Whole Communities as their own Board?
From: O3C11N6G (normangausscharter.net)
Date: Tue, 2 Oct 2007 17:26:47 -0700 (PDT)
I am puzzled at how those California cohousing communities in which the whole community acts as the Board can manage to fulfill the legal requirements of a Board. Board members have certain duties and I don't believe that the whole community can take on all those duties in a competent manner.

California Law states that Board members be elected annually and have certain specified duties. Board members are to act as fiduciaries of the whole community and may not let personal wants or biases influence their decisions.

The two broad duties of directors are to:
Maintain the common areas, and
Enforce the restrictions contained in the governing documents, requiring, of course, a knowledge of what is in the governing documents.
From these two duties flow a number of other duties that are related to and
arise out of their primary duties.
In addition, the board has the necessary authority to carry out their duties. Directors must perform their duties as fiduciaries.

FIDUCIARY DUTIES OF DIRECTORS
Fiduciary Duty: "A duty to act for someone else's benefit, while subordinating one's personal interest to that of the other person. It is the highest standard of duty implied by law (e.g., trustee, uardian)." -Black's Law Dictionary Upon their election, directors become fiduciaries with two primary fiduciary duties: (i) duty of care, and (ii) duty of loyalty. Duty of Care (Due Diligence). Directors must be diligent and careful in performing the duties they have undertaken." Burt v. Irvine Company. Directors must: 1. Attend and participate in meetings so they can be informed about the associations business. 2. Make reasonable inquiry before making a decision. Board may rely on professionals (attorneys, CPAs, consultants) unless director suspects misrepresentation by the person offering the advice. Duty of Loyalty (Self-Dealing). Directors must act in the best interests of the association even if at the expense of their own interests. Violation could result in (i) liability for all profits received, (ii) all damages caused by the breach, and (iii) punitive damages. Conflicts of interest do not necessarily create liability. Ethics Policy. Boards should consider adopting a written ethics policy to guide directors and govern their behavior. Business Judgment. Directors are protected from personal liability by the business judgment rule


DUTY TO REVIEW FINANCIAL RECORDS
Unless the governing documents impose more stringent standards, the board of directors must at a minimum review the financial records of the association as follows:
A current reconciliation of the operating accounts on a quarterly basis.
A current reconciliation of the reserve accounts on a quarterly basis.
The current year's actual reserve revenues and expenses compared to the current year's budget, on a quarterly basis.
The latest bank statements for operating and reserve accounts.
An income and expense statement for the association's operating and reserve accounts on at least a quarterly basis. Civil Code §1365.5(a)
The reserve study annually. Civil Code §1365.5(e)

Given all these duties and obligations, I don't see how a whole community could possibly be its own Board.

Norm Gauss

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