DE Corporation Rules Of Officer Succession

[SurveySays]

What is the name of your state (only U.S. law)? DELAWARE

Are there default laws of succession for officers in a Delaware corporation? Here is the situation that gives rise to this question. Suppose that a DE corporation has only two officers, a President and a Secretary, both of whom were previously appointed by the Board of Directors. The President resigns, leaving the Secretary as the only officer. The Board is deadlocked and cannot agree on a new President or other officer appointment, and the articles and by-laws are silent. Can the Secretary carry on the affairs of the corporation until a new President is appointed by the Board? If the answer is yes, will the Secretary accede to all the powers of the President, or are there powers that the former President had that would not accrue to the Secretary as effective/acting President?

 

[tranquility]

http://delcode.delaware.gov/title8/c001/

http://delcode.delaware.gov/title8/c001/sc04/index.shtml

§ 142 Officers; titles, duties, selection, term; failure to elect; vacancies.

(a) Every corporation organized under this chapter shall have such officers with such titles and duties as shall be stated in the bylaws or in a resolution of the board of directors which is not inconsistent with the bylaws and as may be necessary to enable it to sign instruments and stock certificates which comply with §§ 103(a)(2) and 158 of this title. One of the officers shall have the duty to record the proceedings of the meetings of the stockholders and directors in a book to be kept for that purpose. Any number of offices may be held by the same person unless the certificate of incorporation or bylaws otherwise provide.

(b) Officers shall be chosen in such manner and shall hold their offices for such terms as are prescribed by the bylaws or determined by the board of directors or other governing body. Each officer shall hold office until such officer's successor is elected and qualified or until such officer's earlier resignation or removal. Any officer may resign at any time upon written notice to the corporation.

(c) The corporation may secure the fidelity of any or all of its officers or agents by bond or otherwise.

(d) A failure to elect officers shall not dissolve or otherwise affect the corporation.

(e) Any vacancy occurring in any office of the corporation by death, resignation, removal or otherwise, shall be filled as the bylaws provide. In the absence of such provision, the vacancy shall be filled by the board of directors or other governing body.

 

[SurveySays]

Thanks for your reply, tranquility. I have been through the DGCL but I don't think it speaks to this specific situation. What happens when the only officer left is the Secretary, and the board (for whatever reason) cannot act to name a President/CEO? Does the Secretary effectively serve as interim President until a replacement is appointed?

 

[Silverplum]

Thanks for your reply, tranquility. I have been through the DGCL but I don't think it speaks to this specific situation. What happens when the only officer left is the Secretary, and the board (for whatever reason) cannot act to name a President/CEO? Does the Secretary effectively serve as interim President until a replacement is appointed?

The law says the corporation should follow it's by-laws.

 

[tranquility]

Thanks for your reply, tranquility. I have been through the DGCL but I don't think it speaks to this specific situation. What happens when the only officer left is the Secretary, and the board (for whatever reason) cannot act to name a President/CEO? Does the Secretary effectively serve as interim President until a replacement is appointed?

I'd say it does address your specific situation:

(e) Any vacancy occurring in any office of the corporation by death, resignation, removal or otherwise, shall be filled as the bylaws provide. In the absence of such provision, the vacancy shall be filled by the board of directors or other governing body.

By laws or appointment by the board of directors. Perhaps the board is in breach of their duties if they ignore the "shall".