The High-touch Legal Services® Blog…for Startups!

© 2009-2017 Dana H. Shultz, Attorney at Law

Directors’ Voting Rights Can Be Limited

Logo for Quora, where Dana Shultz answered a question about limiting directors' voting rightsThis post about limiting directors’ voting rights is based on my answer to a Quora question. (See Can a business owner draw up bylaws/articles of an organization that limit voting rights of directors?)

The incorporator or shareholders may approve a certificate of incorporation or bylaws that limit directors’ voting rights. (more…)

What Is a Unanimous Written Consent?

FreeBSD Foundation Unanimous Written Consent

The FreeBSD Foundation – Unanimous Written Consent of Directors

This post explains what a Unanimous Written Consent is. (Sometimes it is called an Action by Unanimous Written Consent.)

The term Unanimous Written Consent typically is used in the context of a corporation, which is the focus of this post. However, it can pertain to limited liability companies and other types of legal entities, as well. (more…)

Who Appoints the Members of a Board Committee?

Logo for Quora, where Dana Shultz answered a question about appointing members of a corporate board committeeThis post addresses a generalized version of a question that I answered on Quora concerning committees of corporate boards of directors. Q. Who appoints the members of a board committee?

A. Appointment of board committee members is governed by the corporation’s bylaws, or by applicable statutes if there are no bylaws. In my experience, bylaws (or statutes) state that a board committee is appointed by a majority of the board members. Committees are not appointed by the CEO or the Chair of the Board. (more…)

How Can We Add a Co-founder to Our Corporation?

Logo for Avvo, where Dana Shultz answered a quesiton about how to add a co-founder to a corporation

This post is based on a question about how to add a co-founder to a corporation that I answered recently on Avvo. The question and answer are paraphrased below.

Q. I would like to add a co-founder to an existing corporation. Does the Founder Agreement need to be changed? How can I make a co-founder designation?

A. The term “add a co-founder” has little or no significance in this context.

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What is a Board of Directors?

Quora logo

This post is based on a Quora question that I answered: Q. What is the board of directors? What are the functions of the board of directors? What is the function of each member of the board?

A. The board of directors, which is subject to shareholder election and removal, generally is responsible for managing the corporation’s business and affairs.

Specific responsibilities typically undertaken by a board (particularly in a mature company) include, but are not necessarily limited to, the following: (more…)

What Happens if the Board Doesn’t Approve My Stock Options?

OnStartups logo

This post is adapted from a question I answered on OnStartups. Q. I’ve been working for a large private company, and my offer letter said I would receive X number of options as long as the board approved it. It’s been a year and I’ve been stonewalled on the option plan. I’ve sent multiple emails to HR and the controller and the CFO. HR has gotten back to me, but their hands are tied. Can I send a letter and a check to the CFO with $100 to force the issue of exercising some amount of shares and determining the strike price that way?

A. Unfortunately, “subject to board approval” is a common contingency for stock option grants. At this point, I’m not sure there is much you can do about it.

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Compliance Services Joins Hall of Shame

Top portion of Compliance Services' website

If you form a corporation, the Postal Service soon will inundate you with official-looking forms from companies offering to create or file corporate documents on your behalf. Earlier this week I rescued a client from one of these unnecessary companies, Compliance Services.

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What Must We Do Regarding Corporate Board Meetings?

Logo of the Delaware Division of Corporations, symbolizing Delaware law about board meetings

The following question (edited for length) is from Founders Space. Q. What’s the minimum two founders must do regarding board meetings for a startup Delaware corporation doing business in California?

A. You should hold an annual stockholder meeting – or, alternatively, prepare a written consent – at which the stockholders elect the board of directors. See Delaware General Corporation Law Sections 211 and following. (more…)

What Does the Chairman of the Board Do?

GavelEarlier today I answered the following Quora question: What does the Chairman of the Board do?

Here is the answer that I provided:

The Chairman of the Board does what the Bylaws and the Board of Directors say s/he will do. Here is some typical Bylaws language: (more…)

Who Can Sign Contracts for a Corporation?

Photo of hand with pen on paper, symbolizing who can sign contracts for a corporationA couple of weeks ago, I answered a question on Avvo about who can sign contracts on behalf of a corporation. This issue comes up from time to time, so I will discuss it at some length in this post.

Authorization to sign contracts is addressed in the corporation’s bylaws and / or in resolutions of the board of directors.

If specific authorizations are set forth in the bylaws, changing those authorizations can be a bit of a hassle, because the bylaws must be amended. As a result, I prefer to have specific authorization to sign contracts established by the board, with the board’s powers being established by the bylaws. Here is a typical such bylaws provision:

Executing Corporate Contracts. Except as otherwise provided in the articles or in these bylaws, the board of directors by resolution may authorize any officer, officers, agent, or agents to enter into any contract or to execute any instrument in the name of and on behalf of the corporation. This authority may be general or it may be confined to one or more specific matters. No officer, agent, employee, or other person purporting to act on behalf of the corporation shall have any power or authority to bind the corporation in any way, to pledge the corporation’s credit, or to render the corporation liable for any purpose or in any amount, unless that person was acting with authority duly granted by the board of directors as provided in these bylaws, or unless an unauthorized act was later ratified by the corporation.

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