In this article, we explain shareholder meetings for corporations. We answer the questions: are shareholder meetings required by Illinois law?, when should a corporation hold its annual meeting of shareholders?, how many shareholders must attend a meeting of shareholders?, what is a special meeting of shareholders?, and what happens at an annual meeting of shareholders?
All Illinois corporations need to know how to conduct a shareholders meeting, because corporate laws require shareholders to meet at least annually. If shareholder meetings have not been properly conducted throughout the life of a corporation, the corporate form may not hold up in court to protect shareholders, officers, and directors from liability for corporate debt. A meeting must be held, regardless of the number of shareholders in the corporation. If you are the only shareholder of the corporation, you should still execute corporate meeting minutes in order to reap the benefits of corporate liability protection.
Generally, the date of the annual meeting is contained in the bylaws of the corporation. A common date for shareholder meetings is right at the end of the fiscal year. This allows for the previous year’s financial performance to be fully addressed and discussed.
In order for the meeting to be considered legitimate, a quorum – the representative of more than half of all shares outstanding – of shareholders must be present.
Shareholder meeting rules vary by ownership structure, typically occurring once a year to cover fairly routine types of corporate actions, such as the election of directors, and give financial updates. Shareholder meetings that cover other, more specific topics are generally called “special meetings” of shareholders. Special meetings of shareholders often review topics that require extra shareholder attention and approval, like changing the corporate name, amending the articles of incorporation, or adding and removing directors.
One of the main purposes of an annual shareholders meeting is the election of the Board of Directors for the upcoming year. All shareholders, regardless of number of shares owned, are allowed to vote for board positions. Shareholders can also submit nominations for individuals who meet certain requirements, defined by the Securities and Exchange Commission.
Dividend distribution may be debated, but dividends have to be proposed by the Board of Directors and approved by the shareholders. For most corporations, a board meeting is held immediately following the shareholders meeting in order to review outstanding items that were identified in the shareholders meeting. For smaller Illinois corporations, directors and shareholders are often present at both meetings.
For more on this topic, check out our article: How to Conduct a Meeting of Shareholders for a Corporation or S-Corp.