How to Add Directors to a Corporation

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Adding new members to a corporate board of directors always requires the approval of the corporation’s shareholders. Since each state has the authority to draft laws that govern the procedures for electing new directors to a corporate board, you need to ensure that you adhere to the laws of the state where the corporation is formed.

Obtain a copy of the corporation’s articles of incorporation. The articles will indicate whether different classes of shares can be issued and whether the shareholders of those classes have preferential voting rights for purposes of electing new directors to the board. Otherwise, each share represents an equal vote.

Read More: What Is the Difference in the Board of Directors and the Stockholders of a Corporation?

Schedule a shareholder meeting to hold a vote for new directors.

Establish a “record date” to determine which shareholders are eligible to vote. The record date, which is set by the current board of directors, is the last date on which a shareholder must own shares in the company in order to attend the meeting and vote. In Delaware, for example, the record date must be between 60 and 10 days before the meeting.

Provide eligible shareholders with notice of meeting. In New York and Delaware – two popular jurisdictions for incorporation -- the notice must also be given between 60 and 10 days before the date of the meeting. Shareholder notice can be in the form of electronic or written communications.

Count shareholder votes at the meeting. The candidates who receive the most votes can be added to the corporation’s board of directors. However, you need to insure that there is a quorum at the meeting – meaning that the minimum number of shareholders eligible to vote as required by state law or the articles of incorporation are either present at the meeting or submit their votes by proxy.

Warnings

  • Many states, such as New York, allow for shareholder cumulative voting when more than one director is being added to the board. For example, suppose a corporation needs to add two members to the board and presents four prospective candidates to shareholders. If shareholders are allowed to cast two votes – one for each vacant seat on the board – cumulative voting allows them to cast two votes to one candidate.

    The number of shareholders necessary to satisfy the quorum requirement can vary significantly depending on the jurisdiction the corporation is formed in. Both New York and Delaware corporate law require at least one-third of all shareholders eligible to vote, whereas the Model Business Corporation Act, which a number of states have adopted, require at least a simple majority. However, the articles of incorporation may require a greater number.

Tips

  • Voting by proxy allows shareholders who are unable to attend the meeting in person to appoint a representative to vote on their behalf or to cast a vote by sending a written statement or form to the corporation.