Cumulative voting for corporate directors is a process by which each shareholder’s voting power is multiplied by the number of directors to be elected. The objective: By allocating all of their votes to one or a small number of directors, minority shareholders can ensure that their interests are represented on the board. (I.e., a majority shareholder will not automatically control all board seats.) (more…)
A client, majority shareholder in a California corporation, asked whether there was any way to make a minority shareholder pay part of the corporation’s losses to date. In this particular case, the answer was “no” – but the question got me thinking about when a corporate shareholder or LLC member might be have personal liability beyond the amount payable for the ownership interest.
The LLC section reference and content below have been updated to reflect California?s new LLC law that took effect on January 1, 2014 (see RULLCA Brings New LLC Laws to California in 2014).
A century ago, corporations routinely issued assessable shares, i.e., shares that carried an obligation for the shareholder to pay additional amounts to the corporation under certain circumstances, such as to cover losses or to buy property. Today, however, almost all shares are non-assessable.
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.