How to Run a Shareholder Meeting & Access To The Corporate Code For Each Of The Fifty States That Have To Do With The Board Of Directors.:
What is an Annual Shareholder Meeting?
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The annual shareholder meeting is a crucial interaction between a publicly traded company and its investors, mandated by all U.S. states. These meetings aim to share pertinent details about company operations and finances, nurture investor relations, and empower investors to wield their ownership influence through recommendations, inquiries, and voting. Legal requirements ensure a streamlined planning and administrative process for these meetings. However, the diversity in business size, structure, culture, and public presence results in a vast array of considerations, making each shareholder meeting unique. Events range from simple afternoon luncheons to elaborate branded gatherings, showcasing the varied approaches companies take.
The First Consideration: Technology
Fifty years ago, shareholder meetings were confined to physical venues, necessitating travel or the use of physical proxies for attendance. In today's technological era, modern shareholders can fully participate from anywhere globally with an internet or telephone connection, thanks to virtual meetings offered by various service providers. This accessibility enables businesses to reach diverse financial markets and potential investors worldwide.
However, integrating technology into shareholder meetings comes with its complexities, especially regarding security requirements for telephonic and online connections, particularly during shareholder voting.
Some businesses, with small, localized investor pools, find it pragmatic to stick to traditional meeting methods. Conversely, there's a growing trend of companies completely forgoing physical venues and opting for online shareholder meetings, a trend likely to increase with advancing communication technology, especially in times of pandemics.
When planning an annual shareholder meeting, carefully consider the optimal level of technological integration for you and your shareholders' needs. For those aiming for a hybrid meeting with both physical and virtual attendees, registrars offer assistance by providing virtual meeting technology, secure online voting systems, and toll-free telephone voting options for investor convenience.
The Key Roles
For Your Reference
At every annual shareholder meeting, several individuals play key roles crucial for compliance with proxy meeting rules dictated by legislation. Below is a listing of these roles, along with a brief overview of the important responsibilities these individuals bear during or before the meeting. While you may already be familiar with many of these roles, this document serves as a reference for future needs.
The Board of Directors:
When a business is publicly traded, the board of directors are appointed as a sort of leadership entity. Every member of the board has the title of director, though they may each hold different powers and offices. The board is able to hand directives and requests to the corporate officers, and thus influence the conduct of the company. It is the purpose of the board to represent the interests of the shareholders in the business.
Because of this special relationship, it is almost always the case that a member of the board conducts the annual shareholder meeting. More specifically, it is common for the chair of the board to conduct—though it should be noted, this is more a norm than a rule.
The chair, or presiding director, holds a pivotal role in the meeting, often considered the most important. Thorough preparation is essential; they should be well-versed in the agenda, acquainted with their script, and knowledgeable about the business's challenges. It's common to rehearse multiple scripts and conduct trial Q&A sessions to ensure the chair is well-prepared for any question. Corporate officers and their staff, responsible for planning and setting the agenda, assist the board in conducting the meeting. Among the officers, only the corporate secretary has a mandated role in the annual shareholder meeting, while other duties are assigned based on quorum requirements and specified in the company bylaws.
Because the role of the corporate officers relating to the annual shareholder meeting is so indistinct, it is not uncommon for any and all officers to participate in those necessary areas to which their respective skill sets lend them. For example, the CEO may assist in the construction of a seating chart if time and skill permit. Alternatively, it may be the assistant of the firm’s vice president who handles this, or a third-party event planner selected by the treasurer, or another delegated staff member. It is also not uncommon to have corporate officers assigned to make presentations or propositions to the shareholders or sit on a panel during Q&A sessions.
The Corporate Secretary: The corporate secretary holds a crucial role, often more significant than any other corporate officer during the meeting. They serve as a link between corporate officers and the board of directors, responsible for capturing distributable minutes in both board and shareholder meetings. Their duty extends to ensuring all necessary documentation for the annual shareholder meeting is available. This compilation, known as the corporate secretary's binder, comprises essential paperwork and reference materials. While not necessarily responsible for preparing each document, the corporate secretary compiles and brings them to the meeting.
Corporate Secretary’s Binder:
The Inspector of Election:
This person is appointed to manage all the tabulation at the meeting. They must be a third party to the shareholders and corporate officers and are often provided by your transfer agent.
Registered Holders:
These are investors who hold physical or electronic stock certificates and who are registered directly with the issuer as shareholders. They are able to vote directly on matters raised at the meeting or by proxy using mail, telephone, or Internet voting systems. Each stock they hold represents one vote. They are allowed to attend the meeting.
Beneficial Holders:
These are investors who hold their stock electronically with their broker. These individuals will receive a proxy card or voting instructions that is sent out by the proxy handler assigned to their brokerage firm. If the beneficial holder would like to attend the meeting and vote in person, they will need to request a legal proxy from their bank or broker. This will need to be presented in order to gain entrance into the meeting.
Dissecting the Agenda
When preparing an annual shareholder meeting, a certain predetermined order of events is usually observed. The meeting can usually be split up into five sections, which are revealed below in chronological order.
Opening Procedures
This is the intuitive first step to any meeting. It is the time for the chair of your board to call the meeting to order and set the stage for the rest of the proceedings. The agenda will have already been distributed to your attendees, and if there are any individuals specifically named in it you may want to take the opportunity to introduce them. It may also be useful to introduce any other important individuals present, such as secretaries, directors, and corporate officers. This will also typically be the time to review your rules of conduct and any procedures necessary to the meeting’s direction. Some formats take the opportunity here to announce the existence of quorums.
Presentation of Information
Any propositions being made to the shareholders will be explained and argued during this time. It is typical to allow shareholders a Q&A session after each presentation. This is not intended to be an opportunity to ask questions about matters of the business in general. Rather, it is a chance to probe the proposition at hand and allow shareholder concerns to be expressed and addressed. If there are many directorial positions up for election, or sizable changes in company practice being suggested, it may take several hours. On the other hand, if there are no propositions on the docket, this part of the meeting can be skipped completely. Proposals and related Q&A are discussed further later on.
Voting
The polls must be officially opened before this process can begin. After this, depending on the level of technological integration in your meeting, you will call for various types of votes to be cast and collected. From those physically present at the meeting you will collect paper ballots, while those attending over phone or Internet connection will cast proxy votes. The Inspector of Election will be in charge of tabulating. When all the votes have been cast, or when a designated amount of time has passed, the polls will be officially closed, and voting through all mediums will lock. Voting is discussed later on.
Results Reporting
Once the Inspector of Election has seen all votes thoroughly tallied, the results will be announced to the shareholders, directors, and corporate officers alike.
Ending Procedures and Other Activities
At this point the official meeting can be adjourned, though the day’s activities are not necessarily concluded. It is often at this time that the floor is open for a general Q&A session. This is meant to allow shareholders a certain level of directive capability in the meeting, though they are not the ones who ultimately host it. If there are any concerns or suggestions shareholders would like to make, they are allowed to do so at this time. General Q&A sessions are discussed later on.
It is also not uncommon for a directors’ meeting to be held after the shareholder meeting.
Opening Procedures
If you expect to have attendees at your meeting, there will be a period of time before it starts where participating shareholders and company officials are scheduled to enter. Because an individual must be authorized to attend the annual shareholder meeting, there will need to be a list of allowable attendees prepared, and those who wish to enter the meeting space will need to verify their identities. This includes those who are standing in proxy for other shareholders.
When the meeting begins, the presiding authority will call it to order. As stated earlier, this person is generally the chair of the board of directors, though there is no specific regulation which requires this. The meeting’s agenda may be distributed at any point here or prior, including during the distribution of notice and literature to shareholders.??The opening of the meeting is a special opportunity to impress shareholders while attentions are fresh. This is the time to set the tone of the meeting, and to win goodwill where there is goodwill to be won. It is not uncommon for this to be the most rehearsed and developed area of the script.?
General Q&A Session
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While it is not always deemed necessary to hold a general Q&A session after the meeting, many companies find that it is a useful opportunity to assuage the concerns of their investors, display professional courtesy, and manage public perception. As with many aspects of the annual shareholder meeting, the rules of conduct in a general Q&A session are found in the company bylaws.
This is a time for questions from shareholders that may not relate to those matters slated for discussion and voting during the rest of the meeting. It may be appropriate to review, again, the rules of conduct, and to ensure that shareholders understand what will and what will not be permitted. While there are no hard and fast rules about how a general Q&A is supposed to be conducted, it is best to prepare answers for questions likely to be asked. In this way, the general Q&A is similar to the Q&A sessions conducted after proposals and presentations.
Proposals
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What can be proposed?
In most states, restrictions on what can and cannot be proposed during an annual shareholder meeting are mostly found in company bylaws. Matters of election and dismissal of members to and from the board are generally addressed—indeed, this is often seen as the purpose of the annual shareholder meeting—but this is also a matter subject only to corporate bylaws. It is far from abnormal for no proposals to be made at all during the meeting at all. It may be that only purpose of the meeting is to officially re-appoint existing directors, and the entire event can be conducted in an hour or two.
?Shareholder proposals
Some companies allow shareholder propositions, where approved investors are allotted time during the meeting to make presentations and arguments of their own. Whether or not this is allowed is, again, a matter dictated in company bylaws. The company may or may not be allowed to review the proposition in full before the meeting. If a shareholder proposition does take place, it is wise to spend time predicting and planning a company response to it.
The Voting Process
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This is an area in which a Transfer agent can provide a great deal of professional assistance. They are able to manage or assist every step of the voting process, from sending materials, drafting of proxy cards, broker search, and final tabulation of votes.
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Speaking broadly, there are two categories of voting shareholders—the registered holders and the beneficial holders—and two ways in which each shareholder can vote—either in person, or by proxy.
It is necessary to store proxy votes prior to tabulation because, as mentioned previously, it is more the rule than the exception for the vast majority of shareholder votes to be cast by proxy. It is the rare company that is in possession of an investor pool localized enough to meet a quorum from in-person meeting attendees. This means that, quite often, issues on the ballot have already been decided by proxy voters by the time the meeting starts. However, proxy votes are not officially tabulated until the closing of the on-site ballots. This is because every shareholder who wants to vote must be given the opportunity to do so before any results are announced.
By providing a qualified inspector of election and online proxy voting systems, a transfer agent will ensure that all of these proxy votes are properly received and stored prior to official tabulation. There are several ways in which proxy votes may be cast.
In-Person Voting
It is generally the duty of the corporate secretary to bring an appropriate number of ballots to the meeting. Once any proposals and related Q&A sessions have been completed, if indeed any are scheduled, it is generally time to open on-site voting. Ballots are distributed, marked, and collected by the inspector of election provided by a transfer agent, or under the inspector’s direction. They are tabulated upon the closing of on-site ballots.
Proxy Voting by Mail
This voting process is one of the mostly commonly used. What it lacks in speed and modernization can often be made up for in convenience. This is because SEC regulated companies are already required to distribute physical literature to their shareholders in the form of meeting notifications and attendance information. The task of adding voting documents to this mailing packet is a remedial one, so it is often done. To registered voters, a company will send a paper proxy card, which is similar to a ballot. Beneficial holders are provided with a synonymous document called a voting instruction form, which directs their broker on how to vote with their shares.?
These documents should typically be mailed 30-45 days before the annual meeting. This allows for more shareholders to respond with their votes, and a greater chance at achieving a quorum.?
Proxy Voting by Telecommunication
Proxy votes may also be cast by telephone or Internet. Instructions for both mediums, sent to shareholders in the same packet of information as the meeting announcement, will direct the shareholders on how to properly and securely cast their votes.
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When voting by telephone, shareholders are usually given two numbers. The first is a phone number which can be called any time before proxy voting has closed. The second is a control number, which is a unique string of numbers that functions as a personal identification code, and which can be used to cast votes. Instructions on how to use the telephonic voting system are generally provided in the proxy materials.
Voting over the Internet is similar to voting by telephone, in that a unique control number is provided in the proxy materials. The only difference is that instead of a telephone number being given as a point of contact, a customizable web address is provided instead.?
Preparing for your Meeting
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Planning your meeting dates carefully is not only important for logistic reasons, but also to comply with the SEC, company bylaws and State rules. Balancing all of these factors is important in holding a proper shareholder meeting. A transfer agent can help you plan these dates and setup your meeting. Each meeting has its unique challenges that a transfer agent can help you solve. A transfer agent services include, but are not limited to:? ?
In the United States, the authority to establish corporate law lies with individual states rather than the federal government. Consequently, regulations governing public companies and corporations can vary between states, including those that pertain to the mandates and limitations of the board of directors. This compilation provides the latest corporate code from each of the fifty states, categorized into the following sections:
1. Laws related to planning shareholder meetings, encompassing record-keeping, mailing, and meeting date requirements.
2. Laws specifying shareholder voting quorum requirements for the board.
3. Laws outlining the duties and prerequisites of the board of directors, including those governing the number and appointment of directors.
4. Miscellaneous laws of significance, covering provisions such as staggering director terms, segregating shareholder classes, or issuing stocks in series.
Each state is included in this comprehensive list, with laws cited in a universal format for easy reference. Comment the state (e.g. #New York) you would like and my social media handler will send you the list of requirements for that particular state.If you would like the whole document please comment #AllLGS in the comment box and my social media handler will inbox you the document. Below is an example of the requirements of the Alabama State.
ALABAMA
Record, mailing and meeting date requirements
Record Date AL Code § 10A-2-7.07 (2018)
(a) The bylaws may fix or provide the manner of fixing the record date for one or more voting groups in order to determine the shareholders entitled to notice of a shareholders' meeting, to demand a special meeting, to vote, or to take any other action. If the bylaws do not fix or provide for fixing a record date, the board of directors of the corporation may fix a future date as the record date. (b) A record date fixed under this section may not be more than 70 days before the meeting or action requiring a determination of shareholders. (c) A determination of shareholders entitled to notice of or to vote at a shareholders' meeting is effective for any adjournment of the meeting unless the board of directors fixes a new record date, which it must do if the meeting is adjourned to a date more than 120 days after the date fixed for the original meeting
Notice of meeting
AL Code § 10A-2-7.05 (2018) (a) A corporation, or, in the case of a special meeting called pursuant to Section 10A-2-7.02(a)(3), the persons calling the meeting, shall notify shareholders in writing of the date, time, and place of each annual and special shareholders' meeting no fewer than 10 nor more than 60 days before the meeting date. Unless this chapter or the articles of incorporation require otherwise, the corporation, or other persons calling the meeting, are required to give notice only to shareholders entitled to vote at the meeting. Notwithstanding the provisions of this section or any other provisions of this chapter, the stock or bonded indebtedness of a corporation shall not be increased at a meeting unless notice of the meeting shall have been given as may be required by Section 234 of the Constitution of Alabama of 1901, as the same may be amended from time to time. (b) Unless this chapter or the articles of incorporation require otherwise, notice of an annual meeting need not include a statement of the purpose or purposes for which the meeting is called. (c) Notice of a special meeting must include a statement of the purpose or purposes for which the meeting is called.
(d) If not otherwise fixed under Section 10A-2-7.03 or 10A-2-7.07, the record date for determining shareholders entitled to notice of and to vote at an annual or special shareholders' meeting is the day before the first notice is delivered to shareholders. (e) Unless the bylaws require otherwise, if an annual or special shareholders' meeting is adjourned to a different date, time, or place, notice need not be given of the new date, time, or place if the new date, time, or place is announced at the meeting before adjournment. If a new record date for the adjourned meeting is or must be fixed under Section 10A-2-7.07, however, notice of the adjourned meeting must be given under this section to persons who are shareholders as of the new record date.
Meeting Requirements
AL Code § 10A-2-7.01 (2018)
(a) A corporation shall hold a meeting of shareholders annually at a time stated or fixed in accordance with the bylaws. (b) Annual shareholders' meetings may be held in or out of this state at the place stated in or fixed in accordance with the bylaws. If no place is stated in or fixed in accordance with the bylaws, annual meetings shall be held at the corporation's principal office. (c) The failure to hold an annual meeting at the time stated in or fixed in accordance with a corporation's bylaws does not affect the validity of any corporate action.
Any laws to do with Quorum requirements
AL Code § 10A-2-8.24 (2018) By default, a quorum of a board of directors consists of a majority of fixed directors (if the board indeed has a fixed size) or “a majority of the fixed number of directors prescribed, or if no number is prescribed the number in office immediately before the meeting begins” (if the corporation has a variable range of directors). Company bylaws can alter these defaults, but must require no less than a third of the fixed of prescribed number of directors. If a quorum is present, the affirmative vote of a majority of directors becomes the act of the board unless the company bylaws require a greater vote. A director is presumed to be present for quorum purposes “for the remainder of a meeting at which he or she has been present for any purpose” unless the contrary can be established. A director present in the meeting or committee in which a corporate action is taken is deemed to have assented to the action unless: The director objects to holding the meeting, or conducting business at the meeting. The director can make their objection at the beginning of the meeting or promptly upon their arrival to the meeting. They can also make their objection before the meeting starts if they are notified of the purpose of the meeting, and object to it. The director’s dissent or absentation from action taken is entered in the minutes of the meeting The director “delivers written notice of his or her dissent or abstention to the presiding officer of the meeting before its adjournment or to the corporation immediately after adjournment of the meeting.” A director who votes in favor of the action taken cannot then dissent or abstain.
Requirements and duties of the board of directors (in regards to proxy meetings) including number of directors and appointment of directors, as specified by the state
Duties of the Board of directors
AL Code § 10A-2-8.01 (2018) (a) Each corporation must have a board of directors. (b) All corporate powers shall be exercised by or under the authority of, and the business and affairs of the corporation managed under the direction of, its board of directors, subject to any limitation set forth in the articles of incorporation or in an agreement authorized under Section 10A-2-7.32.
Number of Directors
AL Code § 10A-2-8.03 (2018)
(a) The number of directors shall be one or more, as specified in or fixed in accordance with the articles of incorporation or bylaws. (b) If a board of directors has power to fix or change the number of directors, the board may increase or decrease by 30 percent or less the number of directors last approved by the shareholders, but only the shareholders may increase or decrease by more than 30 percent the number of directors last approved by the shareholders. (c) The articles of incorporation or bylaws may establish a variable range for the size of the board of directors by fixing a minimum and maximum number of directors. If a variable range is established, the number of directors may be fixed or changed from time to time, within the minimum and maximum, by the shareholders, or, if the articles of incorporation so provide, by the board of directors. After shares are issued, only the shareholders may change the range for the size of the board or change from a fixed to a variable-range size board or vice versa. (d) Directors are elected at the first annual shareholder's meeting and at each annual meeting thereafter unless their terms are staggered under Section 10A-2-8.06.
Any other notable laws regarding proxy meetings. (For example, provisions to stagger director's terms, or segregate shareholders into classes)
Election of Directors by certain classes of shareholders
AL Code § 10A-2-8.04 (2018) “If the articles of incorporation authorize dividing the shares into classes, the articles may also authorize the election of all or a specified number of directors by the holders of one or more authorized classes of shares. A class, or classes, of shares entitled to elect one or more directors is a separate voting group for purposes of the election of directors.”
Provision to stagger directors’ terms
AL Code § 10A-2-8.06 (2018)
If there are 9+ directors, the board can be divided into two or three groups of equal size (or as close to equal size as can be). Then “ the terms of directors in the first group expire at the first annual shareholders' meeting after their election, the terms of the second group expire at the second annual shareholders' meeting after their election, and the terms of the third group, if any, expire at the third annual shareholders' meeting after their election. Directors are appointed for terms of two or three years, depending on the number of groups created.
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Disclaimer: This material provided in this article should be used for informational purposes only and in no way should be relied upon for legal or financial advice. Also, note that such material is not updated regularly and some of the information may not, therefore, be current. Please be sure to consult your own financial advisor and lawyer when making decisions regarding your financial or legal management.