For a California corporation, there are many legal requirements that govern not only the establishment of the corporate structure, but the ongoing operations of the corporation. Observing the formalities involved in a corporation, including having annual meetings, is essential to maintaining limited liability for the corporate directors and shareholders. If the corporate officers fail to follow these requirements, they risk personal liability for any judgments against the corporation. This situation is referred to as “piercing the corporate veil,” and it can result in substantial personal financial losses for corporate shareholders.
All California corporations are required by law to hold an annual shareholder meeting, and may have additional “special” meetings as needed. There certain legal procedures to follow in calling, giving notice of, and holding a shareholder meeting. The date and time for the annual meeting typically is stated in the corporation’s bylaws. The corporation must give notice to all shareholders who are eligible to vote of the annual shareholder meeting and any special meetings. In a very small business, shareholders can hold their meetings without formal notice by having the shareholders sign a written waiver of notice of the meeting. However, in a larger business, it is best to provide proper notice to all required parties.
The notice must state the date, time, and place of the meeting, as well as whether shareholders must attend in person or can attend by telephone or other electronic means. For an annual meeting, the notice also must contain the names of the persons who are nominated for the election, as well as any other proposed actions to be taken. Normally, the corporation must provide an annual financial statement to the shareholders at least 15 days prior to the annual meeting; however, for a corporation with less than 100 shareholders, this requirement can be waived in the corporation’s bylaws. The only required action at a shareholder meeting is to hold an annual election of officers. Of course, the corporation can take other actions during this meeting as needed.
At Heit Law Group, P.C., we have provided effective legal advice to many corporation and business owners throughout the state of California. This advice includes information for you about the importance of abiding by corporate regulations, such as annual meetings, and how doing so – or failing to do so – can affect your business. Contact our experienced Woodland Hills business attorneys today, and learn how we can help.