Owners of corporations are shielded from personal liability for the debts of the business. However, owners and shareholders of New York and New Jersey corporations must follow certain corporate formalities to ensure that protection against personally liability persists. One such requirement is the annual shareholder meeting.
New York’s Business Corporation Law specifically requires that “[a] meeting of shareholders shall be held annually for the election of directors and the transaction of other business on a date fixed by or under the by-laws.”
New Jersey’s Business Corporation Act likewise requires that “[a]n annual meeting of the shareholders shall be held at such time as may be provided in the by-laws, or as may be fixed by the board pursuant to authority granted in the by-laws, and, in the absence of such a provision, at noon on the first Tuesday of April.”
The corporation must give adequate notice of the meeting to the shareholders (date, time and place) in compliance with the company’s by-laws.
What Happens at a Shareholder Meeting and What are Meeting Minutes?
Shareholder meetings normally take place at the end of the corporation’s fiscal year. At the meeting, the shareholders will discuss the prior year, review company financials, and importantly, elect the board of directors.
The corporation also must keep a written records of what transpired in a set of meeting minutes. The meeting minutes must also include some basic information like when the meeting took place, the notice that was sent prior to the meeting, and who attended the meeting. The meeting minutes should be made available to any shareholder upon request.
May a Corporation Conduct a Shareholder Meeting By Video Conference?
In 2021, in response to the COVID-19 pandemic, the New Jersey Business Corporation Act was revised to permit New Jersey corporations to conduct shareholder meetings by electronic remote communications. The only catch is that the board of directors must “authorize and adopt” guidelines and procedures which allow the corporation to:
(a) verify that each person participating remotely is a shareholder; and
(b) provide each shareholder participating remotely with a reasonable opportunity to participate in
the meeting, including an opportunity to vote on matters submitted to the shareholders, and to
read or hear the proceedings of the meeting substantially concurrently with those proceedings.
New York followed suit in late 2021 and permitted its corporations to:
(a) adopt the resolution of members by consent in writing delivered via secured electronic
communication as defined; and
(b) allow corporations to hold meetings of shareholders electronically.
Given the recency of these legislative changes, boards of directors for corporations in New York and New Jersey should review their bylaws and consider revising them to include a specific set of procedures for how to conduct entirely virtual shareholder meetings unless they would prefer to do it face to face.
Maintaining Good Corporate Hygiene
To all directors of New York and New Jersey Corporations, be sure to:
- Conduct a shareholder meeting (on adequate notice) at least once a year,
- Take corporate meeting minutes, and
- Maintain those minutes in corporation’s records.
- If your shareholder meeting will be conducted virtually, review the corporation bylaws to see how such a meeting should proceed.
- If such remote means are not specifically outlined in the bylaws, hire a business lawyer to revise the bylaws and draft and related unanimous written consents.
Failing to do so could jeopardize the protection against personal liability which a corporation affords and could be a violation of the corporation’s bylaws.
For more information about New York Corporations feel free to visit New York State’s Division of Corporations website for more information. For New Jersey Corporations, you can visit the NJ Business Action Center website.
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