I. OPERATING THE COMPANY

The shareholders are the people who own the company; they elect the directors (who are the people who decide the policy of how the company is to be run) and the directors elect the officers (who are the people who actually do the day-to-day running of the company). These three different positions may be filled by the same person, but in many companies they are quite separate and at law they have very different rights and obligations. The shareholders for example have no right to interfere with the way the directors operate the company. If the shareholders do not approve of the way the directors are running the company, the shareholders generally may not interfere but may only remove the directors at the annual general meeting (if they have enough votes) and elect someone else to do the job.

Sometimes the directors have to go to the shareholders and (in effect) ask their permission if they may do some things. For example, in a non-reporting (private) company, they must offer the existing shareholders a right of first refusal on the issue of any new shares. Also, the shareholders must pass a special resolution (75% in favour) if the directors wish to sell the essential business of the company. Generally however, the conduct of the company is up to the directors.

In return, the directors have significant duties and obligations imposed on them - they have to be careful how they act.

It is of course important for the directors to keep records (notes and minutes) of what they have done - but the timing and style is important also. The actions of the company, as a legal person, are carried out generally by the Board of Directors. The directors can act only as a group and they may only do things in the present and to the future - that is, they cannot backdate their actions as if they took place in the past.

Although many Boards of Directors tend to treat the formalities of board meetings rather casually, it is very important for them to go through the correct motions for conducting the business and to keep a record of it; especially with respect to matters such as the declaration of dividends, issuance of shares, and approval of decisions taken.

It is very important for the directors actually to consider their actions as a group. They don't have to be overly formal about the manner of conducting the meeting but the essentials are as follows:

The matter must actually be considered by at least a quorum of directors who are together at the same time (in person or by telephone). In some other provinces it is permissible to go around one-by-one to each director and ask his or her views, but not in B.C. There must be an actual "meeting" or else the "act" of the company did not happen. All directors must know about the meeting in advance and must be given a reasonable opportunity to attend or at least be happy to waive that right later.

In addition, some record should be made. It is proper to prepare the minutes later to reflect what actually (the key word is "actually") went on at the earlier meeting, so long as there really was an earlier gathering at which the subject matter of the business was discussed.

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