It’s that time of year again – time to begin preparations for annual meetings of shareholders and directors. Public companies are now in the throes of preparing and distributing proxy statements and related materials, but closely held companies should begin to prepare for meetings, too.
The Illinois Business Corporation Act of 1983 (“Act”) establishes the general requirements for calling and conducting annual meetings; however, it provides substantial flexibility to companies by permitting them to establish their own rules and procedures consistent with the law. Meetings may be held at a company’s registered office or any other location within or outside the state, as determined by the company. The time and date for meetings is left up to the company and generally is set by its by-laws or by resolution of the board of directors. Failure to hold an annual meeting will not result in a dissolution of a company’s charter or affect the validity of any corporate action, but a consistent failure to conduct meetings may have serious ramifications, especially if a company fails to maintain other structural and financial formalities. In such cases, the protection provided by the corporate shell may be lost and officers, directors and shareholders may be subject to personal liability for actions or omissions between one another and involving third parties.
According to the Act, if an annual meeting is not held within the earlier of six months following the end of a company’s fiscal year, or fifteen months after its last annual meeting, and a notice of meeting is not provided by the company within sixty days following a written request by a shareholder, any shareholder entitled to vote at a meeting may apply to the circuit court for an order to fix a time a time and place for a meeting. Additional court orders may issue if necessary to set up a proper meeting.
Any shareholder may participate in and initiate actions at a meeting. This may be done in person or by telephone, the internet or any other electronic means that enables all attendees to communicate with one another. Since January 1, 2006, a company may be required to permit a shareholder with voting rights to physically attend the meeting if space is available. Of course, the shareholder must comply with any procedural and other requirements established by the company to conduct an orderly meeting and may be subject to ejection for failure to do so. A company may also modify the Act’s provisions relating to required attendance through corporate rules and by-laws.
If you need any assistance in preparing and distributing materials relating to your annual shareholder and directors meetings, please contact us. Annual meetings provide a convenient opportunity to review actions taken during the preceding year, as well as those contemplated for the ensuring year, to ensure appropriate documentation is established to evidence authority and a record of actions approved and implemented by the company and its management.