May A Director Resign By Telling Another Director “I Quit”?

Suppose in a fit of pique, a director telephones a fellow director and announces that she is quitting the board.  Has the director resigned?  California Corporations Code Section 305(d) provides:

Any director may resign effective upon giving written notice to the chairman of the board, the president, the secretary or the board of directors of the corporation, unless the notice specifies a later time for the effectiveness of such resignation.  If the resignation is effective at a future time, a successor may be elected to take office when the resignation becomes effective.

Because the statute is so specific, some might argue that a resignation is effective only when given in writing to one of the specified officers or the entire board of directors.  This argument, however, ignores the fact that “may” is a defined term.  Corporations Code Section 15 provides that “may” is permissive.

Even though Delaware doesn’t define “may” in its General Corporation Law, the Delaware Supreme Court recently reached the same result in interpreting Section 141(b) which provides that “[a]ny director may resign at any time upon notice given in writing or by electronic transmission to the corporation.”  Biolase, Inc. v. Oracle, 2014 Del. LEXIS 278 (Del. June 12, 2014).

So if any form of resignation suffices, is there any profit in submitting a written resignation to one of the statutorily assigned officers or the entire board?  If the statutory procedure is not followed, the questions of if and when a director has resigned become factual inquiries.

A word about “may”

The word “may” is descended from the Old English preterite-present verb, mæg, meaning “able”.  Preterite-present verbs use a past (preterite) verb form for the present tense and a weak verb form to make the past tense.  Thus, in Old English, ic mæg means “I may” and ic mehte means “I might”.  Other Old English preterite present pairs include such common verbs as can/could and shall/should. 

Topics:  Board of Directors, Corporations Code, Resignation, Written Notice

Published In: Business Organization Updates, General Business Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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