Corporate proceedings: Overview, definition and example
What are corporate proceedings?
Corporate proceedings refer to the formal actions, decisions, and processes undertaken by a corporation in accordance with its governing documents (such as bylaws) and applicable laws. These proceedings include activities like board meetings, shareholder meetings, resolutions, and other official actions necessary to manage the corporation's affairs and make key decisions.
For example, the approval of a merger or acquisition by a corporation’s board of directors is considered a corporate proceeding.
Why are corporate proceedings important?
Corporate proceedings are important because they provide a structured framework for decision-making within a corporation. They ensure that the corporation operates in compliance with its governing rules and applicable laws, which helps avoid disputes, protect shareholder rights, and maintain accountability.
Properly conducted corporate proceedings demonstrate transparency and legitimacy in the corporation’s actions, which is critical for regulatory compliance, maintaining investor confidence, and protecting against legal challenges. Failing to follow proper corporate proceedings can result in voided decisions or legal liability for the company and its directors.
Understanding corporate proceedings through an example
Imagine a corporation plans to issue new shares to raise capital. Before proceeding, the board of directors must call a meeting and formally approve the decision through a resolution. Additionally, if required by the company’s bylaws or applicable laws, the shareholders may need to vote on the issuance. These actions constitute corporate proceedings and must be documented in the corporation’s records.
In another example, a corporation decides to amend its bylaws. This requires the board of directors to propose the amendments, call a shareholder meeting, and ensure the amendments are approved by the required majority vote. The process of discussing, voting on, and documenting the amendments forms part of the corporate proceedings.
An example of a corporate proceedings clause
Here’s how a corporate proceedings clause might appear in a contract:
“The Company represents and warrants that all corporate proceedings necessary to authorize the execution, delivery, and performance of this Agreement have been duly taken in accordance with its governing documents and applicable laws.”
Conclusion
Corporate proceedings provide a clear and structured process for making and documenting important decisions within a corporation. They ensure compliance with governance rules, promote accountability, and protect the corporation from potential legal challenges. By adhering to proper corporate proceedings, businesses can maintain transparency, safeguard stakeholder interests, and uphold the legitimacy of their actions.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.