I have a newly formed corporation. I’m putting everything together for our first meeting, and I have found several examples of resolutions to adopt for the issuance of stock. Do I also have to have a separate resolution to create the shares?
Yes, in Pennsylvania, you will need a resolution to issue shares. A corporation is a separate entity. In order for it to act or “do” anything, its shareholders, officers, or directors must execute a resolution. A resolution is a document that memorializes the outcome of your shareholders‘, officers’ or directors’ votes. For example, before a corporation can issue shares, its shareholders must vote and agree to issue shares. If the shareholders vote in favor of issuing shares, then the secretary drafts the resolution, and the voting shareholders sign it.
In Pennsylvania, the directors can agree to waive a meeting and vote by paper, in an informal manner. So every resolution does not require a meeting. In addition, Pennsylvania law does not require an in-person meeting; the law also permit’s shareholders, officers, and directors to meet by telephone. As you can guess, if the directors agree to waive a meeting or meet by telephone, then this agreement must be memorialized by resolution.
Your first incorporation meeting will cover many issues:
- -adopting your pre-incorporation activities
- -adopting the by-laws
- -adopting your office lease
- -appointing officers
- -adopting your shareholder agreement
- -empowering the officers to elect s-corporation status for tax reporting;
These are only a few of the issues that you will discuss and vote on during your first meeting.
After your resolutions are executed, store them in your business minute book, where you store your by-laws and articles of incorporation. These documents are the only proof that your corporation is a legal entity and is a shield protecting you from personal liability.
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Good luck.
Sharmil McKee | Business Attorney | Philadelphia
