Can You Remove a Corporate Director Without Their Consent in Maryland?

A corporation is organized to be run by a group of people and continue to operate even after the original founders or operators are gone.  This means that in most cases, the leadership of the company – the board of directors – will change throughout the life of the corporation.  The chief officers of the corporation are typically beholden to the shareholders’ interests, and the shareholders typically have the right to remove a corporate director with or without their consent.  Baltimore business litigation attorney William S. Heyman explains how this process works and how an experienced corporate attorney might be able to help you remove a director or help you keep your job in a Maryland corporation.

How a Corporate Director Can Be Forcibly Removed in Maryland

Typically, corporate directors are appointed by the shareholders under the terms of the company’s articles of incorporation or bylaws.  These shareholders have the power to give and the power to take away when it comes to positions on the board of directors.  Large companies often have to schedule stockholder meetings well in advance to give voting members and the directors who would be affected notice of these kinds of proceedings, but smaller, more closely-held companies may be able to expedite the process and make decisions about their directors much faster.

Corporate directors serve at the pleasure of the stockholders under most articles of incorporation, and it is solely up to the stockholders whether a director keeps his or her job.  In many cases, the director in question will have a large share of stock in the company, especially in cases involving closely held corporations and S corporations.  This may mean that many of the votes among the stockholders belong to the director but coalitions of voters may still be able to unseat a president or another officer if they have enough votes.

In some cases, the corporate director cannot be removed.  This usually occurs in cases where the director’s contract with the corporation, contract with the shareholders, or the articles of incorporation create another rule or system.  Some setups may include a “for cause” requirement whereby the stockholders must show cause before they can vote the director of the board.

There may also be other mechanisms within the company’s charter or the director’s contract that allows the stockholders to fire the director for other reasons.  This may include things like breach of fiduciary duty, crimes against the corporation, or court orders to be removed from the board.  The articles of incorporation, bylaws or the director’s contract might also create other for-cause reasons, such as unfitness or legal incapacity (e.g., if the director is incapacitated).

Before the question of whether the director can be removed ever comes to the table, the stockholders can call for the director’s resignation.  If the director does resign, there is typically no need to take the issue to a stockholder vote, and the position can be vacated and refilled more quickly.

How a Lawyer Can Help with Corporate Director Removal

If you are a stockholder or represent a group of stockholders in a company, you may be able to work with a business litigation attorney to understand your rights and responsibilities as a shareholder.  You may be able to raise support for a vote to remove an officer and start calling for the vote yourself or with help from a coalition of stockholders.  Your attorney can help guide you and other like-minded shareholders through the process and help represent you in any litigation or disputes that result from the issue.

If you are a corporate director, and you hear that shareholders may begin asking for your resignation or calling for a vote to remove you from office, it is important to have a corporate attorney on your side.  Our business advisory lawyer can work with you to help you make decisions that strengthen your corporation and avoid calls for resignation or removal.  If push comes to shove and processes are started against you, our attorneys may be able to work with you to help combat voting and corporate processes that might remove you from office, potentially challenging the legality of the moves if there are any breaches of contract or other issues that make your removal illegal.

Many corporate directors are attorneys themselves, and still more are experienced business professionals.  Still, it is important to seek help from outside counsel who can protect your interests and fight for what’s best for you.  Trying to protect yourself from removal or affect the removal of a corporate director on your own without proper legal counsel could lead to an undesirable outcome.  Work with one of our attorneys on your business and legal strategy and help make sure that you are choosing the strongest legal paths to accomplishing your goals.

Call Our Baltimore Corporate Litigation Lawyers Today

If you are a shareholder who wants to work to remove a corporate director in your company, you may need sophisticated legal advice to affect your goals.  If you are a corporate director yourself, and the shareholders are working to take your position away, you may need legal counsel to protect your position.  Either way, contact the Heyman Law Firm today to speak with one of our business litigation attorneys about your issue.  Our number is (410) 305-9287.