Hi. Are you the owner of a corporation — a small corporation — knowing that the end of the year or the beginning of 2021 is close and wondering whether you really need to have the shareholder and board meetings that you think you're required to do?
I'm Katherine Taylor, the lawyer for business owners. And the short answer to that question is, yes, you do. I'm going to give you the long answer also.
So, by law in most states, my practice in Maryland. But, by law, in most states, a corporation has a board and has shareholders and both of those groups of people have to have at least annual meetings. That is, unless you're a closed corporation. I've discussed what a closed corporation is in a prior video. Basically, it's an election that you could make in some states to basically to remove some of the formalities, like having the board meetings and shareholder meetings. Most companies were not close corporations, however, so if you're not a close corporation and you are a stock corporation, then you're going to have to have an annual shareholder meeting and annual board meeting.
The main purpose for the shareholder meeting is to elect a board — board members. And the main purpose for the board meeting is to elect the officers of the business and then to conduct any important business that has to be... decisions that have to be made by the board.
When you have the meeting, it doesn't necessarily have to be in person. Most states allow corporations to have what is called instead of an in person meeting. They allow either the board or the group of shareholders to do what is called a consent in lieu of a meeting.
When you have an in-person meeting, you have to give proper notice. And then you also have to make sure you have a quorum. When you have a consent in lieu of a meeting, the consent is a written document, and it has to be unanimous.
So I know this is all kind of confusing. But the gist of this is, if you're a corporation, you must make sure you have documentation off those annual meetings of your shareholders and of your board. It's very important for a lot of reasons, which I'll go over in another video, but and then when you have that meeting you have to make sure you document it. Put the documentation of those meetings or the consents along with all your governing documents, so that if questioned, you'll have easy access.
If you have any questions about a shareholder agreement and whether you need one, please contact our office at www.taylorlegal.com.
KATHERINE L. TAYLOR, ATTORNEY AND CPA
5850 Waterloo Rd