Cumulative Voting for Incorporated Community Associations

A few years ago, the legislature adopted a law that governs the operation of nonprofit corporations that are incorporated. The law modifies the way that incorporated associations handle cumulative voting. Under Hawaii nonprofit corporation law, the following must happen before cumulative voting will be permitted at a community association's election. The law for cumulative voting for nonprofit corporations requires all three of the following things before cumulative voting is allowed:

1.   Cumulative voting must be authorized by the association's Articles of Incorporation or By-Laws;
2.   The notice of the association's meeting (or a statement accompanying the notice) must state that cumulative voting will take place; and
3.   A member must give notice of intent to cumulatively vote at least 48 hours before the meeting or such longer period provided in the By-Laws.

The Hawaii law is based on the Model Nonprofit Corporation Act. The reason for these provisions in the Model Nonprofit Corporation Act is that cumulative voting deprives the rights of a majority of the owners. Cumulative voting allows a minority to elect a director even though the majority would prefer another candidate. Since it is contrary to the rights of the majority, the Hawaii Nonprofit Corporation Act requires notice be given and a member request the cumulative voting. There were probably some other policy concerns about cumulative voting. The average member does not understand how cumulative voting works. Since only a few people understand the process and the way it can be used to maximum effect, it's antidemocratic effect is even more pronounced. In addition, there was also the practical recognition that if someone didn't request cumulative voting, the corporation should have to go through the process of voting cumulatively.

As a result of this law, we recommend that all incorporated community associations other than condominiums to include the following language in their notice of meeting at which directors are to be elected if their By-Laws or Articles of Incorporation permit cumulative voting

Article ____, Section _____ of the Association's By-Laws states that the election of directors shall be by cumulative voting. Hawaii Revised Statutes Section 414D-114 states that if the By-Laws authorizes cumulative voting by the members, cumulative voting will be permitted only if a member gives notice of intent to cumulatively vote not less than 48 hours before the meeting. Accordingly, unless notice is given within the time period mandated by the statute, cumulative voting will not be permitted.

After the notice of the meeting is distributed to the members, any member, including any board member may provide notice of intent to cumulatively vote.

In 2005, the cumulative voting provisions of the Nonprofit Corporation were partially superceeded for condominium associations only. For condominium associations (including incorporated condominium associations) owners holding more than 50% of the common interest in the condominium can remove any director at a meeting regardless of the provisions of the association's By-Laws. The percentage would not change depending on whether cumulative voting was used to elect the director. If the By-Laws provide for cumulative voting by the owners, the owners may so vote if an owner gives notice of the owner's intent to cumulatively vote before voting commences.

Revised August 14, 2005: This article was revised to incorporate the effect of Act 155 which adopted special rules for cumulative voting of condominium associations .