BOARD OF DIRECTORS

TEXAS BUSINESS ORGANIZATIONS

§ 21.401. MANAGEMENT BY BOARD OF DIRECTORS.

(a) Except as provided by § 21.101 or Subchapter O, the board of directors of a corporation shall:

(1) exercise or authorize the exercise of the powers of the corporation; and

(2) direct the management of the business and affairs of the corporation.

(b) In discharging the duties of director under this code or otherwise and in considering the best interests of the corporation, a director is entitled to consider the long-term and short-term interests of the corporation and the shareholders of the corporation, including the possibility that those interests may be best served by the continued independence of the corporation.

(c) In discharging the duties of a director under this code or otherwise, a director is entitled to consider any social purposes specified in the corporation's certificate of formation.

(d) Subject to direction by the board of directors of the corporation, in discharging the duties of an officer under this code or otherwise, an officer is entitled to consider:

(1) the long-term and short-term interests of the corporation and of the corporation's shareholders, including the possibility that those interests may be best served by the continued independence of the corporation; and

(2) any social purposes specified in the corporation's certificate of formation.

(e) Nothing in this § prohibits or limits a director or officer of a corporation that does not have a social purpose specified as a purpose in the corporation's certificate of formation from considering, approving, or taking an action that promotes or has the effect of promoting a social, charitable, or environmental purpose.

§ 21.402. BOARD MEMBER ELIGIBILITY REQUIREMENTS.

Unless the certificate of formation or bylaws of a corporation provide otherwise, a person is not required to be a resident of this state or a shareholder of the corporation to serve as a director. The certificate of formation or bylaws may prescribe other qualifications for directors.

§ 21.403. NUMBER OF DIRECTORS.

(a) The board of directors of a corporation may consist of one or more directors.

(b) If the corporation is to be managed by a board of directors, the number of directors shall be set by, or in the manner provided by, the certificate of formation or bylaws of the corporation, except that the number of directors on the initial board of directors must be set by the certificate of formation.

(c) The number of directors may be increased or decreased by amendment to, or as provided by, the certificate of formation or bylaws. A decrease in the number of directors may not shorten the term of an incumbent director.

(d) If the certificate of formation or bylaws do not set the number constituting the board of directors or provide for the manner in which the number of directors must be determined, the number of directors is the same as the number constituting the initial board of directors as set by the certificate of formation.

§ 21.404. DESIGNATION OF INITIAL BOARD OF DIRECTORS.

If the corporation is to be managed by a board of directors, the certificate of formation of a corporation must state the names and addresses of the persons constituting the initial board of directors of the corporation.

§ 21.405. ELECTION OF BOARD OF DIRECTORS.

(a) At the first annual meeting of shareholders of a corporation and at each subsequent annual meeting of shareholders, the holders of shares entitled to vote in the election of directors shall elect directors for the term provided under § 21.407, except as provided by § 21.408.

(b) A corporation's certificate of formation may provide that the holders of a class or series of shares or a group of classes or series of shares are entitled to elect one or more directors of the corporation.

§ 21.406. SPECIAL VOTING RIGHTS OF DIRECTORS.

(a) The certificate of formation of a corporation may provide that directors, regardless of whether elected by the holders of a class or series of shares or by a group of classes or series of shares, as provided by § 21.405, are entitled to cast more or less than one vote on all matters or on specified matters. Such a provision also applies to directors voting in any committee or subcommittee regarding all matters or the specified matters, as applicable, unless otherwise provided by the certificate of formation.

(b) Unless expressly stated otherwise, each reference in this code or in a corporation's certificate of formation or bylaws to a specified portion of the directors means the portion of the votes entitled to be cast by the directors to which the reference applies.

§ 21.407. TERM OF OFFICE.

Except as otherwise provided by this subchapter, the term of office of a director extends from the date the director is elected and qualified or named in the corporation's certificate of formation until the next annual meeting of shareholders and until the director's successor is elected and qualified.

§ 21.408. SPECIAL TERMS OF OFFICE.

(a) The certificate of formation or bylaws of a corporation may provide that all or some of the board of directors may be divided into two or three classes that shall include the same or a similar number of directors as each other class and that have staggered terms of office.

(b) The terms of office of the initial directors constituting the first class expire at the first annual meeting of shareholders after the election of those directors. The terms of office of the initial directors constituting the second class expire at the second annual meeting of shareholders after election of those directors. The terms of office of the initial directors constituting the third class, if any, expire at the third annual meeting of shareholders after election of those directors. In each case, the term of office of an initial director is extended until the director's successor is elected and has qualified.

(c) If the certificate of formation or bylaws provide for staggered terms of directors, the shareholders, at each annual meeting, shall elect a number of directors equal to the number of the class of directors whose terms expire at the time of the meeting. The directors elected at an annual meeting shall hold office until the second succeeding annual meeting, if there are two classes, or until the third succeeding annual meeting, if there are three classes.

(d) Unless provided by the certificate of formation or a bylaw adopted by the shareholders, staggered terms for directors must be effected at a meeting of shareholders at which directors are elected. Staggered terms for directors may not be effected if any shareholder has the right to cumulate votes for the election of directors and the board of directors consists of fewer than nine members.

(e) Directors elected by the holders of a class or series of shares or a group of classes or series of shares in accordance with the certificate of formation shall hold office for the terms specified by the certificate of formation.

§ 21.409. REMOVAL OF DIRECTORS.

(a) Except as otherwise provided by the certificate of formation or bylaws of a corporation or this subchapter, the shareholders of the corporation may remove a director or the entire board of directors of the corporation, with or without cause, at a meeting called for that purpose, by a vote of the holders of a majority of the shares entitled to vote at an election of the director or directors.

(b) If the certificate of formation entitles the holders of a class or series of shares or a group of classes or series of shares to elect one or more directors, only the holders of shares of that class, series, or group may vote on the removal of a director elected by the holders of shares of that class, series, or group.

(c) If the certificate of formation permits cumulative voting and less than the entire board is to be removed, a director may not be removed if the votes cast against the removal would be sufficient to elect the director if cumulatively voted at an election of the entire board of directors, or if there are classes of directors, at an election of the class of directors of which the director is a part.

(d) In the case of a corporation the directors of which serve staggered terms, a director may not be removed except for cause unless the certificate of formation provides otherwise.

§ 21.4091. RESIGNATION OF DIRECTORS.

(a) Except as otherwise provided by the certificate of formation or bylaws, a director of a corporation may resign at any time by providing written notice to the corporation.

(b) The director's resignation takes effect on the date the notice is received by the corporation, unless the notice prescribes a later effective date or states that the resignation takes effect on the occurrence of a future event, such as the director's failure to receive a specified vote for reelection as a director.

(c) If the director's resignation is to take effect on a later date or on the occurrence of a future event, the resignation takes effect on the later date or when the event occurs.

(d) The director's resignation is irrevocable when it takes effect. The director's resignation is revocable before it takes effect unless the notice of resignation expressly states it is irrevocable.

§ 21.410. VACANCY.

(a) A vacancy occurring in the initial board of directors before the issuance of shares may be filled by the affirmative vote or written consent of the majority of the organizers or by the affirmative vote of the majority of the remaining directors, even if the remaining directors constitute less than a quorum of the board of directors.

(b) Except as provided by Subsection (e), a vacancy occurring in the board of directors after the issuance of shares may be filled by election at an annual or special meeting of shareholders called for that purpose or by the affirmative vote of the majority of the remaining directors, even if the remaining directors constitute less than a quorum of the board of directors.

(c) The term of a director elected to fill a vacancy occurring in the board of directors, including the initial directors, is the unexpired term of the director's predecessor in office.

(d) Except as provided by Subsection (e), a vacancy to be filled because of an increase in the number of directors may be filled by election at an annual or special meeting of shareholders called for that purpose or by the board of directors for a term of office continuing only until the next election of one or more directors by the shareholders. During a period between two successive annual meetings of shareholders, the board of directors may not fill more than two vacancies created by an increase in the number of directors.

(e) Unless otherwise authorized by a corporation's certificate of formation, a vacancy or a newly created vacancy in a director position that the certificate of formation entitles the holders of a class or series of shares or group of classes or series of shares to elect may be filled only:

(1) by the affirmative vote of the majority of the directors then in office elected by the class, series, or group;

(2) by the sole remaining director elected in that manner; or

(3) by the affirmative vote of the holders of the outstanding shares of the class, series, or group.

§ 21.411. NOTICE OF MEETING.

(a) Regular meetings of the board of directors of a corporation may be held with or without notice as prescribed by the corporation's bylaws.

(b) Special meetings of the board of directors shall be held with notice as prescribed by the bylaws.

(c) A notice of a board meeting is not required to specify the business to be transacted at the meeting or the purpose of the meeting, unless required by the bylaws.

(d) Notice of the date, time, place, or purpose of a regular or special meeting of the board of directors may be provided to a director by electronic transmission on consent of the director. The director may specify the form of electronic transmission to be used to communicate notice.

(e) Notice is considered provided under Subsection (d) when the notice is:

(1) transmitted to a facsimile number provided by the director for the purpose of receiving notice;

(2) transmitted to an electronic mail address provided by the director for the purpose of receiving notice;

(3) posted on an electronic network and a message is sent to the director at the address provided by the director for the purpose of alerting the director of a posting; or

(4) communicated to the director by any other form of electronic transmission consented to by the director.

(f) A director may revoke the director's consent to receive notice by electronic transmission by providing written notice to the corporation. The director's consent is considered revoked for purposes of Subsection (d) if the corporation is unable to deliver by electronic transmission two consecutive notices, and the secretary, assistant secretary, or transfer agent of the corporation, or another person responsible for delivering notice on behalf of the corporation, knows that delivery of those two electronic transmissions was unsuccessful. Inadvertent failure to treat the unsuccessful transmissions as a revocation of the director's consent does not affect the validity of a meeting or other action.

(g) An affidavit of the secretary, assistant secretary, transfer agent, or other agent of a corporation stating that notice has been provided to a director of the corporation by electronic transmission is, in the absence of fraud, prima facie evidence that notice was provided under Subsections (d) and (e).

§ 21.412. WAIVER OF NOTICE.

(a) If the bylaws of a corporation require notice of a meeting to be given to a director, a written waiver of the notice signed by the director entitled to the notice, before or after the meeting, is equivalent to the giving of the notice.

(b) The attendance of a director at a board meeting constitutes a waiver of notice of the meeting, unless the director attends the meeting for the express purpose of objecting to the transaction of business at the meeting because the meeting has not been lawfully called or convened.

(c) A waiver of notice of a board meeting is not required to specify the business to be transacted at the meeting or the purpose of the meeting, unless required by the bylaws.

§ 21.413. QUORUM.

(a) A quorum of the board of directors is the majority of the number of directors set or established in the manner provided by the certificate of formation or bylaws of a corporation unless the laws of this state, the certificate of formation, or the bylaws require a different number or portion.

(b) Neither the certificate of formation nor the bylaws may provide that less than one-third of the number of directors constitutes a quorum.

§ 21.414. DISSENT TO OR ABSTENTION FROM ACTION.

(a) A director of a corporation who is present at a meeting of the board of directors at which action has been taken is presumed to have assented to the action taken unless:

(1) the director's dissent or abstention has been entered in the minutes of the meeting;

(2) the director has filed a written dissent or abstention with respect to the action with the person acting as the secretary of the meeting before the meeting is adjourned; or

(3) the director has sent to the secretary of the corporation, within a reasonable time after the meeting has been adjourned, a written dissent or abstention by:

(A) certified or registered mail, return receipt requested; or

(B) other means specified in the corporation's governing documents.

(b) A director who voted in favor of an action may not dissent or abstain with respect to the action.

§ 21.415. ACTION BY DIRECTORS.

(a) The act of a majority of the directors present at a meeting at which a quorum is present at the time of the act is the act of the board of directors of a corporation, unless the act of a greater number is required by the certificate of formation or bylaws of the corporation or by this code.

(b) Unless otherwise provided by the certificate of formation or bylaws, a written consent stating the action taken and signed by all members of the board of directors is also an act of the board of directors.

§ 21.416. COMMITTEES OF BOARD OF DIRECTORS.

(a) If authorized by the certificate of formation or bylaws of a corporation, the board of directors of the corporation may designate:

(1) committees composed of one or more directors; or

(2) directors as alternate members of committees to replace absent or disqualified committee members at a committee meeting, subject to any limitations imposed by the board of directors.

(b) To the extent provided by a resolution of the board of directors designating a committee or by the certificate of formation or bylaws and subject to Subsection (c), the committee has the authority of the board of directors.

(c) A committee of the board of directors may not:

(1) amend the certificate of formation, except to:

(A) establish series of shares;

(B) increase or decrease the number of shares in a series; or

(C) eliminate a series of shares as authorized by § 21.155;

(2) propose a reduction of stated capital under §§ 21.253 and 21.254;

(3) approve a plan of merger, share exchange, or conversion of the corporation;

(4) recommend to shareholders the sale, lease, or exchange of all or substantially all of the property and assets of the corporation not made in the usual and regular course of its business;

(5) recommend to the shareholders a voluntary winding up and termination or a revocation of a voluntary winding up and termination;

(6) amend, alter, or repeal the bylaws or adopt new bylaws;

(7) fill vacancies on the board of directors;

(8) fill vacancies on or designate alternate members of a committee of the board of directors;

(9) fill a vacancy to be filled because of an increase in the number of directors;

(10) elect or remove officers of the corporation or members or alternate members of a committee of the board of directors;

(11) set the compensation of the members or alternate members of a committee of the board of directors; or

(12) alter or repeal a resolution of the board of directors that states that it may not be amended or repealed by a committee of the board of directors.

(d) A committee of the board of directors may authorize a distribution or the issuance of shares if authorized by the resolution designating the committee or the certificate of formation or bylaws.

(e) The board of directors may remove a member of a committee appointed by the board if the board determines the removal is in the best interests of the corporation. The removal of the member is without prejudice to any contract rights of the person removed. Appointment of a member of a committee does not create contract rights.

(f) The designation and delegation of authority to a committee of the board of directors does not relieve the board of directors or a director of responsibility imposed by law.

§ 21.417. ELECTION OF OFFICERS.

The board of directors of a corporation shall elect a president and a secretary at the time and in the manner prescribed by the corporation's bylaws. Other officers, including assistant officers and agents as deemed necessary, may be elected in accordance with § 3.103.

§ 21.418. CONTRACTS OR TRANSACTIONS INVOLVING INTERESTED DIRECTORS AND OFFICERS.

(a) This § applies to a contract or transaction between a corporation and:

(1) one or more directors or officers, or one or more affiliates or associates of one or more directors or officers, of the corporation; or

(2) an entity or other organization in which one or more directors or officers, or one or more affiliates or associates of one or more directors or officers, of the corporation:

(A) is a managerial official; or

(B) has a financial interest.

(b) An otherwise valid and enforceable contract or transaction described by Subsection (a) is valid and enforceable, and is not void or voidable, notwithstanding any relationship or interest described by Subsection (a), if any one of the following conditions is satisfied:

(1) the material facts as to the relationship or interest described by Subsection (a) and as to the contract or transaction are disclosed to or known by:

(A) the corporation's board of directors or a committee of the board of directors, and the board of directors or committee in good faith authorizes the contract or transaction by the approval of the majority of the disinterested directors or committee members, regardless of whether the disinterested directors or committee members constitute a quorum; or

(B) the shareholders entitled to vote on the authorization of the contract or transaction, and the contract or transaction is specifically approved in good faith by a vote of the shareholders; or

(2) the contract or transaction is fair to the corporation when the contract or transaction is authorized, approved, or ratified by the board of directors, a committee of the board of directors, or the shareholders.

(c) Common or interested directors of a corporation may be included in determining the presence of a quorum at a meeting of the corporation's board of directors, or a committee of the board of directors, that authorizes the contract or transaction.

(d) A person who has the relationship or interest described by Subsection (a) may:

(1) be present at or participate in and, if the person is a director or committee member, may vote at a meeting of the board of directors or of a committee of the board that authorizes the contract or transaction; or

(2) sign, in the person's capacity as a director or committee member, a unanimous written consent of the directors or committee members to authorize the contract or transaction.

(e) If at least one of the conditions of Subsection (b) is satisfied, neither the corporation nor any of the corporation's shareholders will have a cause of action against any of the persons described by Subsection (a) for breach of duty with respect to the making, authorization, or performance of the contract or transaction because the person had the relationship or interest described by Subsection (a) or took any of the actions authorized by Subsection (d).

 

Contact Information

Mailing Address

Chowins Law Firm, PLLC
1011 Surrey Lane #200
Flower Mound, TX 75022

Telephone

(469) 630-2550

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