When has a director vacated office?

When has a director vacated office?

By Bruce Gotterson

October 08, 2017

This article appeared in the September 2017 issue of Club Life.

A few years ago, we wrote about the uncertainty which clubs face from time to time in relation to whether a director has vacated his or her office.  I was recently asked about this issue and it prompted me to write about it again. Most of the content below is taken from the article we wrote.

The uncertainty usually arises in cases where directors fail to attend board meetings or in cases where directors indicate they are resigning but fail to give formal notice of their resignation. This month’s column will focus on directors failing to attend board meetings.

The Constitutions of many clubs provide that a director ceases to be a director if that person is absent from a certain number of consecutive directors meetings or is absent from directors meetings over a number of months (usually between three and six months) without leave of absence being granted by the board.

It is also sometimes thought that if a director has tendered his/her apologies for a particular meeting then this constitutes leave of absence.

In the matter of Calabria Community Club Limited [2013] NSW SC 998 (26th July 2013) the court noted from earlier decisions that it was clear that there is a difference between “leave of absence” and an apology for a meeting.  Leave of absence requires a resolution of the board at a previous meeting or the meeting in question.

Where all that can be established is that an apology is proffered and “noted” (albeit without discussion or dissent) with no indication that it has been accepted then there is no positive grant of leave.  Accordingly, the mere noting of an apology does not amount to consent to leave of absence in respect of the particular director who has proffered the apology.

If, however, an apology has been formally accepted and recorded in the minutes as having been accepted then it is much more easily implied that a positive grant of leave has been given by the Board.

However, there can be circumstances where the mere noting of an apology constitutes a grant of leave of absence.  In the particular case the club had no set procedure for seeking and obtaining consent for leave of absence.  The Board noted apologies in circumstances where meetings were called on short notice and the director concerned was subsequently permitted to participate in directors meetings without objection.  This lead the court to the conclusion that the board had in fact consented, albeit informally, to the director’s absence.  This conclusion was strengthened by circumstances where the club had never asserted that other directors who had been absent from meetings over a 6 month period had also ceased to hold office on that account.

If the board of a club has merely “noted” rather than accepted an apology or formally granted leave of absence or if no apology is given by a director it is strongly recommended that notice be given to the director with the relevant provisions in the club’s constitution in relation to vacating office and what will happen if the director continues to remain away from directors meetings.

Directors who intend or are required to be absent for significant periods of time due to travel, health, business or other good reason should formally apply for leave of absence from the board (rather than simply tendering apologies for the relevant meetings) and should make sure that leave of absence has been granted and recorded in the minutes of the relevant board meeting.

I strongly suggest that legal advice should be first obtained if any board is intending to rely on failure by a director to attend board meetings as grounds for the director having vacated their office.

For more information contact Bruce Gotterson on b.gotterson@pigott.com.au

This article is intended to provide general information in summary form on a legal topic, current at the time of publication.  The contents do not constitute legal advice and should not be relied on as such. Formal legal advice should be sought in specific circumstances.