If your business is set up and registered as a Corporation, you’re required by law to hold an annual shareholder meeting and to document the meeting with minutes.
Annual shareholder meetings, sometimes referred to as annual general meetings, are intended to give shareholders an opportunity to learn about a company’s financial situation, obtain updated concerning business goals and any proposed changes in leadership or policy, elect new members to the Board of Directors, and vote on other issues affecting the company. Shareholders, as you know, are the people, companies, or institutions that own shares in the company.
While some major companies position shareholder meetings as gala events with music, entertainment, and celebrity guests, the annual meetings of most Corporations are far more subdued and down to business. Regardless of the scope or atmosphere of the event, however, there are rules that must be followed to ensure that shareholders are heard and business conducted in an effective manner.
If your company is planning for an annual shareholder meeting, there are some important steps and procedures you’ll need to follow. Let’s take some time to consider what’s involved, keeping in mind that because regulations vary you should always consult your state to make sure you’re aware of all relevant requirements.
Preparing for an Annual Shareholder Meeting
Before you begin planning for your company’s annual shareholder meeting, you should compile:
- A summary laying out company achievements
- Challenges
- Financial summaries
- And other information that will be relevant to the meeting
You’ll also need to determine:
- Whether the meeting will be held virtually or in person
- Choose a location or default to one if it’s stipulated in your bylaws
- Prepare an agenda that informs participants of what will be discussed and voted on
When preparing the agenda, keep in mind:
- This should be shared with attendees in advance
- Should include all key topics to be discussed and voted on:
- The election of directors
- Administrative decisions
- The financial report
- Goals and strategies
All shareholders must be notified of the format, date, time, and place of the meeting. How far in advance notices should be distributed may depend on your state, but generally, they should be sent out more than 10 days prior to the meeting, but less than 60 days.
You should also be aware of the need for a quorum, the minimum number of people required to be present at the meeting for it to proceed legally, and make sure a quorum has been attained before the meeting is called to order. Rules regarding a quorum may be specified by your state or stated in your company bylaws.
The All-Important Meeting Minutes
Meeting minutes are extremely important, as they provide a formal record of what was discussed and how shareholders voted. They ensure everyone is on the same page about what transpired during the meeting and provide a means for reviewing past events.
The minutes also are evidence that your business is following the requirements of the state by holding annual shareholder meetings, an important factor in maintaining the corporate legal structure and protecting shareholders from personal liability.
Minutes of the meeting will be recorded by the company’s corporate secretary or another person designated to do so. Annual meeting minutes templates are available to make that task easier and assure that minutes remain in a consistent format from one meeting to the next.
The minutes should include a summary of the discussion that occurs and document any decisions made, or actions taken.
Information to be included in annual meeting minutes includes the following:
- When and where the meeting was held
- The time that the meeting was called to order
- Who attended the meeting and who was absent
- The name of the person who recorded the minutes of the meeting
- Acknowledgement that minutes of the previous meeting were presented and approved
- A record of any voting that occurred
- Names of officers and directors who were elected
- Details of discussions held
- The time the meeting was adjourned
Meeting minutes are not required to be filed with the state, but it’s important to keep them on file with other important records. Most experts advise holding onto meeting minutes for at least seven years, although storing them digitally allows them to remain on record indefinitely. Corporate shareholders, officers, and directors are entitled to review the meeting minutes upon request, and if an LLC holds an annual meeting, its members also are entitled to view the minutes.
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Risks of Not Complying with Meeting Requirements
Not complying with regulations regarding annual shareholder meetings can put your company, and its owners, at personal risk for liability.
Holding an annual meeting and recording and maintaining minutes are key in maintaining the corporate legal structure and preserving the liability shield that protects corporate shareholders’ assets from business liabilities. Failing to operate within that corporate legal structure makes your business vulnerable to having a court rule in favor of piercing the corporate veil and exposing its owners to personal liability.
Always make sure you understand your state’s requirements regarding annual shareholder meetings or seek professional help, as needed.
Making sure your business remains in compliance with the state can seem like a nuisance, but doing so is a sign that your company is acting diligently and working to maintain confidence among customers, investors, and the general public.
There’s a lot to keep track of when attempting to remain compliant with all relevant laws and regulations, but doing so can save your company money, enhance its reputation, make it more competitive, and assure it remains on track to meet future goals.
