Special Shareholder Meetings
Apart from annual shareholder meetings, which are required by state law, corporations also sometimes have “special” shareholder meetings. Unlike annual meetings, special meetings do not occur on a set schedule and are not enshrined in a corporation’s bylaws. Instead, a special meeting is usually called by a corporation officer, a group of directors—or by one or more shareholders who own a sufficient number of shares of corporate stock.
The minimum amount of shares necessary for shareholders to call a meeting is defined by state law, and usually runs between 5 and 10 percent of total outstanding shares. Keep in mind that if a single shareholder alone does not have enough shares of stock, several shareholders who together have enough stock can jointly call a special meeting.
Written notice, or a “call,” of the special meeting must be sent out in advance. Generally this notice is issued by the corporate secretary, who receives an initial “call” from a director, officer, or shareholder, and in turn issues the notice to all shareholders. The corporation bylaws usually state how much advance notice of special meetings must be given to shareholders. Also, a federal regulation requires many publicly-traded corporations to provide a proxy statement to shareholders before a special meeting. Be aware that the corporation bylaws frequently will state that attendees at a special meeting can only vote on matters listed in the meeting notice. Example: Zeta Corporation has 10,000 shares of outstanding stock; you own 1500 Zeta shares, or 15% of all outstanding shares of Zeta stock. You are also certain that Zeta’s President, Treasurer, and other officers have not been fulfilling their legal duties to the corporation. You should be able to contact Zeta’s corporate secretary and call a special meeting to discuss replacing Zeta’s officers.
The foregoing example aside, more common reasons for calling a special shareholders meeting might include filling a vacancy on the corporation’s board of directors following a resignation, or voting to approve a major sale of corporation assets. (Similarly, directors might call a special meeting to consider such matters as a major loan to the corporation or an employment contract for a new officer.) As with annual shareholder meetings, votes taken at special meetings are only valid if a quorum of shareholders is present.
As mentioned in a previous post, what constitutes a quorum is a matter of state law; generally, states requires that more than half of the shares entitled to vote be represented at a special meeting. However, corporations sometimes include a requirement in their bylaws that more than a simple majority of voting shares be present. (Bylaws are kept by the corporation, but are not a public document; if you want a copy of a corporation’s bylaws, you should contact the corporation.)