How to conduct a special shareholder's meeting

Why do you need a special shareholder’s meeting? The annual
meeting of shareholders occurs once a year and generally covers
fairly routine types of corporate actions such as the election of
directors. Any other meeting is generally called a special meeting
of shareholders. During the year, circumstances may arise that
require special attention, such as changing the corporate name,
amending the articles of incorporation, or adding or removing
directors. These actions often require shareholder approval at a
special meeting.

Steps to conduct a special shareholder’s meeting:

1. Send Notice to the Shareholders. All
shareholders are entitled to notice of any meeting of shareholders.
This is fundamental to insure that any actions taken at the meeting
are legal and authorized. Requirements for notice of a special
meeting are usually contained in the corporation’s bylaws. At a
minimum, notice should include specifics as to date, time, and
location of the meeting. The notice should also state or describe
the items or business to be discussed and voted on at the meeting.
Most corporate laws require that the notice be served or mailed at
least ten days before the meeting.

2. Conduct a Shareholders Meeting. There is no
required procedure in corporate law for conducting a meeting of
shareholders. The procedure used is up to the directors and/or
shareholders of the corporation. Some (mostly larger corporations)
use a formal procedure utilizing Robert’s Rules of Order requiring
motions, seconds, discussion and then a vote. Most smaller
corporations use less formal procedures consisting of a simple
discussion on issues and then a vote. The vote can be a voice vote
or a written vote. There should be a count of the vote taken by a
corporate officer, usually the corporate secretary. An agenda of
business to be conducted at the meeting is advisable but not
required.

Special Note About Quorum Requirements: 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. Quorum requirements for a shareholder’s meeting are most
often set forth in the corporation’s bylaws. The presence in person
or by proxy of the holders of a majority of the shares entitled to
vote on a matter at a meeting is the typical or most common quorum
requirement. If the number of people required to make up a quorum
is not met at the meeting, or present by proxy, any resolutions
passed would not be valid and could be challenged.

3. Prepare Minutes of Meeting. A corporate
officer, or person assigned by the corporate officer, should keep
minutes of the meeting. The corporate secretary usually does this,
but minutes can be taken by someone else. Minutes are simply a
written record of the proceedings of the meeting. There is no legal
requirement as to the form for minutes or how detailed minutes have
to be. However, they should be detailed enough for someone reading
the minutes to understand what corporate business was conducted at
the meeting and what resolutions passed or failed. They should also
indicate whether a notice was given for the meeting, who was in
attendance at the meeting, and who voted on various resolutions
brought before the meeting. It is also advisable, but not required,
to indicate reasons for the shareholders taking certain
actions.

For example, if the shareholders decided to remove a director,
it would be helpful to indicate the reasons. If the director were
to file some form of legal action relating to the removal, the
minutes would reflect the shareholder’s reasons for taking the
action.

Minutes are seldom audited by the state and are mainly for the
use of the corporation. However, they are important corporate
documents in the event of legal actions involving directors,
shareholders, or others or in the event of disputes between
shareholders. Generally, the more information that is contained,
the more helpful the minutes will be in the event of disputes. A
copy of the minutes should be kept in the corporate records.


Author: Robert Montgomery

Attorney Robert Montgomery has been counseling and incorporating businesses for more than 20 years. During that time, he's helped set up more than a 1000 corporations and limited liability companies (LLC's). He's a business owner himself and has been corporate legal counsel for numerous small business corporations. He's presented lectures and seminars on the benefits and procedures involved with incorporating or forming LLC's and how to operate them for maximum benefit. View all posts by Robert Montgomery


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