All corporations, whether public or private, must conduct annual shareholder meetings. The specific legal requirements are determined by the laws of the state of incorporation.[caption id="attachment_21977" align="aligncenter" width="550"] Photo courtesy of Paul Bence (Unsplash.com)[/caption]
The main purpose of holding annual shareholder meetings is to elect the board of directors. However, it can also serve as an important tool to conduct other official corporate business and establish strong relations with key shareholders.
New Jersey Laws Governing Annual Shareholder Meetings
When planning for the meeting, corporations must consider the following: the law of the state of incorporation; the certificate of incorporation; and the company bylaws. For corporations that call New Jersey home, below are several legal requirements to keep in mind:
- Timing of annual meeting: An annual meeting for the purpose of the annual election of directors must be held at such time as provided in the by-laws, or as fixed by the board pursuant to authority granted in the by-laws. In the absence of such a provision, N.J.S.A. 14A:5-2 establishes a default date of noon on the first Tuesday of April.
- Special meetings: Special meetings on any matter that necessitates immediate action may be called by the president of the corporation or the board, or by such other officers, directors or shareholders as provided in the corporation’s by-laws pursuant to N.J.S.A. 14A:5-3.
- Notice requirements: Notice regarding the place and purpose of every meeting (annual and special) of shareholders must be provided not less than 10 nor more than 60 days before the date of the meeting, either personally or by mail, to each shareholder of record entitled to vote at the meeting.
- Action without a shareholders meeting: N.J.S.A. 14A:5-6 provides that any action required or permitted to be taken at a meeting of shareholders may be taken without a meeting if all the shareholders entitled to vote thereon consent in writing, with the caveat that certain matters also require advance notification to shareholders.
- Quorum of shareholders: The holders of shares entitled to cast a majority of the votes at a meeting constitute a quorum at such meeting, unless otherwise provided in the certificate of incorporation or the New Jersey Business Corporation Act.
- Votes required: Any action, other than the election of directors, to be taken by the vote of the shareholders shall be authorized by a majority of the votes cast at a meeting of shareholders where a quorum is present unless a greater plurality is required by the certificate of incorporation or by statute.
- Proxy votes: A shareholder may authorize another person to act for the shareholder by written proxy.
- Voting of shares: Each outstanding share is entitled to one vote on each matter submitted to the shareholders unless otherwise provided in the certificate of incorporation.
Because corporations may alter many of the statutory requirements in their governing documents, startups and other new businesses should take great care when drafting articles of incorporation, corporate bylaws, and shareholders agreements. To avoid confusion or unintended liability, it is advisable to consult with a knowledgeable corporate attorney.
Do you have any questions? Would you like to discuss the matter further? If so, please contact me, Robert Marsico, at 201-806-3364.