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 support proper corporate governance 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.
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When to Hold a Shareholder Meeting
The timing of a corporation’s annual meeting is generally established by its bylaws. However, 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.
Preparing 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 create questions about the validity of the meeting and the actions taken there.
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. Delaware also generally permits businesses to set another quorum threshold in their Certificate of Incorporation or bylaws.
What to Discuss at a Shareholder Meeting
During the meeting, any number of topics can be discussed. Common matters discussed or voted on at shareholder meetings may include the election of directors, major corporate transactions requiring shareholder approval, amendments requiring shareholder approval, and other matters submitted to the shareholders in accordance with the company’s governing documents and applicable law.
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 with a Proxy
A shareholder who cannot attend a meeting does not necessarily have to give up their right to vote. A proxy allows the shareholder to authorize another person to vote their shares on their behalf. Under Delaware law, a shareholder entitled to vote may appoint another person to act as their proxy.
Proxies can also help a corporation meet its quorum requirement because shares represented by properly submitted proxies may count as being represented at the meeting. Before the meeting, the corporation should establish clear procedures for submitting and verifying proxies and make sure they are received before votes are counted.
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 also vote in person at the meeting or by proxy, which authorizes another individual to vote on their behalf.
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
- 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.
Holding a Virtual Shareholder Meeting
A shareholder meeting does not necessarily have to take place in a conference room. Depending on the corporation’s governing documents and applicable state law, shareholders may be able to participate and vote remotely through an online meeting platform. Delaware corporations, for example, may hold shareholder meetings entirely online if authorized by the board of directors.
When holding a virtual or hybrid shareholder meeting, the corporation must take measures to verify that participants are shareholders, provide them with a reasonable opportunity to participate and vote, and maintain a record of votes taken electronically.
When planning a virtual shareholder meeting, corporations should consider:
- Choosing a reliable meeting platform
- Providing clear access instructions
- Establishing a voting process
- Verifying shareholder identities before votes
- Maintaining proper records of votes, attendance, and meeting minutes
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Shareholder Meeting FAQs
Do I have to hold an initial shareholder meeting?
Delaware law requires that every corporation hold an organizational meeting with the incorporators of the business, but this meeting doesn’t traditionally involve all of the shareholders. The main business of the initial meeting is to elect a Board of Directors and approve the bylaws.
Who can participate in shareholder meetings?
Shareholders who are entitled to vote are generally allowed to participate in shareholder meetings. Shareholders may also appoint a proxy to attend and vote on their behalf. Corporate officers, directors, legal counsel, and other invited guests may attend as well, although they do not automatically have shareholder voting rights. The corporation’s bylaws can provide additional rules about attendance.
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. 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.
Do all shareholders have the same voting rights?
Not necessarily. Voting rights depend on the type and class of stock a shareholder owns, as well as the corporation’s Certificate of Incorporation. Some shares may carry one vote per share, multiple votes per share, or no voting rights at all. Certain classes may also have special voting rights on specific corporate matters.
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*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.