As the end of year arrives, it is important that small business owners review the things that did and did not work during the previous twelve months and adjust their plans for the next year accordingly. One of the best ways to accomplish this is by holding annual meetings.
In the case of California corporations, annual meetings of shareholders are required by law. California law does not say how often meetings of a corporate board of directors must be held, but it is good practice to also hold director meetings annually. Though not required by law, the frequency of director meetings may be specified in your company bylaws. Annual meetings must be held in order to maintain the corporation’s good standing, shareholder protection against personal liability, and important tax benefits. Minutes of these meetings must be kept in case you are ever audited or sued.
Annual meetings are a great idea even if your business is not legally required to hold them (for example, if your business is a limited liability company (LLC) or partnership). Whether yours is a small or large operation, it’s important to touch base with everyone every so often and keep communication lines open between shareholders, directors, and officers. Having a scheduled annual meeting helps keep everyone on the same page and avoid unnecessary surprises and misunderstandings. Your company’s business attorneys and accountants are also useful attendees because their expertise and input can help identify potential pitfalls and plan more advantageous courses of action. So if the end of year is upon you and annual meetings have not been held, now is a good time to schedule them.
Need a business attorney, or have questions? Contact the Tagre Law Office today.
California Corporations Code Section 600:
(a) Meetings of shareholders may be held at any place within or without this state as may be stated in or fixed in accordance with the bylaws. If no other place is stated or so fixed, shareholder meetings shall be held at the principal executive office of the corporation. Unless prohibited by the bylaws of the corporation, if authorized by the board of directors in its sole discretion, and subject to the requirement of consent in clause (b) of Section 20 and those guidelines and procedures as the board of directors may adopt, shareholders not physically present in person or by proxy at a meeting of shareholders may, by electronic transmission by and to the corporation (Sections 20 and 21) or by electronic video screen communication, participate in a meeting of shareholders, be deemed present in person or by proxy, and vote at a meeting of shareholders whether that meeting is to be held at a designated place or in whole or in part by means of electronic transmission by and to the corporation or by electronic video screen communication, in accordance with subdivision (e).
(b) An annual meeting of shareholders shall be held for the election of directors on a date and at a time stated in or fixed in accordance with the bylaws. However, if the corporation is a regulated management company, a meeting of shareholders shall be held as required by the Federal Investment Company Act of 1940 (15 U.S.C. Sec. 80a-1, et seq.). Any other proper business may be transacted at the annual meeting. For purposes of this subdivision, “regulated management company” means a regulated investment company as defined in Section 851 of the federal Internal Revenue Code.
(c) If there is a failure to hold the annual meeting for a period of 60 days after the date designated therefor or, if no date has been designated, for a period of 15 months after the organization of the corporation or after its last annual meeting, the superior court of the proper county may summarily order a meeting to be held upon the application of any shareholder after notice to the corporation giving it an opportunity to be heard. The shares represented at the meeting, either in person or by proxy, and entitled to vote thereat shall constitute a quorum for the purpose of the meeting, notwithstanding any provision of the articles or bylaws or in this division to the contrary. The court may issue any orders as may be appropriate, including, without limitation, orders designating the time and place of the meeting, the record date for determination of shareholders entitled to vote, and the form of notice of the meeting.
(d) Special meetings of the shareholders may be called by the board, the chairperson of the board, the president, the holders of shares entitled to cast not less than 10 percent of the votes at the meeting, or any additional persons as may be provided in the articles or bylaws.
(e) A meeting of the shareholders may be conducted, in whole or in part, by electronic transmission by and to the corporation or by electronic video screen communication (1) if the corporation implements reasonable measures to provide shareholders (in person or by proxy) a reasonable opportunity to participate in the meeting and to vote on matters submitted to the shareholders, including an opportunity to read or hear the proceedings of the meeting concurrently with those proceedings, and (2) if any shareholder votes or takes other action at the meeting by means of electronic transmission to the corporation or electronic video screen communication, a record of that vote or action is maintained by the corporation. Any request by a corporation to a shareholder pursuant to clause (b) of Section 20 for consent to conduct a meeting of shareholders by electronic transmission by and to the corporation shall include a notice that, absent consent of the shareholder pursuant to clause (b) of Section 20, the meeting shall be held at a physical location in accordance with subdivision (a).