THERE ARE NUMEROUS LEGAL FORMALITIES associated with forming, organizing and operating a business corporation. To create a business corporation, a Certificate of Incorporation must be filed with the appropriate state office. In addition, the corporation must be formally “organized” after the incorporation. An organizational meeting is held by the initial board of directors to adopt bylaws and a corporate seal, elect officers, issue shares of stock, and transact such other important business. The timely completion of this important step may serve to “strengthen” the corporate liability shield and avoid later confusion or disputes concerning the ownership and management of the corporation.
Board of Directors
Generally, the business and affairs of a corporation must be managed by or under the direction of its board of directors. The initial board of directors must be identified on the Certificate of Incorporation.
Corporate bylaws are rules that govern the internal affairs of a corporation. To a large extent, bylaws define the governance structure, including the rights and responsibilities of stockholders and corporate managers and agents.
A corporation must have a president, secretary, and treasurer. The corporation can have other officers if provided for in its bylaws. A person may hold more than one office, but generally cannot execute, acknowledge, or verify an instrument as more than one officer at a time.
Shares of Stock
Ownership of a corporation is represented by shares of stock. The Certificate of Incorporation specifies the number of shares the corporation is authorized to issue, and shares should be issued to the initial stockholders at the organizational meeting.
Procedures for Organizational Meetings
New Jersey business corporation law sets forth procedural requirements for calling the organizational meeting, including matters such as advance notification and designation of the time and place of the meeting. It has become common practice to utilize a written, unanimous consent of the board of directors in lieu of a formal meeting. Whether by way of formal meeting or written, unanimous consent, corporation law requires this post-creation organization procedure.
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This article is provided solely for the general interest of the reader. The article and its contents are neither intended as, nor should be construed as, legal advice or opinion. Legal advice and opinion are provided by the firm only upon engagement with respect to specific factual situations.
Barry F. Gartenberg, L.L.C.
Attorney at Law
505 Morris Avenue, 1st Floor
Springfield, New Jersey 07081