Why you should hold frequent board meetings
In addition to the exchange of ideas that normally occurs at a board meeting, which likely will benefit the business, it is necessary for good corporate governance to meet frequently and it could protect stockholders in the case they are ever sued for the debts or obligations of the corporation. Corporations have a “corporate veil” which basically means that the debts and obligations of the corporation are not the responsibility of the stockholders if certain corporate formalities are honored. These corporate formalities basically show that the corporation is being respected by those operating the business, and that the stockholders should thus be afforded the rights and benefits of the corporate entity existing. The types of corporate formalities include holding frequent board meetings, holding an annual meeting of stockholders, maintaining minute books, keeping corporate bank accounts separate from those of the stockholders (i.e., not commingling corporate funds with those with others) and signing documents under the name of the corporation (and not by individuals). While these actions seem very simple, they are critically important the stockholders of a corporation to ensure that the corporation and its corporate veil will be recognized, and that the stockholders’ personal assets will not become available to the creditors of the corporation to satisfy the corporation’s debts or obligations.
Failure to follow these and other basic corporate formalities could destroy the corporate veil and put the assets of the corporation’s stockholders at risk.
