State law and federal requirements, such as SEC rules if the corporation is publicly traded, prescribe the information that must be submitted for a vote of shareholders. State law generally outlines the requirements for the annual meeting for publicly held and privately held corporations, for profit and non-profit corporations. In all 50 states, Corporations are required to hold a meeting of the shareholders on AT LEAST an annual basis.
Annual Meetings for Corporation’s Shareholders
At a minimum, often the annual meeting is where the annual report is given to the shareholders, shareholders elect the Board of Directors, and may elect the external audit firm that prepares the financial statements for the annual report. Often the annual meetings disclose who is on the board auditing, nominating and compensation committees and the board member’s independence and expertise to serve on these committees. In essence, the annual meeting is an opportunity for the shareholders to vote on issues important to the corporation.
For publicly-held corporations, US Securities and Exchange Commission has an extensive set of rules governing the annual meeting and disclosures to shareholders prior to the meeting. These rules may include requirements for the annual report that is issued at the annual meeting and prescribes the information of how directors are to be elected, management remuneration issues are agreed upon, management transactions are approved, governance and beneficial ownership is noted, comparative performance of the stock compared to its peers and market indices, and the financial report.
Complicating the annual meeting logistic planning may be the need to obtain proxies from the shareholders so that the quorum requirements can be met and allow shareholders to pass certain resolutions. The proxies may include the type of proxy, directors to be elected, issues to be voted on (including any substantial interest each nominee, director, executive officer or associate may have in the issue), disclosure of conflicts of interest and business relationships, bankruptcies, criminal convictions, securities laws violations and other litigation where director and executive officer nominees may cause problems for the corporation, financial disclosures and loans exceeding prescribed amounts, substantial payments to executive officers, law, and investment banking firms. Proxies may include discretionary authority to vote in the proxy’s discretion on other matters that come before the meeting, but not elections for office which a bona fide nominee is not named. The proxy should have a for/against box to be checked. Generally state law makes a provision for the shareholder signing and dating the proxy. Proxies generally are for only one annual meeting.
Disclosures at the shareholder annual meetings often include the report of the audit committee including financial statement, internal controls, and independence issues were discussed with the independent accountants, if the audit committee has a charter, the number of meetings held and the director’s attendance record, information on the independent public accountants, compensations received by directors including board meeting and committee meeting fees. Disclosures may include all compensation for the CEO and four highest paid executive officers. Disclosure may include the price trend of the corporation’s stock, comparison with peers and indexes, audited financial statements, description of businesses, identify of current directors and executive officers. Even if a company has a controlling stockholder with sufficient voting power to avoid having to solicit proxies, the SEC information statement rules require that the same information be disclosed to shareholders as would be required to be disclosed in a proxy statement. For accountability and fiduciary responsibility purposes, minutes of the proceedings of the shareholder’s annual meeting need to be kept permanently available to stakeholders who are interested in the outcome of the shareholders votes.
Annual Meeting for the Board of Directors
Commonly, after the annual meeting for the shareholders where the Board of Directors is elected for the year, the Board of Directors meets and holds its annual meeting. Generally, state law, articles of incorporation, and the bylaws prescribe the purpose of the annual meeting of the Board of Directors. As a rule the annual meeting is the meeting where the Board of Directors organizes itself and elects its Chairman of the Board and board officers. Generally the board officers include a position, generally called the Vice Chairman or President, who will step into the Chairman’s position if the Chairman is unable to perform his duty, a Secretary and Treasurer. Bylaws may require that the Board of Directors elect chairman of committees reporting to the Board of Directors. For accountability, liability, and fiduciary responsibility purposes, minutes of the annual meeting are important and prepared to be kept permanently.
What Other Types of Meetings
The types of meetings are generally described in the corporation’s bylaws. The bylaws also will describe how the meetings are called, by whom, how notices are given out announcing the meetings and what constitutes a quorum.
Besides the annual meeting outlined above, the organizational meeting often is the first meeting of the new corporation where it organizes itself with its shareholders and elected a Board of Directors. It may ratify the actions of the incorporator, elect the directors and officers, adopt a resolution to establish a bank account, authorize the board and officers to file required forms with the state and federal authorities, reimburse expenses, set the date of the shareholders annual meeting and meetings of the Board of Directors. The organizational meeting is important because many state laws require this meeting in order for the incorporation process to be completed with the actual organizational meeting. Many states require that the results of the meeting be filed with the state authority regulating corporations. Therefore minutes of the organizational meeting are important and need to be prepared and permanently retained.
The bylaws generally describe how special meetings are held and may include how the agenda, notices, quorums are detailed so that the corporation is accountable to its stakeholders and the Board of Directors and executive officers are maintaining their fiduciary responsibilities.