If the chairman of the board announces the adjournment of the meeting before the scheduled agenda is completed, can the directors present continue with the meeting? Recently, the Supreme Court issued a judgment on this issue, which is worth noting.

A foundation's board of directors had reached the end of their term without re-election.  The current directors therefore requested, in accordance with Article 43, Paragraph 6 of the Foundations Act, to convene a board meeting for re-election.  After the meeting was convened upon the directors' request, the attending directors requested that the election of directors, originally listed as item 10 on the agenda, be moved to item 1.  However, the chairman of the meeting (i.e. the current chairman of the board) announced the adjournment of the meeting and left the meeting room with several directors.  The remaining attending directors then nominated an acting chairman to continue the meeting, and through an emergency motion, resolved to remove the current chairman of the board and elect a new chairman of the board.  This led to a lawsuit regarding who the current chairman of the board is.

The case was appealed multiple times to the Supreme Court.  In its second judgement, the Supreme Court pointed out that the chairman of the board of a foundation, when presiding over a board meeting, must adhere to the rules of procedure and execute the agenda.  The chairman of the board is not allowed to arbitrarily adjourn the meeting unless there is a motion to adjourn, and the motion has been seconded or put to a vote.  If the chairman of the board arbitrarily announces the adjournment and leaves the meeting, the remaining directors may appoint an acting chairman to continue the meeting.^[1]

Nevertheless, in its third judgement, the Supreme Court further stated: “[w]hen the board of directors of a foundation exercises the aforementioned authority during a meeting, if there is a disruption in the meeting or a change of chairman, the attending directors must be promptly provided with necessary information regarding the chairman's replacement and the successor’s authority to continue presiding over the meeting.  This is to help them determine whether they need to continue participating in the meeting.  Furthermore, if any directors leave the meeting relying on the chairman's authority to adjourn, in order to protect their rights and promote the correctness of the resolutions, it is necessary to promptly provide the relevant information so they can make an informed judgment.  The duty of disclosure and provision of this information is closely related to the protection of freedom of speech.  It is not only a guiding principle for the legality of the procedure for electing or removing the chairman but also an essential procedural requirement during the meeting.  Any violation of this obligation, which impacts a director's participation in the meeting, exchanging opinions, or brainstorming, or results in the loss of an opportunity to be nominated as the meeting's chairman, a candidate for chairman, or the elected chairman, or affects the correctness of the meeting’s resolutions, may be grounds for the meeting's resolutions to be deemed invalid or not established.”^[2]

The above Supreme Court judgment on one hand established that if the chairman of the board violates procedural rules and announces the adjournment of the meeting, the attending directors may elect an acting chairman to continue the meeting.  On the other hand, the continuation of the meeting must also take into account the rights of the directors who left, ensuring that they are informed of the continuation of the meeting and have the opportunity to return and participate.  This provides guidance on how future board meetings should be handled in cases where the chairman unlawfully announces an adjournment, which is an important point to consider.  Moreover, although the Supreme Court's opinion specifically addressed the board of a foundation, considering the similarity between the operation of foundation boards and corporate boards, these insights should be taken into account when planning the procedures for board meetings, as a guideline for compliance.

(The article is originally in Chinese which can be found here.)