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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…)

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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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…)

How Does a Corporation Declare a Dividend?

Photo of cash symbolizing post about how to declare a dividendThis post discusses the process by which a corporation may declare a dividend. This is part of Dana Shultz’s Canonical Questions on the Law™ series of questions and answers about legal issues, concepts and terminology.

Please note that this post assumes that the corporation will pay a cash dividend to its shareholders. If, instead, the corporation wishes to pay a stock dividend (issue more shares to existing shareholders), then somewhat different rules will apply. (more…)

How Do We Issue Corporate Shares?

Share certificate, symbolizing how to issue corporate sharesSeveral weeks ago, I wrote about how to issue LLC membership interests. In this post, I am addressing how a small corporation should issue corporate shares.

To start, one must examine the Certificate of Incorporation (Delaware) or Articles of Incorporation (California) to determine the maximum number of shares that may be issued. (To simplify this discussion, I will assume that only one class of common shares has been authorized.) A corporation may not issue more shares than are authorized. (more…)

Can a Corporation Issue More Shares than are Authorized?

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This post is based on a question that I (and others) answered on Quora: What happens when a corporation issues more shares than are authorized under the Articles of Incorporation?

Answer: The supposedly-issued shares are void – in effect, they do not exist. For the shares to be issued, the Articles (CA) or Certificate (DE) of Incorporation must be amended to increase the authorized number of shares. Then, to be safe, the shares should be re-issued pursuant to an appropriate board resolution.

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Dana H. Shultz, Attorney at Law  +1 510 547-0545  dana [at] danashultz [dot] com
This blog does not provide legal advice and does not create an attorney-client relationship. If you need legal advice, please contact a lawyer directly.

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. (more…)

What is Reincorporation?

Image of moving van, symbolizing reincorporationIn How Can I Move My Corporation to Another State?, I explained that there are three ways to move a corporation from one state to another. This post describes one of those ways: Reincorporation.

Three Ways to Move among States

That earlier post described those three ways to move a corporation to another state as follows: (more…)

What is a Certificate of Determination?

Logo for Avvo, where Dana Shultz answered a question about: a Certificate of DeterminationOne of my Avvo answers led me to write this post. Please see CA corp Certificate of Determination: must it include tag-along and drag-along provisions?

Corporations, by default, issue common shares to shareholders. However, corporations also can issue preferred shares. Preferred shares have characteristics (“preferences“) that typically make those shares more desirable than common shares. Please see What is Preferred Stock?

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What Does an Incorporator Do?

Logo for Quora, where Dana Shultz answered a question about the role of an incorporator in corporate formationThis post discusses the role of the incorporator when a corporation is formed. I decided to write this after answering a Quora question. Please see When a third party files Articles of Incorporation as the incorporator for a company, what are the necessary steps to ensure that the company is legally released to the directors?

The incorporator signs the corporation’s Articles or Certificate of Incorporation. When I form a corporation for a client, the client typically takes that role.
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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…)

Required Officers – California Corporations are Unique

Cover of the California Corporations Code, which has a statute about required officers in corporationsOfficers conduct a corporation’s day-to-day business. Among the states, California law is unique in its set of required officers.

California Corporations Code Section 312(a) states that each California corporation must have:

  • A chairman of the board or a president or both;
  • A secretary; and
  • A chief financial officer.

Additional officers are optional.

That Code section also provides that the president is the chief executive officer of the corporation, unless the articles of incorporation or the bylaws state otherwise.

Other states typically take an approach similar to that specified in Delaware General Corporation Law Section 142 (emphasis added):

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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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Annual Meetings: The Basics

Sometimes, in an effort to reduce legal fees, clients conduct corporate annual meetings, and prepare minutes, on their own. Regrettably, if they do not know what they are doing, they can make a mess. Here is a quick overview of how to do things right.

Both California (Corporations Code Section 600(b)) and Delaware (General Corporation Law Section 211(b)) require that every corporation hold an annual meeting of its shareholders to elect directors for the coming year. (In the case of a Delaware corporation, however, the directors may be elected by written consent without calling a meeting.) Any other proper business may be transacted at the shareholder meeting.

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