Annual Meetings and the Closely Held Corporation

I am often asked whether a small business needs to hold annual meetings of its members or shareholders. Minnesota statute §302A.431 of the Minnesota Business Corporations Act and §322B.333 of the Minnesota Limited Liability Company Act both provide that that there is no requirement for an annual meeting unless the articles of incorporation (or articles of organization, if you are an LLC) or bylaws impose the requirement.

Of course with every rule there are exceptions. Both the Minnesota Business Corporation Act and Limited Liability Company Act provides that if a regular meeting has not be held during the preceding 15 months, a shareholder (or member, as the case may be) or shareholders holding 3% or more of the voting power of all share may demand a regular meeting. The demand must be in writing and delivered to the chief executive/chief manager or chief financial officer/treasure of the company. The company’s board then has 30 days to call a meeting, which must be held within 90 days after receipt of the demand. As far as the required actions at a regular meeting of shareholders/members is the election of qualified successors as directors of the company. No other business is required to be transacted at a regular meeting.

In a closely held corporation, since no annual meeting is required (unless required in the articles or bylaws), the board and management need to decide whether an annual shareholders meeting must be called at all. Of course, if under the articles or bylaws a board member’s term has expired or is due to expire, a meeting must be called to elect new directors. Even if a meeting is not required, a meeting may be desirable if there is information to share regarding the status, financial results or business prospects of the company. But again, the need for this depends on the type and nature of the closely held business. In addition, there are times when certain business may be appropriate for action by the shareholders/members. These would include approval of mergers, amendments to the articles of incorporation/organization or bylaws, and other transactions which required shareholder approval.