am I an officer?

A friend of mine recently got promoted to Vice President [yeah!] of a private company but then immediately called me to verify her potential liabilities. In particular she asked: did it need board of director approval? was she now considered an officer? what were the implications of being an officer? She was panicked - not a good state for someone who was recently promoted.

Being promoted to Director, Vice President or Chief [insert title here - Financial, Marketing, Technical, etc.] Officer does not necessarily mean you are automatically an Officer of the Company. The best place to get this information is the Articles of the Company. In this document look for a section called “Officers” which will cover how Officers are appointed, functions, duties and powers of Officers and how much they will get paid. This section could reference other sections so make sure to read all related information.

Typically the board of directors elects the Officers and they share in the liability of the overall company. For most companies the Officers are the CEO and the CFO; however, there are always exceptions. In her case she provided me with the following snippets (she asked the CFO if she could see the Articles of the Company):

“The corporation shall have a president, a secretary, a treasurer and such other officers, if any as the board of directors from time to time may appoint. Any officer may be, but need not be, a director or a stockholder. The same person may hold any two or more offices. The board of directors may elect officers at any time.”

“The vice presidents, if any, shall be subject to the direction and control of the board of directors, the chief executive officer and the president and shall have the powers and duties as the board of directors, the chief executive officer or the president may assign to them. If the BOD elects more than one vice president, then it shall determine their respective titles, seniority and duties. If the president is absent, disqualified from acting, unable to act or refuses to act, the most senior in rank of the vice presidents (as determined by the BOD) shall have the powers of, and shall perform the duties of the president”

Given the above information I told her:

• yes, the board of directors appointed Officers so if she was considered an Officer it would be in the minutes. She should ask for the minutes to confirm.
• Also, it looks like VP’s are also governed by the board of directors so again the minutes should include her duties and responsibilities and she should confirm her ‘rank’ after the president. Because the most senior in rank of the vice presidents shall have the powers of the president (an Officer) she could be an Officer without election subject to the requirements (e.g. President absent, unable, etc.).
• I told her to verify if the company had Directors and Officers insurance should she fall under the second point. She needs to understand her obligations, liabilities and coverage if available.

So, yes, in her case the Articles ended up being quite revealing and she did follow up and get the minutes etc. And what did she find? She is not an Officer and her rank does not imply second in command and she has peace of mind.

Yeah! Time to celebrate! Can we go for that drink now?