serve on the board of directors. A corporation, however, needs a natural person to speak for it, just as associations rely on boards of directors to speak for them. That means a corporation can appoint someone to attend meetings on its behalf and even serve on the board of directors.

RECOMMENDATION: We include language addressing the rights of entities such as corporations, companies, partnerships, and trusts when we restate an association’s governing documents. Boards should consider doing the same when it comes time to restate their bylaws.

DISCLAIMER. The Newsletter by ADAMS | STIRLING PLC provides commentary only, not legal advice. For legal advice, you’ll need to hire legal counsel.  You can hire ADAMS | STIRLING PLC; Keep in mind they are considered corporate counsel to associations only.