Actions by the Board of Directors

Legally, there are two ways in which the Board of a corporation (the "Board") can act. The Board can (i) have a meeting, either regular or special, or (ii) it can act by written consent--that is, the directors give their written approval of one or more resolutions without the formality of a meeting.

Unlike resolutions agreed to at a meeting, where usually only a majority is required, written consents must be accepted by all of the directors.

A common problem in the corporate governance documents is an action by written consent by directors that is not unanimous and that occured without a meeting; this is an invalid method of adopting resolutions.

If the directors take action at a meeting, certain requirements must be met. The bylaws will typically set the quorum requirements and the requisite vote required to adopt a resolution.

If the meeting is a special meeting (that is, one whose regular time and place have not been fixed in the bylaws or by resolution of the Board), notice is normally required. In some instances, the bylaws may also require prior written notice of regular Board meetings.

The Secretary should consult the corporation's bylaws for detailed requirements governing notice; the bylaws will tell when notice must be given, and in what form. As a practical matter, if notice cannot be properly given, it can (and must) be waived: each director must sign a waiver of notice and consent to the holding of the special Board meeting. (Note that, again, each director's signature is required, lest a special meeting take place without the knowledge of one or more directors.)

The waiver of notice can be a single page signed by the entire Board, or can be executed, if convenient, by individual directors in multiple copies. In either case, be sure that the waiver is filed in the corporate minute book; normally, it is placed directly before the minutes of the meeting in question.

Actions by the Stockholders

Actions by the stockholders are taken in essentially the same way as directors' actions.

Both meetings and written consents are permitted, although action by written consent need not generally be unanimous, provided certain statutory requirements are met.

If it is expected that less than unanimous written consent will be obtained, you should contact us to ensure that the proper formalities have been observed.

There are special and detailed requirements pertaining to notice of the annual stockholders' meeting. The bylaws of the corporation should be studied several months before the annual meeting in order to ensure that the meeting will be properly noticed.

While it is possible for the stockholders to waive notice of an annual meeting, execution of such a waiver may limit the types of decisions that can be validly made at the meeting, unless the waiver states the general nature of the proposals to be voted on.

Unlike directors' meetings, meetings of stockholders involve the setting of a record date to establish voting rights, and voting by shares other than on a one person-one vote basis. Classes or series of stock other than common stock may contain special notice and voting provisions.

Finally, stockholder votes may involve the organized solicitation of proxies by the company's management. These topics will be dealt with in the company's articles and bylaws, and will generally require Board action prior to the meeting date (e.g., set record and meeting dates, approve agenda, approve solicitation of proxies).

Minutes

Minutes of directors' and stockholders' meetings should be as complete as possible.

The minutes should identify the issues before the respective groups and should state the result of the vote on each issue. While this undoubtedly seems self-evident, the point is emphasized because of another persistent problem. From time to time, corporate records may contain an officer's certificate setting forth the text of resolutions adopted at a Board meeting on a given date; a review of the minutes for that date, however, show no record of such a resolution.

Whenever an officer's certificate is prepared, the Secretary should be sure that the resolutions referenced in the certificate were actually adopted as described.

If a bank, corporation, or other institution requires the adoption of certain resolutions as a prerequisite to the closing of a loan or other transaction, and if a meeting of the Board cannot be held within the necessary time frame, the resolutions can, as described above, be adopted by unanimous written consent and their adoption so certified by a corporate officer.

The minutes, together with copies of the notice of the meetings or waiver thereof, should be placed in the corporation's minute book. Detailed minutes do not validate corporate action, but minutes serve as a valuable record that action taken was properly considered and approved.

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