Annual meetings are a central right belonging to shareholders, through which they choose who directs the corporation. Shareholder attorneys who seek to compel an annual meeting in Delaware courts can find paths well-defined by Delaware’s corporation statute and its deep catalog of case law.

In contrast, other states can lack clear precedent regarding the enforcement of shareholders’ right to an annual meeting. Some states’ statutory schemes fail to lay out the procedural mechanisms entirely. There are even jurisdictions that do not expressly answer the question of whether a corporation must hold shareholder meetings on an annual basis.

In considering how to compel such a meeting outside Delaware, attorneys should carefully evaluate the procedural vehicles available in their jurisdiction, the ripeness of the case, and the scope of judicial relief available.

Procedural vehicles

Several states, including but not limited to those that follow a version of the Model Business Corporations Act, have statutes specifying that certain local courts may “summarily order” that a belated annual meeting be held upon shareholder request. In Delaware Chancery Court, actions to compel meetings are filed with a motion to expedite. Attorneys should consult with a local practitioner regarding the correct procedural mechanism to guarantee a speedy resolution of your claim. 

Even where the statute appears silent, attorneys should consider whether there are claims under common law or in equity to compel an annual meeting. For example, although Maryland’s corporation statute does not contain a mechanism by which a shareholder may seek judicial relief, for over a century, its courts have nonetheless recognized a right to seek to compel an annual meeting via writ of mandamus.

Ripeness

While some state statutes specify when a shareholder’s claim to compel an annual meeting becomes ripe (e.g., when no meeting has been held within 13 months in Alaska, or 15 months in Wisconsin), others may be silent. Even so, persuasive cases in other jurisdictions support bringing actions after 13 months since the prior annual meeting.

Scope of judicial relief

Even when a corporation statute states that stockholders have causes of action and specifies when to bring those claims, a separate provision may govern the scope of relief. Many MBCA states have statutes specifically empowering a court to determine (i) time and place of the meeting, (ii) stock eligible for notice and to vote at the meeting; (iii) a record date; (iv) the form and content of the meeting notice; (v) the quorum required for matters considered at the meeting; and (vi) any other necessary matters to effectuate the ordered meeting.

Other state corporation statutes may be silent as to the scope of relief courts may issue (e.g., Alaska). Nonetheless, stockholders should appeal to the local court’s equitable powers to determine the rights of the parties and ensure the effectiveness of its own orders.

Practitioners should also mind the ancillary relief needed to ensure any court order is effective. The first factor is the time for compliance with the court order compelling an annual meeting, which can range from two weeks to as long as 120 days. In our experience, between 30 and 90 days is typical. Courts may consider factors such as whether the company is subject to certain federal securities laws that affect the timing of its proxy solicitation process.

The second type regards the quorum for that court-ordered meeting. Several state statutes empower the local court to order that the stock represented at the meeting, in person or by proxy, constitutes the quorum. This provision is essential because an incumbent Board remains seated for as long as there is no valid meeting. The Board may easily prevent a valid meeting by ensuring that a majority quorum is not present—for example, by failing to bring proxies it controls to the meeting or failing to solicit sufficient proxies. In making that ask, practitioners can look to Delaware for persuasive authority.

When a company refuses to hold an annual meeting, a request for judicial relief should be made with careful planning. Savvy practitioners should, therefore, ensure that a detailed form order and reasons for the relief requested are presented to the Court, which will drive better chances of success.