In this article we explain how to conduct a meeting of shareholders for a corporation or an S-Corp. To learn more about shareholder meetings, check out our article: Illinois Shareholder Meetings for Corporations Explained.
Here are some helpful tips and tricks when it comes to conducting a successful shareholders meeting:
1.) Schedule the meeting and send notice to all shareholders: Every shareholder is entitled to notice of any meeting of shareholders. This is fundamental to insure that any decisions made at the meeting are legal and authorized. Required details of the notice of a meeting are usually included in the corporation’s bylaws. At minimum, the notice should include the date, time, location of the meeting, and business to be discussed or voted on. Most corporate laws require the notice be served or mailed at least ten days prior to the meeting. For larger corporations, all shareholders will receive notice of the meeting and have the ability to vote on certain resolutions, but they may not be able to attend the meeting in person. Regardless of the number of shares owned, all shareholders have the right to vote on the election of the Board of Directors each year.
2.) Predict shareholder attendance: Once you have an idea of how many shareholders will be in attendance, be sure to reserve the appropriate space. For example, if you’re going to have 30 shareholders in attendance, do not reserve a room for 300 people and vise-versa. Including a response card in the meeting notice is an easy way to predict shareholder attendance. By changing the time and location each year and keeping the meeting interesting, you’re more likely to have higher attendance. If you plan to incorporate electronics or virtual engagement, be sure to test the technology prior to the meeting. A “quorum” refers to the number of members of a body or group required to be present in order to transact the business of the body or group, often defined by the corporation’s bylaws. If attendance does not meet the number of people required to make up a quorum at the meeting, any resolutions passed would not be valid and can be challenged.
3.) Prepare a script: Never try to “wing” a shareholders meeting. Be sure to have a script and strict agenda ready. Shareholders can play a role in building the agenda by writing the Board of Directors beforehand with topic suggestions. The Board of Directors usually drafts rules and guidelines regarding the format of an annual shareholders meeting. These guidelines should address parliamentary procedures, time limits for speakers, procedures for recognizing shareholders who wish to present, and if cameras or other recording devices are allowed. Before the meeting takes place, the following materials have to be dispersed to all shareholders: proposed resolutions, company reports, supporting documentation, and meeting minutes from the previous annual meeting. Be sure to anticipate difficult questions and prepare appropriate responses to those questions. Hot topics could include compensation, dividend policy, ongoing litigation, regulatory issues, succession planning, stock buybacks, and public accounting firm changes.
4.) Conduct the meeting: Each corporation usually has its own way of conducting the annual shareholders meeting, so it truly depends on the organization and prepared script. For example, some companies may always address items in a specific order, or maybe they always save voting for the end of the meeting. The Board of Directors truly decides this format, as discussed above. Naturally, larger corporations tend to host more formal meetings (oftentimes utilizing Robert’s Rules of Order), while smaller corporations are less formal. Voting can be either written or oral, as long as a corporate officer counts the vote.
5.) Prepare minutes of the meeting: The corporation’s secretary usually drafts the shareholders meeting minutes, but any corporate officer or any person assigned by the corporate officer can record minutes. Minutes are written record of the meeting’s proceedings. While there are no legal requirements regarding the format or specifics of meeting minutes, they should be detailed enough for all shareholders and the public to understand what corporate business was conducted and what resolutions passed or failed. Minutes should include who attended the meeting, topics discussed, and who voted on what resolutions. The more information, the better, because in the event of a dispute between shareholders, legal actions may reference these minutes. The documentation should be approved by a majority vote of the shareholders present at the next meeting, as well as signed, dated, and notarized. Once the information is compiled into a written format and made available to all shareholders, as well as the general public, they should be kept in the corporate records.