Manager Acting as President

Manager Acting as President

Below is a helpful tip from the Newsletter by ADAMS | STIRLING PLC regarding . . .

Manager as President

QUESTION: Can we operate without a president? The manager refuses to allow us to have a president claiming we would be sued. To compensate, the manager has taken over the president’s powers. How long can we function this way?

ANSWER: You should not be functioning that way at all. By law, all corporations must have a president, secretary and treasurer. (Corp. Code §7213(a).) It is possible there are efforts behind the scenes to resolve the problem and the situation is temporary. If not, the scenario you describe is troubling.

Business Judgment Rule.  If the board is truly accepting legal advice from a manager, especially when there is a threat of litigation, directors have legal exposure. It puts them outside the protection of the business judgment rule. Without that shield, board members can be held personally liable for the decisions they make. (See Palm Springs II HOA v. Parth.)

RECOMMENDATION:  Your board should put the association’s insurance carrier on notice of the threat of litigation you referenced. Next, directors should retain an experienced association lawyer for its legal advice. Finally, they should appoint one of their directors as president.

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