question.jpgIn Business Law

What is the annual meeting of shareholders?

The annual meeting of shareholders is a once-a-year meeting, required by state corporate law, where the shareholders elect the corporate directors for the next year. The corporate bylaws generally establish the date that the annual meeting must be held. Because this date is in the corporate bylaws, the corporation does not generally have to give any formal notice alerting shareholders of an upcoming annual meeting. However, most corporations provide such a reminder notice anyway.

Many corporations set up their annual shareholder meeting to take place after its fiscal year has ended, so that the shareholders can also discuss the corporation’s financial performance during the annual meeting (of course, even if the annual meeting is not held after the fiscal year has ended, the shareholders often discuss many financial issues anyway). In addition, many corporations hold their annual meeting of directors on the same day as the annual meeting of shareholders, and they have the directors meeting right after the shareholders meeting.

During the meeting, any vote is only valid if there is a quorum of shareholders present. This ensures that a minority of shareholders can’t take controlling actions. Each state’s corporate laws define what that state considers a “quorum” to be, and it is usually defined as being a majority of the outstanding voting shares (thus, over 50% of the shares must be represented by present shareholders). However, corporations can change this via their bylaws, and some corporations raise the requirement from a simple majority to something greater (a so-called “supermajority”). Shareholders often appear at these meetings by proxy, which is where they authorize some other person to attend the meeting and vote their shares. Again, the state corporate laws and the corporate bylaws will generally define exactly how this proxy voting works.

Finally, the corporate secretary must record minutes based on the meeting, outlining what the meeting was about, who attended, who ran it and when and where the meeting took place.