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Are Suspending a Director and Removing a Director the Same Thing?

No. Suspending a director and removing a director are not the same thing. According to a B.C. court in George v. The B.C. Wildlife Federation (released April 2016), the B.C. Wildlife Federation (BCWF) validly suspended a director for violating corporate policy. The director's suspension did not amount to his removal from the board. However, considering the technical and practical issues surrounding a director's suspension, suspending a director may not be a good practice.

Keep reading if you want to learn more!

What Happened

George was a vice-president of the BCWF and, by holding this position, was an (ex-officio) director of the BCWF. His term expired in April 2016.

BCWF investigated allegations that George sent offensive emails to two employees, which is contrary to BCWF's HR manual. Failing to comply with the manual can lead to disciplinary measures. After investigating, the BCWF asked George to resign. He refused. BCWF's board then disciplined George by suspending him from his duties for 3-months. George only had 3 months left of his term when he was suspended.

George argued that the board's suspension was invalid because his suspension essentially amounted to his removal from the board (the duration of his suspension and the amount of time he had left on office were the same). In this instance, only members could only approve his suspension (removal) from the board.

What the Court Said

Suspending a director is the same as suspending an employee. Suspension puts a director's duties on hold, but does not end a term of office. As long as the 3-month suspension was justifiable, then the board's suspension of George for the remainder of his term did not effectively remove him from the board.

Observations

George v. BCWF was decided under the common law. This is because the B.C. Society Act is silent as to whether a director/officer could be suspended. This led us to wonder how the court would have decided if BCWF was governed by the Canada Not-for-profit Corporations Act (CNCA).

Like the Society Act, the CNCA is silent on whether a director can be suspended from his duties. Under the CNCA directors can be removed prior to the end of their term, and, under the common law, officers can be suspended from office so it looks like suspension is possible. However, suspending a director can lead to technical and practical problems for a not-for-profit.

Under the CNCA, directors must fulfill their duties to the corporation or face personal liability. Directors can also face personal liability for failing to pay employee wages or authorizing certain distributions to members that don't comply with the law. How does a director fulfill these mandatory duties of he is suspended? Is a director still personally liable while suspended?

Possibly. The CNCA does not set out whether a director is eligible to vote while suspended. If so, and the suspended director is absent from a meeting, he is regarded as having consented to any resolution passed by the board, if he doesn't, within 7 days, dissent to the resolution. Since a suspended director may not know if a meeting was held, or what decisions were passed, dissenting may not be possible.

Suspending a director also presents certain practical issues. First, authority to suspend a director or officer must be explicitly set out in a not-for-profit's records. In George v. BCWF, this authority was found in BCWF's HR manual. The power to suspend cannot be created out of thin air.

Second, the suspended director can contest the suspension, which is what happened in George v. BCWF. Litigation can be extremely costly for a not-for-profit.

Third, suspending a director may cast into doubt the validity of all board resolutions passed during the period of suspension - particularly if a court later sets the suspension aside.

Accordingly, it is generally preferable to avoid suspending a director. Instead, the board should seek member approval to remove the director before his term ends. While obtaining member approval can be onerous, chances are most directors will resign rather than contest their removal by the membership.

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