Can a board member of our C corp retain his board seat after filing personal bankruptcy.

He has not formally notified the company, but has filed bankruptcy.

Livermore, CA -

Attorney Answers (4)

Michael Charles Doland

Michael Charles Doland

Corporate / Incorporation Lawyer - Los Angeles, CA
Answered

As long as not prohibited by the bylaws or an employment contract from doing so, there is no prohibition. He does not required to , but probably should advise the board.

The above is general legal and business analysis. It is not "legal advice" but analysis, and different lawyers may... more
David Lynn Morehous

David Lynn Morehous

Business Attorney - Knoxville, TN
Answered

Unless there is something in your Articles/Certificate of Incorporation or Bylaws that *automatically* disqualifies him/her, then the answer is yes, he retains his seat on the Board. If there is an automatic disqualifier - and you should review the language with an attorney - then it's like he resigned or died -- *poof*, he's not a director anymore.

An automatic disqualifier isn't likely, but it's included occasionally. It's also possible that you'd have the option to remove him for "cause." Going that route is likely to be unpleasant, so check with a lawyer to see if you have the power to remove directors for cause, and if so what counts as "cause" and what the procedures are.

Michael Avanesian

Michael Avanesian

Chapter 11 Bankruptcy Attorney - Glendale, CA
Answered

If you want to boot him, and he has not exempted his stock, maybe you can buy it from the Trustee before he abandons it back to the debtor.

The above is general legal and business analysis. It is not "legal advise" but analysis, and different lawyers may... more
Jeffrey Ferris Clark

Jeffrey Ferris Clark

Business Attorney - Belvedere Tiburon, CA
Answered

My colleagues are right, of course, i.e., a director can retain his/her seat despite personal bankruptcy, unless you have removal recourse under your bylaws (by a specific BK-related provision or a general "for cause" interpretation). But, I'd stress an issue about which one of the other attorneys commented: your director is probably a shareholder, so take a look at your bylaws and/or shareholders agreement regarding what your options are for preventing his shares going to his creditors.

This response to your question is general in nature, and is not intended (and is not authorized to be received) as... more

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