Kiritsis & Associates
WHAT ARE THE BASIC RULES WITH THE NUMBER, ELECTIONS, AND REMOVAL OF DIRECTORS IN NEW YORK BUSINESS CORPORATIONS?
Aug 13, 2021
Kiritsis Law Group 212-922-0005
Author John Kiritsis, Esq., CPA, MBA, MS, JD, LL.M
One or more members can make up a board of directors. BCL 702. Absent of a controlling provision in the bylaws or certificate of incorporation, which may for example provide for cumulative voting (BCL 618), directors are elected by a plurality of votes cast by shareholders entitled to vote (BCL 614(a)). Failure to adhere to the applicable requirements could expose the corporation to litigation.
It may be a good idea to make a list of potential legal issues that need to be addressed in the Corporation's governing documents, such as:
What is the Corporation's name?
Is the corporation going to be for profit or not?
Will the bylaws indicate if the corporation is for profit or not?
Is it possible to take action on behalf of shareholders without holding a meeting?
How many members of the Board of Directors will be appointed?
Is there going to be a seal for the Corporation?
Will the company bylaws be amendable by a simple majority vote?
Will a super majority be required to change the company bylaws?
Will the corporation cover the legal expenses of its directors and officers in the case of a lawsuit?
Will the Corporation be able to issue stock certificates in response to a valid request?
Should the members of the first Board of Directors be included in the Articles of Incorporation?
Will there be at least one President for the Corporation?
Will there be at least one Vice President in the Corporation?
Is there going to be a treasurer for the Corporation?
Who will serve as the Corporation's corporate secretary?
When will the Corporation's internal affairs regulating papers be signed?
Who will be in charge of the Corporation's organization?
Will the company take on a new name?
What will the legal name of the corporation be?
What will the Corporation's physical address be?
What is the Corporation's mailing address going to be?
When do you think the Corporation's operations will start?
How many people will work for the Corporation?
What is the Corporation's expected yearly revenue?
What are the main types of activity that the Corporation will pursue?
Where will the Corporation's day-to-day activities take place?
What is the number of authorized shares that the Corporation will have?
Will the Corporation's shareholders have the legal right to keep their ownership percentage by purchasing more stock?
Will the Corporation's stockholders be compelled to first offer their shares to the Corporation before selling them to others?
When will the Corporation's fiscal year come to a close?
What are the members of the Board of Directors' names, residences, and phone numbers?
Will the terms of the directors be staggered?
What will the duration of the director periods be if they are staggered in terms of years in office?
Will the directors be protected from the Corporation's personal liability?
What is the President of the Corporation's contact information?
What is the Vice President of the Corporation's contact information?
What is the corporate secretary's contact information?
What is the Corporation's treasurer's contact information?
Will the Corporation pay for the legal defense of the Corporation's directors/officers if they are sued for their work performance and/or corporate duties?
Is it legal for the Corporation to do business with its directors and officers?
In terms of real estate contract agreements, who has the authority to sign and legally bind the Corporation?
What will individual directors/officers be allowed/authorized to conduct on a day-to-day basis on behalf of the Corporation?
Will the Corporation's directors be able to lease office space on the Corporation's behalf?
In terms of correspondence with the underlying commercial landlord, who is the corporate commercial tenant's point of contact?
Will the corporation's executives and directors be able to engage into employment arrangements with the company?
Which corporate executives will have legal authority to bind businesses in employment agreements?
What is the individual officers' contact information?
In terms of taxation and corporate governance, who are the Corporation's most important employees?
Will there be significant workers who aren't Board members?
Who were the company's first shareholders?
What will each of the early stockholders' contributions be?
What shareholder voting procedures are required for properly organized shareholder meetings to approve company action?
What are the conditions for approving corporate activity by written permission (in the absence of a shareholder agreement)?
What are the conditions for amending the company bylaws in terms of shareholder voting?
When and where will the first shareholder meeting of the Corporation be held?
What are the logistics of business shareholder meetings that are scheduled?
Is it possible for the Corporation to issue stock certificates?
Will the Corporation provide any ancillary benefits?
What (if any) advantages will the Corporation provide to its shareholders, executives, and/or directors?
Is the Corporation going to be regarded as a C Corporation for tax purposes?
Will the corporation elect to be taxed as a S Corporation?
Will the corporation have Limited Liability Companies (LLCs) as Subsidiaries?
Citations and possibly useful reference links, may include:
-U.S. Constitution
-New York State Bar Association
-New York City Bar Association
-American Bar Association
-New York State Secretary of State: Divisions of Corporations
-Internal Revenue Code
-Internal Revenue Service
-New York Department of Finance
-New York Business Corporation Law
-New York UCC (Uniform Commercial Code)
-New York LLC (Limited Liability Company) Law
-New York General Obligations Law (GOL)
-New York CPLR
-Delaware Corporate Law
-Delaware LLC Law
-Bankruptcy Code
-Revised Uniform Limited Liability Company Law (RULLCA)
-New York Partnership Law
-New York Trust Law
-New York Constitution
-Gordon v. Doty 69 P.2d 136 (Idaho 1937)
-A. Gay Jenson Farms Co. v. Cargill, Inc., 309 N.W.2d (Minn 1981)
-Hoddeson v. Koos Bros., 47 N.J. Super. 224 (N.J. Super. Ct. App. Div.1957)
-Ira S. Bushey & Sons, Inc. v. United States, 398 F.2d 167 (2d Cir. 1968)
-Majestic Realty Assoc., Inc. v. Toti Contracting Co., 30 N.J. 425 (1959)
-Town & Country House & Home Serv., Inc. v. Newbery, 3 N.Y.2d 554
-Fenwick v. Unemployment Compensation Comm’n, 133 N.J.L. 295 (1945)
-Martin v. Peyton, 246 N.Y. 213 (1927)
-Meinhard v. Salmon, 249 N.Y. 458 (1928)
-Eisenberg v. Flying Tiger Line, Inc., 451 F.2d 267 (2d Cir. 1971)
-Marx v. Akers, 644 N.Y.S.2d 121
-Auerbach v. Bennett, 47 N.Y.2d 619 (1979)
-A.P. Smith Mfg. Co. v. Barlow, 13 N.J. 145 (1953)
-Kamin v. American Express Co., 86 Misc.2d 809 (N.Y. Sup. Ct. 1976)
-Francis v. United Jersey Bank, 87 N.J. 15 (1981)
-Bayer v. Beran, 49 N.Y.S.2d 2 (N.Y. Sup. Ct. 1944)
-Escott v. BarChris Construction Corp.m 283 F.Supp. 643 (S.D.N.Y. 1968)
-Levin v. Metro-Goldwyn-Mayer, Inc., 264 F.Supp. 797 (S.D.N.Y. 1967)
-Rosenfeld v. Fairchild Engine & Airplane Corp., 309 N.Y. 168 (1955)
-AFSCME v. AIG, Inc., 462 F3d 121 (2d Cir. 2006)
-Crane Co. v. Anaconda Co., 39 N.Y.2d 14 (1976)
-Ingle v. Glamore Motor Sales, Inc. 73 N.Y.2d 183 (1989)
-Metropolitan Life Ins. Co. v. RJR Nabisco, Inc., 716 F.Supp 1504 (S.D.N.Y. 1989)
-Morgan Stanley & Co. v. Archer Daniels Midland Co., 570 F.Supp 1529 (S.D.N.Y. 1983)
-Buckley v. Valeo, 424 U.S. 1 (1976)
-First National Bank of Boston v. Belloti, 435 U.S. 765 (1978)
-Subchapter C of the Internal Revenue Code
-Subchapter S of the Internal Revenue Code
-McConell v. FEC, 540 U.S. 93 (2003)
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