“The board of directors of a corporation is charged with managing the business of the corporation. Business Corporation Law (or BCL) Section 715 provides that corporate officers “shall have such authority and perform such duties in the management of the corporation as may be provided in the bylaws [of the corporation] or, to the extent not so provided, by the board [of directors].” Officers derive their authority to act and bind the corporation from the BCL, the certificate of incorporation of the corporation, the bylaws of the corporation or a resolution of the board of directors.
“Assuming that the motion/resolution of the board was properly adopted and was for a lawful purpose, the president and the board member should abide by the resolution. The failure of the board member or president to adhere to the resolution may be a violation of his/her fiduciary responsibility and cause for removal as president or from the board. The president and board member may also be financially responsible for acts taken in violation of the resolution.
“Although the law provides that an officer or board member acting in violation of the governing documents or a board resolution is unauthorized, they may still enter into contracts that bind the cooperative or the condominium because to an outsider, the board member and/or the president may be clothed with “apparent authority” by reason of his/her position. It is not a defense to a contract signed on behalf of the co-op or condo that the officer or board member signing the agreement was not authorized. The contract would have to be repudiated promptly by the board, typically by a letter indicating that the person who signed on behalf of the co-op or condo was not authorized. This should be done as soon as possible and before any of the benefits of the contract are received by the co-op/condo. There may be personal liability to the board member or president who improvidently enters into such a contract.
“On Robert’s Rules, in many years of practicing law, I have only seen a handful of co-ops that have formally adopted Robert’s Rules of Order as part of their governing documents. Unless Robert’s Rules were adopted by the board or specifically referred to in the bylaws, they should not be considered by the questioner and have no bearing on this response. Nevertheless, there is nothing in Robert’s Rules addressing this issue, or at least in my version of Roberts Rules, which is the 9th Edition.
“It is advised that the board members seek the advice of the attorney for the cooperative or condominium to determine whether the resolution was properly adopted in accordance with applicable law and with the governing documents of the cooperative or condominium. The board members opposing the actions taken by the president or the board member lacking authority may seek judicial aid with respect to the particular item of business to recover damages, to prohibit any further action by the board member or president and possibly to set aside any transaction entered into by the president and/or officers. Prompt action is usually required and, as mentioned above, the advice of an attorney is recommended.”