Eleanor Finch
A special shareholder meeting is called to handle urgent issues that arise between annual meetings. It can be called by the board of directors, executive officers, or shareholders, depending on the company's bylaws and the state's corporate law. Shareholders who are eligible to call a special meeting must provide a legitimate reason and follow specific procedures, including proper notification to all shareholders. These meetings allow shareholders to be informed about the company's affairs and vote on critical decisions, such as approving transactions or electing directors. The meeting's agenda and scheduling must comply with legal requirements, and the process varies across states and companies.
| Characteristics | Values |
|---|---|
| Purpose | To handle issues that arise between annual meetings, such as seeking shareholder approval for a transaction or addressing concerns about the company's direction. |
| Initiation | Special meetings may be called by the board of directors, executive officers (e.g., CEO, President), or shareholders who meet ownership thresholds, depending on state laws and company bylaws. Some states, like Delaware, default to the board's authority, while others, like California, allow shareholders with as little as 10% ownership to call a meeting. |
| Notification | Shareholders typically require between 10 and 60 days of notice, depending on state law. Notification can be given in person, by mail, or electronically with the shareholder's consent. |
| Agenda | The agenda is typically limited to the purpose(s) stated in the meeting notice, but additional discussions may be included. The only required agenda item for an annual meeting is the election of the board of directors. |
| Voting | Shareholders can vote in person or by proxy if they are unable to attend. A quorum typically consists of a majority of shareholders, either in person or by proxy. |
| Timing | Special meetings can be held on short notice if enough shareholders agree. Once scheduled, the voting date is typically set for 30 to 90 days later. |
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What You'll Learn
Who can call a special meeting?
The ability to call a special meeting varies according to state law and individual company bylaws. In most cases, the board of directors is empowered to call a special meeting. However, some states, like California, require their corporations to allow shareholders to call a special meeting.
In California and most other states, the demand for a special meeting must be supported by investors representing a given percentage of outstanding shares. This is often 10%, but it can vary. For example, Microsoft's bylaws allow investors representing 25% of outstanding shares to call a special meeting.
Some companies allow a single shareholder to call a special meeting, while others require multiple investors or a higher percentage of shares. For example, some companies require investors representing 80% of shares to demand a special meeting.
The corporation may also allow other individuals to call a special meeting, such as the board chair or CEO, as long as it is specified in the bylaws or certificate of incorporation.
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What are the requirements for calling a special meeting?
The requirements for calling a special meeting vary depending on the company's bylaws, the state, and the country. Here are the key requirements to consider:
Notification Requirements
Proper notification is essential for calling a special meeting. The company's bylaws or certificate of incorporation should specify who is authorised to call a special meeting, which may include the board of directors, executive officers (like the CEO or president), or shareholders who meet certain ownership thresholds. In some states, like Delaware, the board has the authority to call a special meeting unless otherwise stated in the governing documents. Other states, like California, may permit shareholders with a minimum ownership threshold, often 10%, to call a special meeting. Shareholders seeking to call a special meeting must typically provide written notification to the company, stating the purpose of the meeting and demonstrating their ownership of a sufficient number of shares.
Timing and Notice Period
Special meetings are typically called to address time-sensitive issues that cannot wait until the next annual meeting. Once a special meeting is scheduled, the company sets a voting date, usually within 30 to 90 days of receiving the demand. Shareholders must be given clear advance notice of the meeting, typically between 10 and 60 days, depending on state law. The notice should include the date, time, location or online link, agenda items, and any procedures for proxy voting or remote participation.
Attendance and Voting
Special meetings require a quorum, meaning a majority of shareholders should be present to make group decisions. Shareholders who cannot attend the meeting may appoint a proxy to cast their vote on their behalf. Proxies must be submitted to the secretary of the corporation before the meeting, and shareholders can only vote once for themselves and once as a proxy for another shareholder. It's important to note that shareholders in rent arrears or tenants may not be eligible to vote.
Agenda and Purpose
Special shareholder meetings are called to discuss specific matters that require shareholder input or consent, such as electing directors or approving significant transactions. The agenda for a special meeting should be focused and clearly communicated in advance to all shareholders. It's important to follow the company's bylaws and state regulations when determining the agenda to avoid legal issues and ensure the validity of the meeting's outcomes.
In summary, calling a special shareholder meeting requires careful consideration of the company's bylaws, ownership thresholds, notification requirements, timing, and the specific purpose of the meeting. By following these requirements, shareholders can effectively exercise their influence and contribute to the decision-making process.
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What is the purpose of a special meeting?
A special shareholder meeting is called to handle issues that arise between annual meetings. These meetings are necessary when a problem cannot wait until the next annual meeting, such as when a company needs shareholder approval for a transaction or when shareholders want to replace directors.
Special shareholder meetings can be called by the board of directors or any person authorized by the certificate of incorporation or the company's bylaws. The corporation may also allow others to call a special meeting, such as the board chair, CEO, or shareholders, as long as it is specified in the certificate of incorporation or bylaws. The bylaws or certificate of incorporation may also require a minimum ownership threshold for shareholders to call a special meeting.
The process of calling a special shareholder meeting involves sending out notices to all shareholders, typically between 10 and 60 days before the meeting, depending on state law. The notice should include the purpose of the meeting, and any changes to be made should be planned accordingly. Once the meeting is scheduled, a voting date is set, usually within 30 to 90 days.
The purpose of a special shareholder meeting is to enable shareholders to be informed about the company's affairs and to vote on the management's recommendations. Shareholders are essential in the decision-making process, and their participation is encouraged to ensure compliance with the company's bylaws. These meetings provide an opportunity for shareholders to address market concerns and other issues outlined by the company's regulations.
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How much notice is required for a special meeting?
The notice period for a special shareholder meeting depends on the bylaws of the company and state law. In general, shareholders must be given clear advance notice of the meeting's date, time, place, and agenda, within a state-specified timeframe. Typically, this is between 10 and 60 days, with states like California and Delaware offering clear statutory guidelines.
Some sources suggest that shareholder meetings can be held on short notice, provided that the required number of shareholders have agreed to attend the meeting within a short time. This permission must be given in writing and signed. However, it is important to note that improper notice can invalidate the meeting and its outcomes, and affected shareholders may take legal action.
To call a special meeting, the bylaws or certificate of incorporation of the company must allow it. Some states, like California, require their corporations to permit shareholders to call a special meeting. In other jurisdictions, such as California, shareholders with as little as 10% of outstanding shares may call a special meeting unless the corporate documents specify a different threshold.
Shareholders must receive written notice of the meeting within a specific timeframe, typically no less than 10 days and no more than 60 days before the meeting. This notice can be given via mail, in person, or electronically (email or fax). It is important to check the bylaws to ensure compliance and avoid any problems.
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How is a special meeting different from an annual meeting?
A special shareholder meeting is called to handle issues that arise between annual meetings and cannot wait until the next annual meeting. These meetings are subject to certain regulations, and failing to follow them can put members at risk of liability.
Special meetings can be called by the board of directors or any person authorised by the certificate of incorporation or the company's bylaws. Some states, like Delaware, default to the board's authority, while others, like California, may permit shareholders with as little as 10% of outstanding shares to call a special meeting. In most cases, investors will need other shareholders to demand a special meeting, and they must have a specific reason for calling it, such as electing directors who support their case for change.
Annual meetings, on the other hand, are typically held during “annual meeting season” in the spring, a few months after the fiscal year ends on December 31. The only required agenda item is the election of the board of directors, although other items can be added as long as they are included in the meeting notice.
While annual meetings are expected and scheduled in advance, special meetings are called on an as-needed basis to address immediate concerns. They are subject to similar notification requirements as annual meetings, and shareholders must receive notice at least ten days before the meeting.
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Frequently asked questions
A special shareholder meeting is called to handle issues that occur between annual meetings. These meetings are usually called when a problem cannot wait until the next annual meeting.
The board of directors usually calls a special shareholder meeting. However, some states allow shareholders to call a special meeting if they meet a minimum ownership threshold.
The procedure for calling a special shareholder meeting varies by state and company bylaws. Typically, a written request is made to the board, stating the reason for the meeting. The company then sets a meeting within a specified time frame, such as 30 to 90 days.
Special shareholder meetings are called to discuss issues that require shareholder input, such as a change in directors or shareholder approval of a transaction. The agenda for a special meeting is limited to the purpose(s) stated in the notice.
The requirements for holding a special shareholder meeting include providing proper notice to shareholders, typically between 10 and 60 days in advance. A quorum must also be met, with a majority of shareholders present, either in person or by proxy.
