When your company was first formed, articles of incorporation were drawn up and filed as part of the process by which your company became legally recognized by the government. These company articles of incorporation serve functionally as a contract. As a result, they constitute a legally binding agreement between the company, its shareholders and the government of the state in which your company is incorporated. Just as your company cannot unilaterally change the terms of contracts it holds with other companies, especially without notice, it cannot unilaterally change the terms of its company articles of incorporation without first meeting certain conditions including board approval.
Under common law, shareholders must unanimously approve amendments to a company’s articles of incorporation. However, state law is often less straightforward than the common law approach and does not necessarily require unanimous shareholder approval or board approval. State law generally trumps common law, so it is important to speak with your attorney about the specific requirements mandated by the state in which your company originally incorporated.
In general, states require that shareholders entitled to vote approve any potential changes. However, some states are even more lenient than this. Some states do not require the shareholder approval for company articles of incorporation to be amended but may require board approval.
The Amendment Process
Amending articles of incorporation is not a decision to be taken lightly. As previously noted, these articles of incorporation constitute a binding legal agreement between the state, your corporation and its shareholders. Therefore, if you have questions in regards to any potential legal consequences of your desired amendments, please consult your attorney. It is far better to make sure that you have done your due diligence in regards to this process than it is to simply hope that your amended articles of incorporation will not result in negative legal consequences and potential liabilities.
Once you have decided to amend articles of incorporation, your attorney will need to obtain them from your company’s state Secretary of State. It is important to have a formal copy of the original articles for numerous reasons. Once the copy is in hand, your attorney will aid you in drafting your desired changes. These changes will likely then need to be formally proposed to your company’s Board of Directors for board approval. You will need to make sure that you have a quorum before you adopt a resolution and vote on the changes or the changes may not be recognized legally as valid. Then, depending on your state’s requirements, you may need to hold a shareholder vote and/or you may need to provide written notice of the changes to shareholders. Finally, you will need to file the amended articles with your state’s Secretary of State and pay any required fees.
LawTrades Is Here to Assist You
The process of amending articles of incorporation is technical and can therefore be overwhelming. The team at LawTrades is highly experienced in aiding businesses navigating complex legal matters and we are eager to assist your company with the amendments you wish to make.