Whether the initial meeting of the Board of Directors is undertaken by agreed upon written consent or by an actual meeting with waiver of notice, certain organizational actions must be taken by the directors. These actions are taken in the form of resolutions adopted by directors which relate to the formation of your corporation. Some of the items included in the organizational resolutions will also be included in your corporation’s bylaws.

The Board of Directors holds its first meeting to take certain actions to complete the organization of the corporation. These actions are taken in the form of resolutions at the first meeting of the Board of Directors. If the board of directors has been named in the articles of incorporation, generally they will adopt the initial bylaws of the corporation

Bylaws are the rules and regulations adopted by a corporation for its internal governance. Bylaws usually contain provisions relating to shareholders, directors, officers and general corporate business. Bylaws are a private document not filed with any state authority. Bylaws are more flexible than the articles of incorporation because they are easier to amend.

Bylaws normally cover the following:

General corporate matters

The company’s fiscal year

The size of the board of directors

Duties and responsibilities of directors and officers

Regulation of the transfer of corporate stock

When and how board meetings are called

When and how shareholder meetings are called (including a notice)

Procedures for exercising voting rights

Indemnification obligations for officers, directors, and agents

These Bylaws and can be contained within a single written document. They dictate the operating principles and procedures that the corporation will follow throughout its life as a business entity, therefore are very key when outlining what the corporation can and cannot do.

Here Are Five Reasons Your Corporation Should Adopt Bylaws :

The outside world expects a corporation to have Bylaws; Banks, credit companies, and the IRS expect a corporation to have Bylaws;

The adoption of Bylaws indicates that your corporation takes its corporate responsibilities seriously;

Bylaws provide broad and day-to-day guidance in running your corporation; and

When you adopt Bylaws you have addressed various key issues for the operation of your corporation.

Corporate Resolutions, Bylaws, Company Minutes and Stock Ledger information maintained properly are vital to the continued success and existence of a corporation. They are the unfailing protection of the company directors and shareholders.

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By David Gass

A Shareholder Meeting is presided over by the Chairman. The responsibility of coordinating the meeting wrests with him unless the chairman assigns this responsibility to someone else. The formalities to adhere with, before calling a shareholders’ meeting, are

• Participants’ List : Preparing a comprehensive list of the participants of the meeting is the very first step in conducting a shareholder meeting. All the participants should be carefully noted to avoid any discrepancy of leaving someone important out of the meeting.
• Proper Notice : A proper notification, well in advance, should be issued to all the participants about the venue, timing and a brief agenda of the meeting. It should ideally be followed by a courtesy call reconfirming their intent to be present at the meeting.
• Agenda : A clear and well chalked out agenda should be formulated and circulated among the organizers and the participants, giving them a brief and a fair idea as to what is expected in the meeting.
• Reference Material : Any reference material having relevance to the meeting should be lined up. These can be documents such as the company’s charter, figures or reports which could be of importance regarding the agenda of the meeting and which might help the board to have a more comprehensive view of the situation in hand and facilitate a decision in that regard.

Importance of Shareholder Meeting:

Some of the aspects that come under the umbrella of Shareholders and which can not be decided without their consent are:

• The decisions pertaining to classes of shares, rate of annual dividend on respective class of shares.
• The decisions related to any change in management or board of directors such as addition or termination of its members.
• All the subjects related to the company’s image in the market or any damage to it.
• Decisions related to acquisition of other company.
• Decisions related to dissolution of the company.
• Approval of annual financial statements.

Essentials of Shareholder Meeting:

There needs to be not less than a specific number of participants for a meeting to be conducted. This is known as Quorum. Generally, the assembled shareholders should qualify for more than 51% shares, otherwise the status of the meeting remains unofficial and is devoid of the power to implement any decision or pass any resolution, and hence the Quorum should be religiously adhered by the coordinator of the meeting for making the efforts worthwhile. Although generally it is required to have a majority or more than 50% of votes to preside over any resolution, there are some aspects and subjects in a company’s charter where, according to law it is required to gather more than 65% votes to pass a particular resolution. These subjects include

• Decisions on the classification of shares and the number of shares to be offered to the particular class.
• Introduction of any change in the company’s charter.
• Dissolution of the organization.

There can be provisions of virtual shareholder meeting wherein physical presence can be replaced by face to face
interaction even from a distance. There are softwares available in the market to assist corporations in streamlining their efforts to conduct a smooth shareholder meeting. These softwares assist in documenting the meeting and provide other considerable assistance to minimize human errors and efforts.

By David Gass

Now that you have formed your corporation, protected your personal and family assets from the risk of doing business, it is time to issue your stock certificates.

While stock structure and issuing shares may seem very complicated at first, it is not. This useful information should help you make the process a real breeze. Stock structure is pretty flexible and can be amended as the needs of your company change.

No matter how large or small your business is, all corporations have stock; even those that are privately owned. A corporation is responsible for filing a notice of stock issuance, preparing stock certificates, and issuing stock certificates to its shareholders.

Stock represents ownership of the business.  For you or anyone else to have an ownership in a corporation, shares of stock must be issued. When you structure your corporation, you will designate the number of shares that you will want to issue. These shares will exist as soon as your corporation is filed with the secretary of state.

Your Articles of Incorporation will state how many shares the company is authorized to issue. Basically, all issued shares will represent ownership of the company. Usually, a corporation does not issue all of its shares at the start of business as it probably will wish to save some shares of stock in reserve to be issued at a later date to raise capital for the corporation.

  
Many small corporations have only one stockholder, the person who started and runs the business. Regularly, a founder’s spouse or children are stockholders.  A stock certificate is the physical evidence of ownership of shares in a corporation. It is also referred to as a share certificate.       

Subsequently issuing stock in a small corporation, you will be able to determine who will receive shares of stock, what percentage of the corporation each shareholder will own and how much shareholders will pay for each share of stock.

Other important stockholders can include investors, friends, business partners and employees.  Stockholders are also referred to as shareholders.  Basically, shareholders significance in the company is proportional to the amount of shares that they own.

So now that you understand the simple stock certificate facts, you are ready to run your business!

 

By David Gass

Stock Split is a kind of corporate action wherein the existing outstanding shares are divided in order to boost the liquidity of shares. The prices of the shares are adjusted automatically in the stock market when the action is implemented. It needs to be clarified that the equity capital of the company and its net assets remain the same. For instance, assume that the board of directors of a company decides to go for a 3:1 stock split. In this scenario, if the existing value per share is $90, the new value per share would become $30, while the net worth of the stock would remain the same.

Liquidity

The main reason behind companies going for a stock spit is to increase the liquidity of the shares in stock the market. More liquidity makes the buying and selling of the shares of a particular company easier. The split is either referred in the form of ratio or percentage as per the convenience of shareholders. Liquidity is an important factor to be considered by the management of the company. It is defined as the degree of flexibility to purchase or sell the shares or securities without making an impact on the prices of that share. It is done for the betterment of the investors.

Reverse Stock Split

Reverse stock split is an action that increases the par value of a share, while the total number of the company’s outstanding shares decreases. In this kind of split there is no effect on the net equity capital. To clarify the concept, we can take the following example. If the board of directors of a company decides to pursue a reverse split of 1:5, a shareholder having 5 shares of that company will now own only one share, but the value of that one share will be equivalent to the total value of 5 shares.

Reasons for Opting Stock Split

Over the past few years, companies used to pursue stock splits in order to help brokerage firms, since brokerage firms used to charge commission on the basis of number of shares being traded. Also market had been welcoming greater liquidity. However, the same does not hold true in today’s market, as most of the brokers charge a flat rate, irrespective of the number of shares you want to trade.

An investor may have concern that he or she is capable enough to purchase shares of high value. But a greater number of shares at a reduced purchase rate per share after stock split would make an investor to feel comfortable in making positions the stock. In this way, companies with a higher price may go for a stock split and decrease the rate per share, eventually attracting prospective investors. The net value and overall stock value remains the same at the end of the day, with higher greater number of shares and investors.

The market is now equipped with softwares that can enable you to handle necessary documents related to stock splits. Softwares to understand the accounting procedure involved in this process are available in the market at affordable prices.