Passing a new by-law

The Code of Ethics gives the majority of the board a tool that could be used to keep one or two rogue or dissident directors in line if there was a sure-fire method of enforcing it.

Going to the owners is too hazardous and messy while the courts may tell the condo corporation to requisition an owners meeting. Something different, an Ethics Review by-law, is needed.

Example by-law
Here is one by-law that a board tried to get passed at an AGM.
All directors have to be a registered owner.
Any director who missed three regularly scheduled board meetings in a row, without a valid excuse, ceases to be on the board.
All directors had to sign the CCI Code of Ethics.
Any director who violated the Code of Ethics on two occasions can be removed from the board after a hearing by a resolution passed by the majority of the directors.

A pretty crude by-law that appears too have been slapped together in haste by the corporation's lawyer.

There is no explanation on how the hearing is suppose to work and the word "can" in "can be removed from the board" should be "will"—should it not?

It looks like the board may be giving itself wiggle room so it can force someone off the board when they wish to and can ignore transgressions when it so pleases.

Another example
Here is a Directors Qualifications by-law that has been better thought out.

In part it says:
the person violates the “Directors Code of Ethics” on three (3) occasions over the course of the director’s term, unless determined otherwise by a court. For the purposes of this section, a violation of the Directors’ Code of Ethics will be established if:

(a) another director notifies the Corporation, in writing, of the violation (the “Code of Ethics Violation”), upon which the matter shall be added as the first agenda item to the very next meeting of the Board and shall be identified in the agenda as the “Ethics Review”.

The Ethics Review
The procedure to be used for the Ethics Review shall be the same procedure used by the Board to decide all Corporation matters, except, to ensure fairness, the director named in the Code of Ethics Violation shall be allowed to address the Board at the meeting, but shall not vote nor be present when the Board votes on the matter; and

(b) the majority of the remaining directors, present at the meeting during the Ethics Review, determine that a Code of Ethics Violation has occurred.

The decision rendered at the conclusion of the Ethics Review shall be duly minuted in the Corporation’s records.

If it is determined at the end of the Ethics Review that the Code of Ethics Violation has occurred and constitutes the subject director’s third (3rd) violation, then prior to concluding the Ethics Review, the subject director shall provide, in writing, his/her immediate resignation from the Board, failing which shall be deemed to have been provided and duly noted within the minutes as such.

Tinkering with the by-law
This second by-law may remove a director from the board but there is nothing preventing that director from running in the next election and getting re-elected to the board.

To prevent this from happening, one law firm added the following to the Directors' Qualifications.

To qualify as a director of the Corporation, one must:
not have resigned or been removed from the board and two (2) years have not passed from the date that said director's term would have expired.

A director resigns orally at a meeting of directors, or resigns in writing, in which case such resignation shall be irrevocable.

In the first case, if a director resigns, or is removed from the board in their first year of office, then that owner—depending on the whim of the present board—has to wait until the fifth AGM before he will be eligible to be a candidate for a position on the board.

So if a director gets into a heated discussion at a board meeting and blurs out, "I quit", even if they then say, I have changed my mind, they may be gone for up to five years.

The result
The secrecy provisions contained in the CCI "Code of Ethics" and the new Ethics Review to enforce silence means that a director cannot warn the owners of what the majority of the board is up to even in such cases as where the board illegally removes money from the reserves to pay operating expenses or to fund upgrades to the property if the majority says that that information is confidential.

This makes for a potentially very dangerous situation.

top   contents   chapter  previous  next