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QUESTION/ANSWER BY: JOHN H. GETTINGER, ESQ.

I voted against the president of our management company also serving as treasurer. The management company does a great job but this seems not advisable. Am I wrong?

Answer:

It depends. The first thing you need to do is review your by-laws to determine if the president of your management company (the "Managing Agent") is qualified to serve as an officer and director. Typically, officers are required to be members of the Board and members of the Board are required to be home owners. As such, you need to determine if the Managing Agent is qualified to fill either position.

If the Managing Agent is qualified (and meets all of the other qualifications set forth in the by-laws), the Board may appoint the Managing Agent to serve as treasurer. Obviously, such appointment would require a determination by a majority of the board at a meeting at which a quorum is present that the Managing Agent is the most qualified person to act as treasurer. It may also be convenient that the Managing Agent have some limited check writing authority. Any decision by the Board to appoint the Managing Agent to serve as treasurer, as long as it is is made in good faith, would be protected by the business judgment rule.

Notwithstanding the foregoing, this appointment creates a potential conflict of interest, especially if the Managing Agent also serves as a director and has voting rights. As such, the Board must have good reason to appoint the Managing Agent as treasurer. Obviously, if appointed, the Managing Agent must not participate in decisions involving the Board and his management firm. The Board should adopt a conflict of interest policy with which it should comply in dealing with "Interested Transactions" such as this one.

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