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

Livermore, CA |

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

Attorney Answers 4


  1. Best answer

    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 analyse this matter differently, especially if there are additional facts not reflected in the question. I am not your attorney until retained by a written retainer agreement signed by both of us. I am only licensed in California. See also avvo.com terms and conditions item 9, incorporated as if it was reprinted here.


  2. 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.


  3. 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 analyse this matter differently, especially if there are additional facts not reflected in the question. I am not your attorney until retained by a written retainer agreement signed by both of us. I am only licensed in California. See also avvo.com terms and conditions item 9, incorporated as if it was reprinted here. Please visit my web site: www.avanesianlaw.com for more information about my services.


  4. 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 reliable legal advice upon which any action or decision can be based. Other facts and considerations not known may substantially affect the answer as it applies to your particular circumstances.

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