Posts Tagged ‘Annual Meeting’

The Legal Underpinnings of Annual Meetings

Thursday, July 24th, 2008

A corporation in the United States is a legal entity that typically is formed to conduct business.  Its internal affairs are governed by the law of the state in which it is incorporated.  That means that under state law, a company’s shareholders must annually elect directors and transact other business that may be appropriate at the time.  This may be done at an annual meeting.  However, it is not only state corporate law that governs annual meetings.

The corporation’s organizational documents – the articles of incorporation (AKA certificate of incorporation) and by-laws – also control annual meetings.  For example, they may allow action to be taken without a meeting, upon the written consent of the shareholders.  Organizational documents provide the skeleton of the annual meeting, in that that may provide for the meeting time, date and place (or the way to determine the meeting time, date and place), setting the record date to determine the shareholders who will be eligible to vote and the voting rights of various classes of securities if there is more than one class.

Corporations with securities registered on a national securities exchange also must comply (unless they are exempted securities) with proxy rules, the rules and regulations enacted by the Securities and Exchange Commission (SEC) under Section 14 of the Securities Exchange Act.  Broadly stated, a proxy is a consent or authorization to act for another.  Regarding an annual meeting, the SEC’s proxy rules govern the form of the proxy and the form of the annual report provided to shareholders, regulate the information to be presented in the proxy statement, address the procedures pursuant to which shareholders receive the proxy and annual report before a meeting, and also mandate certain filing requirements.

Finally, national stock exchanges  (e.g., the New York Stock Exchange) have listing requirements which include rules addressing annual meetings.  Corporations with securities listed on a national stock exchange must comply with such rules.