Corporate clients of Navigato & Battin received an email back in March requesting they fill out a questionnaire regarding their company’s operations during 2019. The information included in these questionnaires allows us to draft Shareholder and Board of Director Actions for your corporation which ratify all actions taken in the preceding year, elect directors for the year, and appoint officers for the year. These annual actions – taken in lieu of annual meetings – are part of the annual corporate formalities corporations are required to observe to maintain their status. Other such formalities include but are not limited to filing an annual Statement of Information with the California Secretary of State, listing the corporation’s address, officers, and directors.

California law requires corporations to hold annual shareholder meetings. At the absolute minimum, the shareholders in attendance at such a meeting must elect the directors of the corporation. While the law does not require annual director meetings, we recommend our corporate clients hold such director meetings immediately following the shareholder meetings. For closely held corporations, these meetings will usually largely consist of the same persons. The directors are responsible for appointing all officers the corporation may have, and this can and should be done in this meeting. Furthermore, the directors should ratify all major actions taken by the corporation’s officers in the preceding year.

Especially now, gathering all the corporation’s shareholders and directors may prove difficult. Luckily, the corporate code allows for unanimous written consents to take the place of these meetings. These written consents are writings including all resolutions and actions which would have been taken at a meeting of the shareholders or directors and require each and every shareholder and director to sign off, respectively. These written consents can be very helpful for those corporations whose shareholders and directors are numerous and not able to meet. They can also be helpful during the current pandemic, when gatherings are limited to a certain number of people and recommended social distancing and face coverings may cause in person meetings to be quite difficult.

The purpose of these annual meetings or unanimous written consents is to observe certain required formalities of the corporation. In the event the corporation is named as a defendant in a lawsuit, failure to observe the corporate formalities, among other factors, may cause a judge to find the corporation is simply an alter ego of the shareholders and thus hold the shareholders liable for the corporation’s debts. Since one of the primary reasons business owners form corporations (or LLCs) is to shield themselves from the company’s obligations, this is a less than desirable result.

To properly observe the corporate formality requiring annual shareholder meetings, please fill out and return the corporate questionnaire you received from our office in March. If you did not receive this or need another copy, do not hesitate to email briana@navbat.com or daviera@navbat.com. Once your questionnaire is returned, we will prepare Shareholder and Board of Director Actions for a flat fee.