Corporate Formalities and Meetings 101, Part 2

In our first overview of corporate formalities and meetings we looked at corporate formalities that help to preserve corporate liability protections. In part two, we look at meetings specifically, including the types, procedure, and substance of meetings. 

Types of meetings

At a high level, there are shareholder meetings and there are board meetings.

Corporate bylaws may refer to a variety of meetings: shareholder meetings, board of directors meetings, annual meetings, and special meetings. 

Shareholders, the owners of the corporation, typically have at least one annual meeting, the principle purpose of which will be to elect the board of directors but also to vote on any shareholder resolutions that might be proposed. Sometimes the shareholders may have special meetings to vote on matters that have to come before the shareholders (such as a sale of the company or other major company decisions that affect the shareholders). Special shareholder meetings tend to be less common. Sometimes, shareholders may also pass resolutions without a meeting—those procedures are governed by the corporation’s bylaws and applicable state law. 

In contrast to the shareholders, the board of directors—the corporation’s main governing body—will usually meet more regularly, perhaps once a month, to discuss corporate business and make decisions about the corporation’s direction. Board meetings are typically closed to shareholders, but not always. The board may have special meetings as well to address emergency or more pressing matters. Boards may also pass resolutions without a meeting, again, as typically set forth in the corporation’s bylaws and subject to applicable state law.

Meeting procedure

While bylaws and state law can alter the requirements and processes around meetings, the following are typical procedural steps that corporations will follow in conducting meetings:

  1. Schedule the Meeting: Corporations should choose a convenient date and time for the meeting. The annual meeting is often held on or around the same date each year to establish a routine. Sometimes a calendar of meetings is set for the whole year during the annual meeting.
  2. Notice of Meeting: Corporations must provide proper notice to all shareholders, directors, and officers (as applicable)  required by the corporation’s bylaws and state law. Sometimes this requirement is different for scheduled meetings and special meetings. Typically, notice should be sent well in advance of the meeting (the amount of advanced notice is typically in the bylaws) and include the date, time, and location of the meeting. The notice may also include an agenda and other materials if required.
  3. Agenda: Corporations can consider preparing a detailed agenda outlining the topics to be discussed during the meeting. Common items include electing directors, approving financial statements or budgets, voting on major transactions such as sales of the company, and ratifying auditor appointments. 
  4. Quorum: Whoever oversees the meeting must ensure that a quorum, as defined in the bylaws, is present. For example, under Delaware law, quorum at a stockholders’ meeting typically requires a majority of outstanding shares entitled to vote are represented at the meeting, but the bylaws may vary this and it may vary from state to state.
  5. Minutes: There should be a secretary to record minutes of the meeting. These minutes should document who attended, the decisions made, and any other relevant details. Minutes should be signed by the secretary.
  6. Proxy Voting: If a person entitled to vote cannot attend in person, proxy voting may be allowed under the bylaws and applicable law (i.e., designating another person or entity to vote on their behalf).
  7. Compliance: Corporations must ensure that the meeting complies with all applicable state laws and regulations. Corporations should consult with legal counsel to ensure compliance.
  8. Adjournment: Meetings must be officially closed after making any necessary announcements or resolutions. 

Substance of meetings

The following is a brief list of the most common substantive items that a meeting may address. This list is non-exhaustive as each corporation will have different needs and raise different issues.

  • Election of Directors: Typically at annual shareholder meetings.
  • Financial Reports: Corporations may share financial statements and reports with shareholders at the annual shareholder meeting and with board members at most board meetings.
  • Amendments to Bylaws or Charter: If there are proposed changes to the bylaws or charter those proposals will be presented for approval. Corporations should be sure to follow the proper procedures for amending corporate documents.
  • Ratification of Actions: Corporations may (or may be required to) seek director or shareholder approval (as applicable) to take any significant corporate actions. 
  • Auditor Appointment: If required, shareholders may be asked to ratify the appointment of an independent auditor or accounting firm for the upcoming fiscal year.

Again, it’s important to consult legal counsel and industry-specific experts to ensure that corporate meeting practices align with applicable laws and regulations as well as expectations. Proper meeting procedure not only helps with compliance but also facilitates effective corporate governance, financial management, and decision-making.

Ryan Fairchild

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