We have written numerous articles regarding the importance of conducting homeowners association (HOA) meetings in accordance with the HOA’s specific governing documents as well as applicable law. This includes ensuring that notice is properly given, as we wrote about here, making sure that elections taking place at the meetings meet procedural requirements as discussed here, and addressing any number of situations that may arise at the meeting in a way that is congruent with reasonable and lawful procedure. That said, the scheduling itself can be a source of controversy that deserves further discussion on this blog. An issue that has given rise to challenges from members of numerous HOAs is the failure of an HOA to schedule its annual meeting at the time fixed in the HOA bylaws, particularly where the bylaws set forth a specific date for the annual meeting. For example, perhaps the HOA bylaws call for the annual meeting to be held on the first Monday of February of each year, but the HOA actually holds the annual meeting on a different date. This article examines what South Carolina law provides on this point, as well as some of the implications of holding annual meetings at a time separate than what is specified in the HOA’s governing documents.
The overwhelming majority of HOAs in South Carolina are nonprofit corporations and therefore subject to the South Carolina Nonprofit Corporation Act (the “Act”).
Therefore, for the purposes of this article, it is assumed that the HOAs being discussed are nonprofit corporations. Fortunately for HOAs that held annual meetings at times other than the times fixed in their bylaws, the Act contains a helpful provision. The Act specifically provides, “the failure to hold an annual or regular meeting at a time stated in or fixed in accordance with a corporation’s bylaws does not affect the validity of a corporate action.[1]” The Act is effectively saying here that just because the meeting was not held on the date set forth in the bylaws, it does not mean that any corporate actions taken at that meeting are invalid.
Now, this helpful provision from the Act does not mean HOAs should disregard a date fixed in their governing documents for annual meetings.
Absent special circumstances, good-faith efforts should still be made to comply with the specific provisions of the governing documents. For one reason, compliance with the governing documents helps members trust the HOA and expect consistency from their HOA because they see that the HOA board follows their governing documents. Moreover, while the failure to hold the meeting at the date fixed in the bylaws may not legally invalidate a corporate action under the Act, it is still preferable to avoid such a challenge, and the HOA does not want to be faced with a situation where perhaps a court has to evaluate whether the delay or deviation was so drastic as to give rise to real legal concerns. In fact, the Official Comment to the Act provides that even though the failure to hold an annual meeting on the date fixed in the bylaws may not invalidate a corporate action, directors must still exercise their discretion in scheduling the meeting with “good faith.”[2] Of course, failure to hold an annual meeting at all or with unreasonable delay can give rise to a host of issues to be discussed in another article.
In closing, it is always important to be familiar with your HOA’s bylaws and any other governing document provisions regarding the scheduling of annual meetings. That said, HOAs who had their annual meeting dates fixed in their bylaws but actually held their annual meetings on a different date may find comfort in the aforementioned provision of the South Carolina Nonprofit Corporation Act.
This article is not intended to be an exhaustive discussion of applicable law regarding the scheduling of annual meetings nor any guarantee of the outcome of any litigation regarding the same. Our attorneys at McCabe, Trotter & Beverly, P.C. are experienced and well-equipped to answer questions you may have regarding this topic. Please contact us at 803-724-5000 for further information.
Christian Saville
McCabe, Trotter & Beverly, P.C. blogs and other content are for educational and informational purposes only. This is not legal advice and does not create an attorney/client relationship between McCabe, Trotter & Beverly, P.C. and readers. Readers should consult an attorney to understand how this information relates to their personal situation and circumstances. You should not use McCabe, Trotter & Beverly, P.C. blogs or content as a substitute for legal advice from a licensed attorney.
[1] S.C. Code § 33-31-701(f).
[2] S.C. Code Ann. § 33-31-701(f) Official Comment.