( Originally Published 1918 )
COMPLETING THE ORGANIZATION
First Meeting of Incorporators.—After the charter or certificate of incorporation has been duly executed and filed in the office of the Secretary of State and any duplicates or certified copies thereof filed in any other necessary offices, and any required court orders secured, the next step is the holding of the first meetings of the incorporators, for the purpose of completing, so far as may be done by the incorporators, the organization of the company.
While this is the procedure in most states, yet there are some in which the procedure is practically reversed in that the election of the directors and officers and the adoption of the by-laws precedes the filing of the charter itself, and hence it is important to carefully study the statute requirements of the state selected for the incorporation, in order that the steps in completing the organization may be strictly followed. It must be remembered that a corporation is a creature of law, having no legal status save that arrived at in strict conformity to the laws of the state of its creation.
Notice of the Meeting.—The statutes of the different states provide for the giving of notice to the incorporators of the first meeting, and specify the length of that notice, which should also contain a brief statement of the business in general to be conducted thereat, and the time and place at which it shall be held.
Waiver of Notice.—As the incorporators or their proxies are the only persons entitled to participate in such meeting, they are the only ones to whom notice is to be given. It is the general practice for the incorporators to sign a written waiver of such notice and to proceed with the holding of the meeting upon an agreed date. The courts have upheld the signing of such a waiver in lieu of the formal notice required by the statutes upon the ground that "the only persons interested in the result to be obtained by giving notice of the object, time and place of meeting of the subscribers to the capital stock of a corporation for the purposes specified in the statutes are the subscribers themselves," and that, consequently, if all the subscribers or incorporators join in the signing of such a waiver of notice, and the meeting to organize is held in accordance with such waiver, the purpose of the statute has been accomplished.
Form of Waiver.—The following is the usual short form of waiver, where there is nothing to be done outside of the regular routine.
Call and Waiver of Notice
First Meeting of Incorporators and Stockholders
We, the undersigned, being all of the incorporators and stockholders of the Hopkins Manufacturing Company, do hereby call the first meeting of the incorporators and subscribers to the capital stock of the said corporation, to be held at the office of John W. Hopkins, No. 253 Broadway, in the Borough of Manhattan, in the City, County and State of New York, at 10 o'clock in the fore-noon of the 11th day of March, 19 , for the purpose of completing the organization of said company, the adoption of by-laws and the transaction of all such other business as may be incidental to such completion of organization, and we do hereby expressly waive any and all requirements of statute as to the giving of notice of such meeting and consent to the transaction thereat of any and all business pertaining to the affairs of the company.
In states where the incorporators elect the first board of directors, notice of such election should be included in the "purposes" specified in the Call and Waiver.
In the case of the larger corporations and especially where there is important business to be transacted such as the acquisition of property in exchange for the capital stock of the corporation, it is frequently desirable that a more formal and detailed Notice and Waiver be used, and substantially in the following form:
Call and Waiver of Notice
First Meeting of Incorporators and Stockholders
We, the undersigned, being all of the incorporators and stockholders of the Hopkins Manufacturing Company, entitled to notice of the holding of the first meeting of the incorporators and subscribers thereof, do hereby call the said first meeting of such incorporators and subscribers to the capital stock of the said corporation to be held at the office of John W. Hopkins, No. 253 Broadway, in the Borough of Manhattan, in the City, County and State of New York, at 10 o'clock in the forenoon of the 11th day of March, 192 , for the purpose of receiving the charter of the said corporation, adopting by-laws, considering and acting upon a proposition for the issue of the en-tire unissued and unsubscribed capital stock of the corporation in exchange for certain property, as more specifically set forth in the said proposal to be submitted to said meeting, and for the trans-action of all such other business as may be necessary or advisable in connection with the completion of the business and affairs of the corporation, and we do hereby waive all statutory requirements as to notice or publication of the time, place and purposes of the first meeting, and do consent to the transaction thereat of any and all business pertaining to the affairs of the company.
Dated New York City, March 10, 192 .
Signatures of all of the incorporators.
Call Without Waiver.—In cases where it is impossible to secure the waivers in writing of all of the incorporators, the notice of the time, place and object of the meeting must be given, following in such cases, the provisions of the statutes in that regard. If the statute prescribes a form for such notice, it must be used. If not, the notice must fix the time and place and state generally the business to be transacted. Such a notice would have to be signed by a majority of the incorporators. The meeting may be held at any convenient place in the city or town named as the place of the principal business office of the corporation, such as the office of one of the incorporators or the office of the attorney taking charge of the incorporation matters, should one be employed.
Proxies.—If any of the incorporators cannot attend the meeting, they can be represented by a proxy who may be one of the other incorporators or another person. Such a proxy usually differs from a general proxy for regular stockholders' meetings, in that it covers the organization meeting only. The usual form is as follows :
First Meeting of Incorporators and Stockholders
I, the undersigned, an incorporator and a sub-scriber to the capital stock of the Hopkins Manufacturing Company, do hereby appoint Harvey L. Wilcox my true and lawful attorney, with full power of substitution and revocation, to represent me, and to vote in my name, place and stead at the first meeting of the incorporators and stockholders of said corporation, to be held at the office of John W. Hopkins, No. 253 Broad-way, in the Borough of Manhattan, in the City, County and State of New York, at 10 o'clock in the forenoon of the 11th day of March, 192 , and at any adjournment thereof.
Witness my hand and seal this 9th day of March, 1920
Witnessed by Henry P. Truman. James B. Russell.
Conduct of the Meeting.—In most cases, the conduct of the first meeting is largely, if not entirely formal, as the parties have undoubtedly come to agreement as to what shall be done, and the minutes of the meeting, including the pro-posed by-laws have usually been prepared and submitted in advance to those interested.
These matters are usually placed in the hands of the attorney who prepared the charter or certificate of incorporation, and he reads the minutes to the meeting, taking the assent of those present as he proceeds. If one or more of the incorporators are familiar with corporate organization matters, then he virtually assumes charge of the meeting in much the same way.
Whether such a course be followed or whether the meeting acts upon its own initiative, the following steps are taken.
Opening the Meeting: At the appointed time and place, providing a majority of the incorporators are present, one of their number calls the meeting to order and by vote, a chairman is selected to take charge of the meeting. At the same time a secretary of the meeting is appointed, usually by the chairman, if there be no objection.
The secretary then notes the names of the incorporators present and calls for the proxies of any who may not be present in person. If a majority of the incorporators are thus present and represented, the chairman announces the presence of such majority and states that the meeting is ready to proceed to the business for which it has been called.
Proof of Notice of the Meeting.—The Secretary should then call for evidence that the pro-visions of the statutes as to notice of the meeting have been complied with or the waiver thereof by all the incorporators. When the same are produced and found correct, they should be ordered entered upon the minutes of the meeting and the originals filed with the secretary of the company. If publication is had, copies of the papers in which such notices appeared should be produced, and the certificate of any mailing of copies thereof that had been done or of personal service thereof, according to the procedure followed.
Reception of the Charter.—The chairman or the secretary of the meeting should next produce a copy of the charter or certificate of incorporation, and report as to the filing of the same in the office or offices required by law, as well as to any other acts necessary to give effect to it as the charter of the corporation. A motion should then be made to the effect that the charter or certificate of incorporation as presented and filed, be accepted or received as the charter of the company and spread upon the minutes of the meeting, as a part of the records of the meeting.
While it is not necessary that the copy of the charter presented to the meeting be a certified copy, yet it is more acceptable to those interested that it be thus authenticated by the Secretary of State.
In entering it and other documents upon the minutes of the meeting, it is considered the better practice to have the charter appear on the first pages of the minute book and the other documents follow at the end of the minutes of the meeting than to scatter them in the body of the minutes themselves, as they are more readily found for reference if by themselves,.
Adoption of By-Laws.—The next matter to be taken up is the adoption of the by-laws of the corporation. This is one of the most important parts in the organization of any corporation, as they constitute the internal law for the government and control of the corporation, and prescribe the powers and duties of the officers and affect the rights and privileges of stockholders.
While the widest latitude is permitted in the framing of the by-laws, yet their provisions may not contravene those of the charter itself nor the laws of the state in which the incorporation is had, nor be unjust, inequitable or against public policy.
In drafting by-laws it is advisable to include therein and as a part thereof the various provisions of the state law concerning the conduct of the business and affairs of corporations, for the proper guidance of the officers and directors. It is better that they be more complete than absolutely necessary, than that for the sake of brevity they omit matters that should be included to avoid mistakes or misunderstandings in the future.
For the purpose of saving time at the first meeting the proposed form of by-laws is prepared in advance, and are read by the secretary or other person designated by the chairman. Most frequently the by-laws are read, article by article, and then adopted as a whole, while in other cases each article is adopted, followed by the adoption of the by-laws as a whole at the close. While this is not a necessary formality, it is a wise course to follow, or at least to stop at the end of each article and give opportunity for the making of any suggested changes before proceeding to the next article. By following this plan every one of the incorporators is bound and precluded from making any subsequent objection to any matter therein.
Entering By-Laws Upon the Minutes.—Like all other matters coming before the meeting, the by-laws, in the form in which they are adopted, should be ordered spread upon the minutes in full.
Form of By-Laws.—While it will be recognized that no form of by-laws will meet all of the requirements of every corporation, and that changes must be made to conform to provisions of statutes in the different states and of the char-ter of the company, yet the following form covers the principal matters that should be embraced therein.