June 12, 2023
Will the secretary please read the annual meeting minutes. Wait what minutes? If you have created a Corporation or Limited Liability Company (“LLC”) think again before throwing out those corporate documents and setting the cruise control. The importance of having a well-recorded annual meeting should not be overlooked.
Generally, State law requires a Corporation to hold an annual meeting of the Shareholders and the Board of Directors each calendar year. While not mandated by law, an LLC might be required to have an annual meeting depending on the language of its operating agreement. Regardless of the structure of your business, having an appropriately documented annual meeting is best practice.
Compliance with the documentation of your annual meeting can come in two forms. In the event your business holds a physical meeting, the Corporation’s Secretary should record the minutes. These minutes might include information such as date and time of the meeting, attendance, agenda, and a brief description of each item of business. If a physical meeting is not held, an organization can effectively document their annual meeting through a resolution known as a “Written Consent in Lieu of Meeting”. This agreement must be signed by all Shareholders and should outline any major corporate actions or decisions undertaken by the Corporation beyond routine, operational actions constituting the Corporation’s regular course of business. These records will ideally become part of the business’s permanent record and should be kept on hand for at least seven years.
Whether you are a publicly traded company, or a closely held family corporation, the importance of observing these requirements can’t be overstated. Many third-party organizations require evidence of an annual meeting before transacting business with a Corporation. Banks, government agencies, insurance companies, and real estate title companies are amongst those who commonly request minutes, or at the very least, certification that an Officer is designated to transact business on behalf of the Corporation.
Moreover, one of the most important features of a corporation is that it provides individual owners protection from legal liability by separating the Corporations assets and activities and your personal assets and activities. This legal shield is subject to the requirement that you operate the Corporation as a separate legal entity and properly respect all corporate formalities and requirements. Failure to hold and document annual meetings for Shareholders and Directors is a failure to meet and respect these requirements. If these failures persist and your Corporation gets sued for any reason, you run the risk of incurring a legal judgment and collection against your personal assets for liability events occurring through the Corporation’s activities and operations.
Traditionally, LLCs are not subject to state law requiring an annual meeting unless it is designated in the LLC’s operating agreement. Failure to hold an annual meeting generally does not result in a loss of liability protection unless it is required by one of the organizational documents. Nevertheless, if your LLC gets sued, a court will look to see if you are treating the LLC as a separate legal entity. Thorough annual meeting minutes are one of the most persuasive means of showing this legal separation and bolstering protection of your personal assets.
Here is the good news. Even if your business is not current in terms of holding and documenting annual meetings, we can help. Our attorneys at Rembolt Ludtke LLP are eager to assist you in bringing these requirements up to date. If you would like our Firm’s professional assistance with these updates, please call us at (402) 475-5100 at your earliest convenience to discuss further.
This article is provided for general information purposes only and should not be construed as legal advice. Those requiring legal advice are encouraged to consult with their attorney.
