How to Run a Shareholder Meeting
While day-to-day management is handled by directors and officers, certain decisions require shareholder approval. A shareholder meeting is a formal gathering of a corporation’s owners to vote on major company matters and exercise their rights as shareholders. Most corporations hold an annual shareholder meeting with special meetings added to the calendar when urgent matters arise.
Properly running a shareholder meeting is more than a formality. Proper notice, quorum requirements, accurate vote counting, and well-documented minutes help protect the corporation’s legal standing and reduce the risk of disputes. Even if you operate a small, closely held corporation or a growing company with multiple investors, understanding how shareholder meetings work is necessary to stay compliant.
Types of Shareholder Meetings
Corporations typically hold two types of shareholder meetings: annual meetings and special meetings.
An annual meeting is held once per year and is usually required under state law and the corporation’s bylaws. At this meeting, shareholders elect directors and vote on recurring matters such as ratifying prior actions or approving certain reports. Annual meetings serve as the regular checkpoint for corporate governance and accountability.
A special meeting is convened to address specific, time-sensitive matters that cannot wait until the next annual meeting. These may include approving a merger, amending the certificate of incorporation, authorizing a major stock issuance, or removing a director. Special meetings are typically called by the board of directors, though in some corporations, shareholders may also have the authority to call them if permitted by the bylaws or governing statute.
When to 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.
As mentioned above, shareholder meetings can also be held whenever corporate action requires shareholder approval. For example, if the company is raising capital, restructuring ownership, or facing a potential acquisition, a special shareholder meeting may need to be scheduled promptly to obtain the required approvals.
How to Prepare for a Shareholder Meeting
In most corporations, the board of directors calls annual and special meetings. However, the certificate of incorporation or bylaws may permit certain officers (or even shareholders) to call a special meeting.
Next, provide proper notice to shareholders. Notice requirements typically specify how far in advance notice must be sent (often 10 to 60 days), what information must be included (date, time, location, and purpose for special meetings), and acceptable delivery methods (mail or electronic transmission). Failure to provide proper notice can invalidate actions taken at the meeting.
Oftentimes, official notice to the shareholders will also include the meeting’s agenda. This document will outline any orders of business for the shareholder meeting. Common items include approval of prior minutes, election of directors, and any proposed resolutions requiring shareholder approval.
Finally, you’ll need to confirm that a quorum will be present. A quorum, usually defined as a majority of outstanding shares entitled to vote, must be represented in person or by proxy for business to be conducted legally.
What to 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.
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 attorney 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. While the Board of Directors sets the direction of the company, shareholders should remember that it is their right to elect the Board of Directors.
Voting Procedures
Voting is the central function of a shareholder meeting. Once a quorum is established, shareholders may vote on the matters outlined in the meeting notice and agenda. Voting rights are typically determined by the number and class of shares held as of the established record date.
Shareholders may vote in person at the meeting or by proxy, which authorizes another individual to vote on their behalf. Proxies must be properly submitted in accordance with the company’s procedures. In some cases, corporations may also permit electronic or virtual voting if allowed by their bylaws and applicable state law.
Keep in mind that voting thresholds may also vary depending on the topic. Routine matters may require a simple majority of votes cast, while significant corporate actions may require a majority of outstanding shares or a supermajority vote.
Keeping Minutes
Part of a Delaware corporation’s internal formalities includes 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.
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.
Shareholder Meeting FAQs
Do I have to hold an initial shareholder meeting?
Delaware law requires that every corporation hold an initial shareholder meeting, but shareholders may act without a meeting if they sign a written consent approving the action. The main business of the initial meeting is to elect a Board of Directors and approve the bylaws.
What happens if a quorum is not met?
If a quorum is not present, the meeting generally cannot conduct official business. A quorum typically requires a majority of the outstanding shares entitled to vote, unless the certificate of incorporation or bylaws specify otherwise. In most cases, the meeting would be adjourned to a later date to allow additional shareholders to attend or submit proxies.
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.
If you’ve just formed a corporation of your own or are planning to form a corporation, our team at Harvard Business Services, Inc. is here to help. Form a Delaware corporation online, and our team will be ready to support you however you need.
*Disclaimer*: Harvard Business Services, Inc. is neither a law firm nor an accounting firm and, even in cases where the author is an attorney, or a tax professional, nothing in this article constitutes legal or tax advice. This article provides general commentary on, and analysis of, the subject addressed. We strongly advise that you consult an attorney or tax professional to receive legal or tax guidance tailored to your specific circumstances. Any action taken or not taken based on this article is at your own risk. If an article cites or provides a link to third-party sources or websites, Harvard Business Services, Inc. is not responsible for and makes no representations regarding such source’s content or accuracy. Opinions expressed in this article do not necessarily reflect those of Harvard Business Services, Inc.
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There are 3 comments left for How to Run a Shareholder Meeting
Hassan Sedehi said: Monday, April 13, 2020Is it an obligation to report the changes in the composition of the share holders of a C corporation to the State.
HBS Staff replied: Thursday, April 16, 2020Shareholders of a Delaware corporation are not reported to the state. The corporation's annual report must include the Directors and one Officer. You can find more information here: https://www.delawareinc.com/blog/what-is-on-public-records-delaware/
Joe said: Wednesday, June 20, 2018In the case of a Close Corp C-Corp, can the Secretary record make an audio recording of the annual shareholder'conference call?
HBS Staff replied: Thursday, June 21, 2018Minutes of every shareholder meeting must be recorded by the corporate secretary, which should include where and when the meeting is held, who is in attendance at the meeting and any significant actions that are voted on or taken at the meeting.
In terms of how the minutes are recorded, you can check with the Delaware General Corporation Law here:
http://delcode.delaware.gov/title8/c001/sc07/index.shtml
Deborah said: Tuesday, February 13, 2018
Do annual Shareholder's meeting minutes need to be sent out to shareholders after it is recorded by the Secretary?
HBS Staff replied: Wednesday, February 14, 2018Typically, meeting minutes are sent out to shareholders, though you can double-check with an attorney to be certain in your specific situation.