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Arizona Corporate Meeting & Minute Preparation Service

Everything You Should Know About Arizona Corporate Meetings & Minutes

by Richard Keyt, Arizona corporate law attorney

Piercing the Corporate Veil - The Ultimate Corporate Disaster

If your Arizona corporation does not hold shareholders and directors meetings before engaging in important corporate acts and if it does not document those meetings with minutes or resolutions, creditors of the corporation will use that fact and attempt to "pierce the corporate veil" and hold the shareholders liable for the corporation's debts and obligations. 

Arizona law generally protects the shareholders of a corporation from the corporation's debts and obligations.  See A.R.S. § 10-622.B.  One major exception to the general rule of no shareholder liability occurs when the corporation does not follow the legal formalities of operating in the corporate form.  The two most important corporate formalities that all Arizona corporations must follow are: (i) do not use corporate money to pay shareholder debts or expenses, and (ii) hold meetings of shareholders and directors and document the meetings with minutes or resolutions.

The Arizona Corporate Formality Test

Take the following quiz to see if your Arizona corporation is complying with Arizona law with respect to meetings of shareholders and directors:

1. Does your corporation hold annual and special meetings of shareholders and directors?

2. Does your corporation send notices of annual and special meetings to all shareholders and directors?

3. Does your corporation prepare minutes of annual and special meetings of the shareholders and directors?

4. Does your corporation prepare Actions by Unanimous Consent to be signed by all shareholders or directors to document meetings and major corporate action?

5. Does your corporation maintain a minute book that contains copies or originals of signed and approved minutes of meetings of annual and special minutes of shareholders and directors and Actions by Unanimous Consent?

6. If your corporation has loaned money to a shareholder, are the loans approved by the directors and evidenced by a promissory note and appropriate minutes?  If the corporation is audited, the IRS will ask to see the note and corporate minutes and if the loan is not properly documented, the IRS may treat the loan as a nondeductible corporate dividend and taxable income to the shareholder.

If you answered "no" to any of the above questions, your corporation: (i) is at risk for having its corporate veil pierced and holding the shareholders liable for the debts and obligations of the corporation, and (ii) needs the services provided by KEYTLaw's Corporate Meeting & Minutes Service.

Annual Meetings Required by Arizona Law

Arizona law requires all Arizona corporations to hold a meeting of shareholders annually at a time stated in or fixed in accordance with the bylaws.  A.R.S. § 10-701.A.  Arizona corporations must notify all shareholders entitled to vote of the date, time and place of each annual and special shareholders' meeting at least ten, but not more than sixty days before the annual meeting date.  A.R.S. § 10-705.A.  Directors shall be elected at the first annual shareholders' meeting and at each annual meeting thereafter.  A.R.S. § 10-803.C. 

Minutes

Every Arizona corporation should prepare minutes of all meetings of the shareholders and directors.  The minutes should be approved by the appropriate parties, signed and added to the corporate minute book along with copies of the notices of the meetings sent to the shareholders and directors.  Important corporate actions authorized by shareholders and directors without a meeting should be evidenced by resolutions signed by all the shareholders and directors, respectively, and added to the corporate minute book.

Actions by Unanimous Consent

In lieu of actually holding a meeting, shareholders and directors may approve corporate action if ALL shareholders or ALL directors approve the action(s) taken or to be taken.  Corporate actions approved with a meeting are evidenced by a document entitled "Action by Unanimous Consent."  Note that actions taken without a meeting must be approved in writing by every shareholder or director.  If a single shareholder or director does not sign the Action by Unanimous Consent, the action will not be duly approved unless it is approved by a quorum at a properly called and noticed meeting.

Arizona corporations that fail to hold annual meetings of shareholders and directors increase the risk that a creditor may "pierce the corporate veil" and hold the shareholders liable for the obligations of the corporation.  The approved and signed minutes and resolutions are the evidence that meetings of shareholders and directors were held in accordance with Arizona law.  A corporation that fails to hold annual meetings or to properly adopt resolutions of the shareholders and directors may also experience problems if a shareholder dispute arises.  Corporate action taken without proper approval can create liability for the persons who authorized the action.

KEYTLaw Corporate Meeting Service

All Documents Attorney Prepared - not Paralegal or Document Preparer Prepared

KEYTLaw provides Corporate Meeting & Minutes Service for all Arizona corporations to assist them in satisfying their obligations to hold meetings of shareholders and directors and to document the meetings with minutes and resolutions.  We offer two levels of annual meeting and minutes maintenance service, the Silver Plan and the Gold Plan.

Our Gold Plan for maintaining corporate minutes and resolutions includes all of the services provided in the Silver Plan plus the comprehensive additional services listed in the following table. 

Our comprehensive Gold Plan takes the worry out of notifying shareholders and directors of meetings and documenting the meetings with minutes or resolutions.  Let us send your notices and prepare your minutes or Actions by Unanimous Consent. 

Reasons to Use KEYTLaw's Gold Corporate Meeting & Minutes Compliance Plan:

1. Your minutes/resolutions and notices will be prepared.  In my experience as a business lawyer since 1980, most small businesses do not hold annual meetings, prepare minutes and maintain minutes in the corporate minute book.  Everybody wants to do it, but most put the task on the back burner and it never gets done.  Three clients recently asked me to review their minute books and assist in getting them in order.  One client was getting a divorce and his divorce lawyer needed the minutes for his property settlement, but no minutes had been prepared for over five years, including years when a former shareholder owed stock and was a director.  The second client had been sued and the opposing counsel was trying to pierce the corporate veil.  This client had never held an annual meeting or prepared minutes of shareholders or directors.  The third client sold half of the stock to a new stockholder who insisted (prudently) that the minutes be current.  The reality is that few closely held corporations dot the "i"s and cross the "t"s when it comes to annual meetings and minutes.  If you use KEYTLaw's Gold Corporate Meeting & Minutes Compliance Plan, your minutes will be prepared and notices mailed.  All you have to do is get the proper people to sign the documents and return them to us to scan and insert in the corporation's digital minute book on CD.

2. It's cheap!  The cost is only $595 for the Gold Plan or $295 for the Silver Plan.  Compare the cost of one of our maintenance plans to the costs and liability the shareholders might incur if the corporate veil is pierced because the corporation failed to follow the formalities of operating in the corporate form.

3. You probably will not do it!

How to Purchase Our Silver or Gold Corporate Meeting & Minutes Compliance Plan

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This page was last modified on October 18, 2007.

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