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Shareholder and director meetings ...Failure to keep corporate minutes can be costly

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Many corporations do not properly maintain minutes of shareholder and director meetings as required by Missouri law. This is especially true of closely held corporations owned by one or two persons.

While following the formalities of the corporate statutes may be burdensome, failure to do so may result in the shareholders being personally liable for the debts and obligations of the corporation.

The purpose of taking minutes is to provide a written history of the actions and activities of the corporation. While companies may minimize the importance of written minutes, often by failing to take them for many years, the final outcome of a lawsuit or corporate dispute may well turn on the evidence contained in the minutes.

It is especially important to take careful minutes at directors meetings, since directors are in some instances personally liable and accountable for supervision of corporate officers. Failure to keep written records may lead to disagreements about what was said and how each director voted.

Missouri law states that an annual meeting of shareholders for election of directors shall be held on the date specified in the corporation's bylaws, or if no date is specified, then on the second Monday in the month of January.

It is, of course, the shareholders who elect the directors, who are responsible for the overall direction of the corporation and the oversight of the officers. It is important to provide notice of the holding of all shareholder and director meetings, in accord with the Missouri statutes and the bylaws of the corporation. The notice should specify the time, place and purpose of the meeting. In small corporations, it is common for shareholders or directors to sign a waiver of such notice.

Many corporations fail to hold the meetings, either because of a lack of time or because it seems pointless to do so for a small business. A meeting of one or two shareholders does seem to be unnecessary, especially since the shareholders in a small company probably manage the business on a day-to-day basis. Missouri law does, however, provide a means for satisfying the meeting requirement without actually holding a meeting.

Section 351.273 states that any action required by the general and business corporation statutes to be taken by a meeting of the shareholders may be taken without a meeting, if all of the shareholders agree in writing to the action. Thus, the signature of all shareholders will validate an action the statutes would otherwise require to be dealt with by a meeting.

Similarly, directors' meetings may be done by consent. Action the statutes require to be taken at a board of directors meeting may be taken by the written consent of all directors without the need of a formal meeting. The secretary of the corporation must file all such consents with the minutes of the directors.

If a formal meeting of the shareholders or directors is held, the minutes should at a minimum reflect the following:

1. that the meeting was called in conformity with the bylaws of the corporation and the laws of the state;

2. the names of those present, unless the number is too large;

3. an accounting of all votes taken and how each person present voted;

4. a description of all reports presented; and

5. a summary of all other business considered and its resolution.

Attention to written minutes may be very helpful to the long term life of a corporation.

(Stephen F. Aton is a Springfield attorney practicing in the areas of corporate law and taxation, and estate planning.)

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