As a general rule, stockholders cannot act in relation to the ordinary business of a corporation. The body of stockholders have certain authority conferred by statute which must be exercised to enable the corporation to act in specific cases, such as ...
As a general rule, stockholders cannot act in relation to the ordinary business of a corporation. The body of stockholders have certain authority conferred by statute which must be exercised to enable the corporation to act in specific cases, such as consenting to the amendments to the articles of incorporation, merger, dissolution, sale of all or substantially all of a corporation's assets. Any action by shareholders relating to the details of the corporate business is necessarily in the form of an assent, request or recommendation.
At common law, stockholders have the inherent power to remove director for cause, regardless of the presence of provision in the charter or bylaws providing for such removal. The right of stockholders to remove a director for cause may only be exercised by stockholders controlling at least a majority of votes, or, where certificate of incorporation contains provisions permitted by Stock Corporation Law section, such number greater than majority as therein provided.
Notwithstanding that a shareholders' agreement requires maintenance in office of a particular director designated by a stockholder, director may be removed for cause since implicit in any agreement to maintain a particular director in office is director's duty to fulfill faithfully the requirements of his office.
When shareholders attempt to remove a corporate director for cause, there must be service of specific charges, adequate notice, and full opportunity afforded to such director to meet the accusation.
Whether cause exists for the removal of directors is subject to the judicial review. As a general rule, a director's organizing a competing company or accepting employment with a competing company, a director's allowing the payment of rebates contrary to the board's order and improper withdrawal of funds and payment have been held to constitute sufficient cause.
In the absence of authorization by statute or charter or bylaws, the directors do not have the power to remove one of their members even for cause.
If cumulative voting is authorized, a director may not be removed if the number of votes sufficient to elect him under cumulative voting is voted against his removal.
In a corporation with a number of classes, with each class electing a specified number of directors, shareholders of a specific class should have exclusive power to remove the directors whom they elect.
The court that removes a director may bar the director from reelection for a period prescribed by the court.
The restriction of the removal of directors under cumulative voting or staggered terms and the prohibition of the reelection of directors removed by the court are highly recommended to be introduced to the Korean Commercial Code.