Special Shareholder Meeting Requirements
A special shareholder meeting is called to handle issues that occur in between annual meetings and there are requirements for calling and holding the meeting.3 min read
A special shareholder meeting is sometimes called to handle issues that occur in between annual meetings, and often have certain requirements for calling and holding the meeting.
Annual shareholder meetings have become something that is expected from investors. Most companies hold this meeting in the spring, a few months after the fiscal year ending on December 31. This is considered “annual meeting season.” While most companies hold these meetings at executive offices, some companies will hold them at plants and stores. Some shareholders will come, discuss the state of the company, and vote on a few matters. Sometimes even more shareholders show up than company employees.
A shareholder meeting will often be called when shareholder input is needed in a major decision, such as a change in directors. Investors are also able to call special shareholder meetings, subject to a specific set of rules. There are some strategic advantages involved in scheduling a special shareholder meeting:
- An investor can accelerate change by restructuring or making other changes, without having to wait for the annual meeting to do so.
- An investor can demonstrate concrete support for a program without actually having a vote on that particular program.
Special stockholder meetings can be called by the board of directors or any person that is authorized in the certificate of incorporation or in the bylaws of the company. The corporation may allow others to call a special meeting such as the Board of Director chair, CEO, or shareholders, as long as it's specified in the Certificate of Incorporation or in the bylaws. Specifications vary state to state.
Proper notification for a shareholder meeting is dependent on the bylaws of the company, but typically requires written notification by a shareholder holding a certain threshold of shares in the company. The letter will typically state that a meeting is requested and the reason for the meeting. The company then sets the meeting within a set time frame, such as 30 to 90 days, and establishes a record date for eligibility to vote at the meeting.
All voting shareholders must be given written notice of the meeting, but it is not required that all voting shareholders attend the meeting. The bylaws cannot override this important requirement.
Sometimes, small businesses will hold their shareholder meetings without formal notice, and the shareholders will sign a waiver. This is not a good idea if there is any disagreement because a shareholder could refuse to sign and the shareholders will then not be able to take any action at the meeting.
In a special meeting, shareholders are not allowed to act on any business not included in the notice unless all shareholders sign a written waiver. Notice can usually be given via mail, in person, or electronic delivery (e-mail or fax), but it is always best to check the bylaws for clarification to avoid any problems.
An investor may call a meeting for some of the following reasons:
- Dismiss some or all of the current directors
- A change in size of the Board of Directors
- The election of new directors to fill vacancies
- To revoke amendments to the bylaws or Certificate of Incorporation
Many investors will need the support of other shareholders to call a meeting, unless they meet the ownership requirement in the business on their own. If an investor forms a large enough group, they will need to fill out a Form 13D disclosure. A demand for a meeting is different, and much easier, than soliciting votes for the issue at hand. However, if shareholders can get enough support to hold a meeting, they may be able to win additional votes, as well.
A shareholder meeting must be called, noticed, and held properly. There are general guidelines as to what this means, but every company will be different and will rely on its corporate documents. The annual meeting should be held on the date and time specified in its bylaws, which will be different for each corporation.
At the annual meeting, the only required agenda item is to elect the board of directors, however, other items can be added as long as they are included in the meeting notice. The schedule, or meeting agenda at a shareholder meeting needs to follow both state corporation law and the individual bylaws of the company.
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