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MemberDecember 14, 2022 at 9:36 am
That sounds like a very difficult situation and I’m sorry to hear the new board inherited this mess.
The board makes decisions on behalf of the corporation and as long as the board was working in compliance with legislation and the corporation’s bylaws then I would guess that the bills are legal.
A couple things you could look into:
-Read your bylaws and confirm the board members were in compliance with bylaws. Are there are limitations in board member spending (sometimes the bylaws will say a lawyer or professional cannot be hired without approval of the owners). Are there any arbitration requirements or board member duties that might apply to this situation?
-Read the last year of board meeting minutes. Did the board actually record approve hiring this lawyer in the minutes? If the board did not hire the lawyer (there is no board resolution to hire the lawyer), did individual board members instead hire the lawyer? If so you might be able to send the lawyer bills to the individual board member who hired the lawyer. This is a good reminder that individual board members do not have any power to direct corporation activities except what is delegated down to board members in legislation, bylaws, and board resolutions (even the president of the board needs to follow these parameters).
-Read your service agreement with the management company. Are these kinds of costs automatically charged per the service agreement? If not, did the board approve these charges? This will help you negotiate waiving fees with the management company. Also point out that the management company has a clean slate with a new board as they might have been charging extra due to the difficult nature of the old board
-I suggest being careful to limit your communication with any lawyers until you’ve done the above research as lawyers generally charge for every interaction. This might be obvious advice but thought I should throw it out there anyway!
-If you can legally charge these lawyer costs to individual board members you could send the bills to collections. Your management company can hopefully provide you with advice in this area.
-Note that this entire post is discussing directors liability, which can be very messy in a legal way and all this advice is very general. A lawyer will provide much better advice that what I could provide.