Request By:
Paul J. Vesper
Attorney and Counselor at Law
28 West Fifth Street
Covington, Kentucky 41011
Opinion
Opinion By: Robert F. Stephens, Attorney General; Nancy S. Marksberry, Assistant Attorney General
This is in answer to your request for an opinion concerning the conduct of meetings of the board of directors of a non-profit corporation. You ask:
(1) Do the provisions of KRS 273.217 allow for the by-laws of a Kentucky non-profit corporation to specify less than a majority of the directors as a quorum for conducting business (ie. one-third of the number of directors set out in by-laws is a quorum for conducting business) ?
(2) Do the provisions of KRS 273.377 allow normal corporate business to be conducted without meeting if consent in writing is obtained by less than unanimous board membership approval? Does any provision of Kentucky law allow such result?
In response to the first question, it is our opinion that KRS 273.217 permits the by-laws of a non-profit corporation to specify less than a majority of the directors as a quorum for conducting business. KRS 273.217 provides:
A majority of the number of directors fixed by the bylaws, or in the absence of a bylaw fixing the number of directors, then of the number stated in the articles of incorporation, shall constitute a quorum for the transaction of business, unless otherwise provided in the articles of incorporation or the bylaws. The act of the majority of the directors present at a meeting at which a quorum is present shall be the act of the board of directors, unless the act of a greater number is required by KRS 273.161 to 273.390, the articles of incorporation or the bylaws. (Emphasis added.)
The proviso is similar to the former quorum provision for private corporations as found in KRS 271.345(4)(c), repealed in 1972. We recognize that KRS Chapter 271A governs private corporations and that the provisions of KRS 271A are entirely separate from and do not control those of KRS Chapter 273, which deals with non-profit corporations. An examination of the language of KRS Chapter 271A, however, is useful to determine the intent of the legislature regarding KRS 273.217.
Former KRS 271.345(4)(c) provided that a majority of the directors constituted a quorum unless the by-laws specified a different number, and set the absolute minimum at one-third the total was intentionally deleted in the Kentucky Business Corporation Act, KRS Chapter 271A, adopted in 1972. See Hatfield, C. Kent, "Statutory Treatment of Directors and Officers Under the Kentucky Business Corporation Act," 61 Ky.L.J. 115 (1972). This conscious deletion of the less-than-majority provision in favor of the language of KRS 271A.200, which does not permit a downward adjustment of the number of directors constituting a quorum, is dispositive of the intent of the legislature that private corporate boards must have a majority of directors present to conduct business. Blackburn v. Maxwell Company, Ky., 305 S.W.2d 112 (1957).
The legislature did not manifest a similar intent regarding non-profit corporations in that KRS 273.217 has, to this date, never been amended to delete the less-than-majority provision. Thus, the by-laws of a non-profit corporation, as defined in KRS 273.161, may specify less than a majority of the directors as a quorum for conducting business.
Turning now to your second question, the answer is in the negative. KRS 273.377 provides that business may be conducted without a meeting "if a consent in writing, setting forth the action so taken, shall be signed by all of the members entitled to vote with respect to the subject matter thereof, or all of the directors, as the case may be." The use of the mandatory "shall" prevents action by less than unanimous approval, absent a meeting of the board.