Two recently-acquired clients had similar situations that brought up the importance of complying with legal requirements.
Each company is a multi-founder startup where one founder became non-productive, and even somewhat detrimental to the business. The other founders wanted to move the problem founder off to the side, where he could cause no more trouble, in a manner that would be fair to everyone involved.
Unfortunately, each company had failed to comply with some of the most basic legal requirements: Holding annual shareholder meetings to elect directors, annual board of director meetings to appoint officers, etc. As a result, in each instance we had to spend time and money taking corporate actions, and recording those actions appropriately in meeting minutes, before the real problem could be solved.
So here is my view of how important legal compliance is:
- Without question, top priorities include making sales, delivering products / services, and taking in revenue.
- When it comes to administrative tasks, however, legal should be closer to the top of the list than the bottom. If legal affairs are not in order, problems can become greatly magnified.
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This blog does not provide legal advice and does not create an attorney-client relationship. If you need legal advice, please contact an attorney directly.