Eliminating Quorum Requirements – One size does not fit all

Recently there has been significant discussion of and movement toward modification of homeowner and community association voting processes. Much of the focus of these activities has centered on efforts to make elections easier by eliminating quorum requirements through a Bylaw amendment.  It has been suggested that eliminating quorum will help to avoid the problem of membership apathy in the election of directors.  While this concept is not novel (the provisions of Corporations Code Section 7512 which allow Bylaws to establish lesser quorum requirements have been around for many years), it is important that you as directors and managers realize this strategy is not necessarily a panacea to make life easier.  While managers and directors both would greatly appreciate making the election of directors more convenient, we do not feel that eliminating a quorum altogether is necessarily the most appropriate method to accomplish this goal.

Here are some reasons why:

In order to amend your bylaws, you will need to obtain the approval of your members through a secret ballot.  Depending on what your Bylaws indicate concerning amendment, at a minimum this means that a majority of your members must cast votes and that a majority of those voting must vote in favor of the change.

In discussions regarding why the amendment to eliminate quorum is being sought, some members may realize that one of the consequences of such an action is to potentially allow a “super-minority” of the members to control the election of the Board of Directors.  Absent a quorum requirement, there is no minimum threshold of participation required to elect directors.  While no doubt making elections easier, such an approach could have some unintended consequences:

One likely consequence is that if there is a proliferation of attempts to eliminate quorums by community associations, our activist State Legislature will simply step in and mandate a more burdensome quorum requirement to supersede this action.  If you have any doubt that this could happen; observe the legislation enacted over the last several years which significantly increases the burden on Associations to provide disclosures and make the processes within Associations more fair and transparent, most all without regard to inconvenience or cost to the Association.  Civil Code Section 1363.03 (election statute) is in direct response to a perception by the Legislature that the election processes within Associations were subject to manipulation and fraud.

Another possible consequence which Directors should not ignore is that eliminating a quorum for election of directors would also eliminate a quorum for the recall of the entire Board of Directors.  All it takes is 5% of the membership to demand a recall election. When members perceive that a minority of the Association’s members are represented by the Board, rather than a majority, the likelihood of recall elections being sought will increase.  Without a quorum requirement in place, the likelihood that recalls will be successful will also increase.

Finally, there is an underlying concern about whether the interests of convenience should outweigh the effort to obtain participation by the members.

Because of the reasons outlined here, we believe that other strategies may well be better solutions to the problem of apathetic members.  These solutions include:

A Bylaw Amendment to reduce quorum from a simple majority of members to the statutory 33% set forth in Corporations Code Section 7512.

A Bylaw Amendment to provide for a 50% reduction in quorum requirement if not achieved as of the first scheduled annual meeting with a short adjournment period (five or ten days).

Both of these approaches reflect the Association’s need to move forward with elections without completely ignoring the quasi-democratic nature of such elections.  There are also other ways in which to address particular elections problems through changes in election policies and procedures. When amending or otherwise modifying bylaws for any reason; associations should consult counsel to determine how best to avoid any unwanted results and to achieve the planned outcome.