How to Run a Shareholder Meeting
This post originally appeared on Harvard Business Services‘s blog.
New business owners who form a corporation often wonder how to run their shareholder meetings. Answers to common questions about shareholder meetings:
Do I have to hold an initial shareholder meeting?
Yes. Delaware law requires that every corporation must hold an initial shareholder meeting. The main business of the initial meeting is to elect a Board of Directors and review the bylaws.
Do I have to hold annual shareholder meetings?
Yes. Delaware law requires every corporation to hold an annual shareholders meeting at least once every 13 months. Generally, the date of the annual meeting is contained in the bylaws of the corporation. A meeting must be held, regardless of the number of shareholders in the corporation.
What should I discuss at a shareholder meeting?
During the meeting, any number of topics can be discussed. It is imperative that, at the very least, the election of the Board of Directors is accomplished.
In order to have a legal meeting you must have a quorum of shareholders present. Typically, a quorum is defined as a representative of more than half of all shares outstanding.
There are many other items that can be included on the agenda for an annual shareholder meeting. The election of officers can be submitted by the Directors at shareholders’ meetings.
The appointment of a corporate attorneys and/or accountant is also a typical agenda item.
Dividend distribution can be debated, but dividends must be proposed by the Board of Directors and then approved by the shareholders. You can also discuss capital improvements and debt obligations.
Shareholders can play a role in what is discussed at the annual meetings by writing the Board of Directors beforehand with their suggestions. Shareholders should remember that it is their right to elect the Board of Directors. Then the Board of Directors sets the direction of the company.
When should I hold a shareholder meeting?
An annual shareholder meeting is typically scheduled just after the end of the fiscal year. This allows for the previous year’s financial performance to be fully assessed and discussed.
The timing also allows for any newly elected officer and director information to be collected and made available for the Delaware annual report filing, which must be submitted by the March 1 deadline.
What else am I required to do at a shareholder meeting?
Part of a Delaware corporation’s internal formalities include keeping minutes at shareholder meetings. These minutes are not provided to the Delaware Division of Corporations and are not part of the public record. They’re typically kept on file internally within the Corporate Kit. Whenever a meeting is held, written minutes are created documenting the actions taken at the meeting.
What’s Included in Corporate Minutes?
There are certain things written minutes should include at a minimum:
– The name of the company
– Type of meeting
– Date, time, and place of the meeting
– Whether or not the meeting had a special or specific purpose
– Name and title of the persons who acted as chairperson and secretary of the meeting
– Whether the meeting was held pursuant to notice, or that notice had been waived by those entitled to receive it
– A listing of officers or directors present either in person or by proxy and their voting power
– Whether officers or directors vote at the meeting, and identification of those present and voting, and also whether a quorum was present
– Identity of any other persons present at the meeting
– Whether minutes from a previous meeting were distributed and approved, or approved as corrected
– Description of any reports presented and identification of the presenters
– Any resolutions or other votes presented, discussed, approved, disapproved, etc.
– Who made the motions, who seconded them, and the result of the vote
– Any other business presented
– Time and date of next meeting
– Time of adjournment
Generally, the secretary will prepare minutes within a few days of a meeting and distribute copies before the next meeting so they can be reviewed.
Gust has a long-standing working partnership with Harvard Business Services and we are available to help with any additional questions and needs you might have. Please also note, we are not attorneys and cannot give legal advice. If you need legal advice, please contact a lawyer familiar with Delaware corporate law.
This article is intended for informational purposes only, and doesn't constitute tax, accounting, or legal advice. Everyone's situation is different! For advice in light of your unique circumstances, consult a tax advisor, accountant, or lawyer.