Formalities for Shareholder Meetings Flashcards
Corporate statutes generally require an annual meeting of shareholders.
What else do these statutes provide?
These statutes also provide that failure to hold the annual meeting in accordance with the bylaws does not affect the validity of corporate action
Special meetings can be called by the board of directors or persons authorized in the articles or the bylaws.
What else do some states empower?
A number of states also empower a stated percentage of voting shares to mandate a special meeting.
The annual shareholder meeting is to be held at the time and place as fixed in the bylaws
What are required?
- Notice required
* Must state date, time, and place
Notice for special meetings must be at least 10 and no more than 60 days in advance of the meeting date.
What must the notice contain about the meeting?
Notice must contain a description of purposes and the matters to be voted upon
Who are entitled to vote or receive a dividend in a corporation?
Corporation will set a “record date” for those entitled to vote, i.e., only those shareholders listed as owners on that date will be entitled to vote or receive a dividend
• For votes the record date may be set by the bylaws or the board of directors if the bylaws fail to do so
Schnell v. Chris-Craft Industries, Inc. (1971) summary
The directors of Chris-Craft were worried because some shareholders had announced that at the next shareholders’ meeting, they were going to hold a vote to replace the directors. So, the directors moved the annual meeting up from January to December, making it harder for stockholders to make travel arrangements (and therefore show up to vote to kick out the directors). Some of the shareholders (including Schnell) sued to stop the directors from moving up the date of the shareholders’ meeting. Under the by-laws of the company, and under Delaware State law, it was legal for the directors to change the date of a shareholders meeting, as long as they gave 60 days notice (which they did). The Trial Court found for the directors. The shareholders appealed. The Trial Court found that the directors’ actions were designed to obstruct the shareholders’ efforts to gain control of the corporation. However, the Court declined to force the directors to reschedule the meeting.
The Delaware Supreme Court reversed. The Court found that even though the directors strictly complied with Delaware law, it was inequitable for them to profit from their shady decision.
Schnell v. Chris-Craft Industries, Inc. (1971) rule
Inequitable action does not become permissible simply because it is legally possible. (if you can’t think of anything, argue Schnell)
