Resolutions

The second segment of the annual meeting is to ratify resolutions adopted by the directors during the year. I found this to be quite interesting from the Shareholders perspective. When the year is complete, the Shareholders get to find out what resolutions were adopted during the past year. The Shareholders are not voting on these resolutions during the year. If you are a director you know what they are, but if you are not, this could be a very stick situation.

Say, you are a Shareholder, and you find out at the annual meeting that a resolution was adopted by the directors during the past calendar or fiscal year, that they approved receiving a loan from a bank. This should make you upset that you are only a Shareholder. Your investment has just taken a step back in a return on your investment. The bank will now have to be paid back first, and what if the company is not making any money? What happens when they do not know how to spend money wisely, or do not use a budget?

Directors of a company, public or private have a lot of power. If they are able to get a loan from a bank, without the vote of the shareholders, then you as a shareholder are left holding the bag. If it is a public held company, then the price per share will drop, when they have more debt. If the public company can have a press release to say it is for materials for a contract they just received and the money is going to be paid back once the contract billing starts getting paid, then you at least know what the revenue outlook is like.

If you are a shareholder of a private company, then you do not have to be told what the Directors and Officers are doing at the company. You will find out at a shareholders meeting, if one is called for. An annual meeting is a requirement to continue status of a corporation. If the Directors or Officers do not have an annual meeting, the Shareholders can protest that the company is being run like a sole proprietorship and that any debt incurred should not be taken out of the Shareholders investment. The Shareholder should request that they receive the fair market value for their shares and remove themselves as a shareholder.