Meetings of Members or Managers of a Delaware LLC
Steven D. Goldberg, Esq. Wilmington, DE
sgoldberg@stevendgoldberg.com
http://www.stevendgoldberg.com
Contact me if you need assistance in forming/organizing a Delaware business entity or any matter of Delaware law. Delaware Forms and Publications are available at http://www.delawarellclaw.com
In previous posts I have discussed the need for minutes of meetings and just what should appear in the minutes of those meetings. In this post I will discuss the need for meetings and the requirements of the Act as well as the counterparts under the DGCL.
Section 211(b) and (c) of the DGCL provide:
(b) Unless directors are elected by written consent in lieu of an annual meeting as permitted by this subsection, an annual meeting of stockholders shall be held for the election of directors on a date and at a time designated by or in the manner provided in the bylaws. Stockholders may, unless the certificate of incorporation otherwise provides, act by written consent to elect directors; provided, however, that, if such consent is less than unanimous, such action by written consent may be in lieu of holding an annual meeting only if all of the directorships to which directors could be elected at an annual meeting held at the effective time of such action are vacant and are filled by such action. Any other proper business may be transacted at the annual meeting.
(c) A failure to hold the annual meeting at the designated time or to elect a sufficient number of directors to conduct the business of the corporation shall not affect otherwise valid corporate acts or work a forfeiture or dissolution of the corporation except as may be otherwise specifically provided in this chapter. If the annual meeting for election of directors is not held on the date designated therefor or action by written consent to elect directors in lieu of an annual meeting has not been taken, the directors shall cause the meeting to be held as soon as is convenient. If there be a failure to hold the annual meeting or to take action by written consent to elect directors in lieu of an annual meeting for a period of 30 days after the date designated for the annual meeting, or if no date has been designated, for a period of 13 months after the latest to occur of the organization of the corporation, its last annual meeting or the last action by written consent to elect directors in lieu of an annual meeting, the Court of Chancery may summarily order a meeting to be held upon the application of any stockholder or director. The shares of stock represented at such meeting, either in person or by proxy, and entitled to vote thereat, shall constitute a quorum for the purpose of such meeting, notwithstanding any provision of the certificate of incorporation or bylaws to the contrary. The Court of Chancery may issue such orders as may be appropriate, including, without limitation, orders designating the time and place of such meeting, the record date or dates for determination of stockholders entitled to notice of the meeting and to vote thereat, and the form of notice of such meeting.
Under 141(f) the members of the board of a corporation my act by written consent if all of the member of the board consent. This provision is intended to insure discussion and that all views are heard. There is no similar unanimity requirement in the LLC Act unless the parties include such language in the company agreement.
Unlike the DGCL which requires meetings, the LLC Act in 18-302 (members) and 18-402 (managers) defers to the terms of the company agreement. Under (a) of both sections the agreement may grant of withhold voting rights to any member (manager), group or class. The agreement may provide under (a) for the taking of any action, including the amendment of the agreement, “without the vote or approval of any member or class or group of members…” The agreement may deny voting rights to some members or groups or classes of member (or managers). Under (c), unless otherwise provided in the agreement, any action may be taken by written consent which must be signed by “not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all members entitled to vote thereon were present and voting.” Again, unlike Section 211(b) there is not a requirement that the non consenting members or managers be notified of the action taken and unlike 211(b) managers are not required to be unanimous in taking an action by written consent.
Conditions for voting at a meeting of members or managers is determined in the company agreement. “Voting by members may be on a per capita, number, financial interest, class, group or any other basis.” (18-302(b)) Under (c) “A limited liability company agreement may set forth provisions relating to notice of the time, place or purpose of any meeting …, waiver of any such notice, action by consent without a meeting, the establishment of a record date, quorum requirements, voting in person or by proxy, or any other matter with respect to the exercise of any such right to vote.”
Subsection (d) provides certain default rules, unless otherwise provided in the agreement: (i) meetings may be conducted by conference telephone call, (ii) any matter may be consented to by written consent, without prior notice and without vote (iii) members may act through a proxy and (iii) members may provide their consent though “electronic transmission” which functions as a signed writing.
The LLC Act, unlike the DGCL does not require an annual meeting of members or managers. The LLC Act defers to the company agreement. Unless otherwise provided in the company agreement all actions requiring the approval of either members or managers may be taken by written consent signed by the number of member or members “necessary to authorize or take such ation at a meeting..”.
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