Shareholders are normally entitled to elect directors to the corporation’s board at the annual meeting of the shareholders. This is very important because, in general, the business and affairs of the corporation are managed and all corporate powers are exercised by or under the direction of the board of directors. Directors normally serve until the next annual meeting of the shareholders. One way for an insider such as a majority shareholder or a CEO to control the corporation would be for the insider to manipulate the process to get a board elected that will always follow the wishes of the insider. Then the insider can continue to maintain his control by preventing the corporation from holding an annual meeting of the shareholders resulting in the continued governance of the corporation by the board controlled by the insider.
California law allows any shareholder to make an application to the Superior Court for an order compelling the corporation to hold an annual meeting of the shareholders if it failed to hold the meeting within 60 days after the date designated for it in the bylaws or, if no such date is specified in the bylaws, if the corporation failed to hold the meeting within 15 month after either the date the corporation was organized or the date of the last annual meeting of the shareholders.
If you have been unable to compel your corporation to hold an annual meeting of shareholders, and you live in the state of California, call me for a free consultation to discuss your case: San Diego area – (858) 794-4805 | San Francisco area – (415) 536-1530. Or fill out the form at the right and we can setup an appointment.