Shareholders in large and small corporations often inquire: How is a director removed from a corporation’s board of directors?
The question may be posed out of concern that the shareholder – who also serves as a director – feels threatened about being ousted as a director. Alternatively, the shareholder may be frustrated with a particular director’s conduct and is seeking a change in board composition and leadership. Either way, in theory, removing a director from a corporation’s board of directors is relatively straightforward.
As the corporation’s owners, shareholders possess power under Iowa law to “remove one or more directors” in an Iowa corporation. Importantly, pursuant to Iowa law, so long as the corporation’s articles of incorporation do not state otherwise, “shareholders may remove one or more directors with or without cause.” In other words, if the corporation’s articles of incorporation are silent and do not address the issue, shareholders may remove a director or directors without providing any justification for their decision – they can simply act and remove the director(s).
Notably, however, if a director is elected by a voting group of shareholders, only the shareholders of that voting group may participate in the vote to remove that director.
As with many corporate actions, removing a director requires shareholders to follow a very specific process. For instance, as of the time of this posting, shareholders may only remove a director at a shareholder meeting that is called for the express purpose of removing the director and after proper notice is provided. The notice must state that the purpose (or one of the purposes) of the meeting is removing the director(s).
Additionally, a shareholder may also petition a court and request a judge remove a director from the board. Not surprisingly, there is also a very specific process by which to seek removal through the court system.
If you are considering removing a director from your Iowa corporation’s board of directors, or if you are a director concerned about future removal, you should consider contacting a licensed attorney who practices in this area of law.