Q&A on The Corporate/Company Seal
Filed Under: General Corporation, Limited Liability Company, Q&A
Tags: General Corporation, Limited Liability Company, Q&A, The Company Seal, The Corporate Seal
When talking to clients we often get asked:
Is the company or corporate “seal” required? and What is it’s main function?
The corporate seal is a tool used to stamp or emboss your important documents to show that the document is certified by and agreed upon by the Board of Directors of the company. The seal contains the company’s name, year of incorporation, and the state filed in. Think of the seal as the official signature of the company.
Documents you might want sealed, are employment and vendor contracts, minutes of Directors meetings, leases, agreements of sale, loan documents, and other commitments by the company.
The company may adopt a seal, change it as needed, and authorize it to be used by causing it or a facsimile to be affixed or impressed or reproduced in any other manner. This is usually done in the organizational meeting, called by the initial Director of the company. This meeting is normally held as soon as possible after incorporating. Once this meeting is held and the proper documents are signed, sealed and placed in the minute book, the corporation or LLC has the authority to conduct the day-to-day operations of the business.
One of the first orders of business in this meeting is the issuing of stock, for a corporation, or issuing membership certificates, for an LLC. The seal can also be used to stamp the stock / membership certificates, along with the signature of the President. This is important because the certificates and the board resolution authorizing the issuance of the certificates are the evidence that prove ownership in the entity. Making sure the stock certificates are properly stamped and signed by the President can make it harder for someone to claim ownership with fraudulent certificates, which does happen from time to time.
It is typical for the secretary to keep possession of the seal in order to stamp office documents, however the Board of Directors may give general authority to any other officer to affix the seal of the Corporation and to attest the affixing by his signature.
The corporate seal has been used in some form since Roman Times. During the middle ages, the seal was stamped in melted wax, which assured that no one had tampered with the document and that the document was authentically signed by the person whose name appears on it.
Do you need one? It’s not legally required, but many companies form the beginning of business history have chosen to adopt and use the Company, or Corporate seal. For more information on the seal, or to order additional seals for you company, contact Harvard Business Services.
Privacy in Delaware: What’s on Record?
Filed Under: Delaware, Franchise Tax, General Corporation, INC Knowledge, Limited Liability Company
Tags: Delaware, Franchise Tax, General Corporation, INC Knowledge, Limited Liability Company
Many clients who incorporate or form an LLC in Delaware want to know exactly what information is private and what is public. Since one of the primary benefits of incorporating in DE is anonymity; we will spell out the details. The most common question we encounter is “What’s on the record?”
For the LLC filed through a Professional Registered Agent this is very simple. These LLC’s have the privilege of an anonymous filing. This means that only the company name and the name and address of the agent will typically appear; along with the date of filing and the company file number. With each year after the filing; there will also be record of the company’s Franchise Tax payment amount and the date it was paid. No member or management data will appear on the public record.
Corporations filed in Delaware can also enjoy a private filing; however, with each annual report and Franchise Tax payment, the name and addresses of officers and directors must be submitted with the FT payment. Obviously, the difference concerning the anonymity is that the privacy is shorter lived for the corp.; than for the LLC’s. Filing date and file number also appear for corporations. You may file the corporation with anonymously, but by March 1st of the following year; the FT information will be available to the public through the State of Delaware. A fee of $10.00 is required by the State of Delaware Division of Corporations to obtain this information. Although it is obtainable, it comes at a cost. Many states simply post all the information on their Division of Corporations website where it can be easily searched.
When self-filing either type of entity; individuals will not have the benefit of anonymity. They must reveal their name and address as the incorporator. The benefit of privacy is typically lost when filing the company yourself. Many clients initially want to file their company documents themselves, but the benefit of privacy tips the scale and they often chose a service such as Harvard Business Services, Inc. to handle the filing and agent details. For the drawbacks of the DIY filing please click HERE.
101 sobre la estructura de una Corporación General
Filed Under: 101, Blog Posts in Spanish, General Corporation
Tags: 101, General Corporation, Spanish
La Lajmdcm La Sociedad Anónima (Corporación) de Delaware ha sido la forma más fuerte en organización de entidades en los Estados Unidos desde finales de los años 1800 cuando las entidades importantes, como los ferrocarriles, la Standard Oil y DuPont, vieron necesaria la organización en las estructuras organizativas que se destinarían a la gobernanza de la empresa, a medida que crecían más allá de la vida de sus fundadores famosos. La Corporación General está perfectamente diseñada como un vehículo para la incorporación al mundo empresarial, y también proporciona una manera de reunir capital, según sea necesario durante toda la vida de la empresa.
En su forma más simple, la Corporación General consta de tres niveles de poder; los accionistas, los directores y los oficiales. La Asamblea de Accionistas “ADUEÑAN” la empresa. Los directores “MANEJAN” la empresa y los oficiales”CORREN” la compañía día a día. Los Estatutos de la empresa establecen las facultades y los límites del poder en cada una de las gradas. Cada grupo puede tener prioridades distintas y podrian devatir de vez en cuando. Cuando uno sube de nivel en contra de los otros, una batalla de adquisición puede sobrevenir. Batallas de adquisición son habitualmente peleadas en la Corte de Delaware de la Cancillería. En esta corte de negocio único un solo juez decide el caso. No hay jurados, ni tribunales, ni 12 hombres en pugna. Un juez determina rápidamente qué parte deberá prevalecer de acuerdo a los 200 años de las leyes y los precedentes legales. Se dice que los Cancilleres Tribunales respetan las decisiones de buena fe de los administradores sobre las prioridades de beneficio de los accionistas, pero la mayoría de los accionistas en general, pueden elegir una nueva junta directiva, en caso de no agradarles la que actualmente tienen.
El “Reglamento” acerca de cómo estas tres categorías interactúan entre sí, está contenida en tres bases de conocimiento general. El “código”, que es la norma legal aprobada por la Legislatura del Estado, en este caso llamada “Ley General de Sociedades de Delaware” (DGCL), la “jurisprudencia” dictada por la Corte de Delaware de la Cancillería y el Tribunal Supremo de Delaware en los últimos 200 años y en las sentencias “Carta”, que son las decisiones judiciales individuales en una miríada de pequeños detalles que surgen en un caso judicial.
Los accionistas tienen concedidos dos “derechos” que los directores y administradores no reciben: El derecho a votar por La Junta Directiva, y el derecho a participar en los dividendos de la empresa en su parte proporcional cuando la Directiva declaró dividendos. Los accionistas, sin embargo, no pueden operar la empresa. Ellos no pueden intervenir de repente y empezar a decirle a la gente qué hacer. Ellos actúan en juntas, no en forma individual. (A menos que una persona es propietaria de más del 50% de la empresa. En ese caso se podría controlar toda la empresa y los tres niveles de poder.)
La Mesa Directiva también actúa en las reuniones. Directores no suelen actuar de forma individual. Las reuniones deben ser previamente anunciadas a todos los Directores y debe contener la mayoría de los consejeros presentes a ser una reunión legal. El Consejo de Administración toma todas las decisiones importantes en la empresa. Son responsables de la política de la empresa y supervisar a los administradores. Los directores de la compañía determinan lo qué se hará con sus beneficios y controlan la venta de acciones en la compañía. Contratan a la Mesa Directiva de la compañía para dirigir la empresa día a día.
Los oficiales trabajan a placer de la Mesa Directiva, o por contrato con la Junta. Los oficiales son por lo general el Presidente, Vicepresidente, Secretario y Tesorero, pero los estatutos de la empresa pueden preescribir cualquier tipo de funcionarios y títulos, responsabilidades y funciones. Los oficiales son responsables del comportamiento de la empresa y la rentabilidad. Si fracasan, podrian ser despedidos. Si tienen éxito, se convierten en superestrellas.
Esta estructura única, con tres niveles obligatorios de poder, merece un voto de confianza por el éxito de la revolución industrial americana, la economía estadounidense desde 1900 y todo el negocio de Wall Street. Esta estructura difiere de otras formas de organización de empresas como el único propietario o sociedad, que le preceden y la Sociedad de Responsabilidad Limitada que le siguió históricamente.
Si su visión es formar una gran empresa, como Apple o Google o Dell, no se podía elegir un mejor vehículo para tomar el paseo, que una Corporación General (sociedad anónima) de Delaware.
To read the English version of this post, click HERE.
101: Preferred Stock
Filed Under: 101, General Corporation, INC Knowledge, Stock
Tags: Delaware, General Corporation, Preferred Stock, Stock
Every Delaware General Corporation must have one class of common stock, but it can have more than one class of stock, with different rules for the different classes. The most popular second class of stock is called “preferred stock” because it contains terms that are preferred over the rights of common stockholders. Delaware’s brand of preferred stock is so powerful and flexible a business tool, it is commonly called “Blank Check Preferred.”
Common stock has two characteristics that are written in the law. They are mandatory. The first is that every share of common stock carries one vote. If you own 100 shares you have 100 votes to vote on all matters presented at Stockholder meetings. The second is the right to your pro-rata share of any dividends issued by the Directors to the common stockholders. If the total dividend is $1,000,000 and you own ten percent of the total outstanding shares, you’re entitled to 10% of the million dollars. Common shareholders OWN the company and they have a right to share in the profits. That’s fair.
But the Board of Directors, with shareholder approval, can authorize a second class of “preferred stock” that can be issued by the Board to attract capital or top people or strategic alliances. The total number of shares of preferred stock may be split into any number of different “series” of the preferred stock, each series having its own separate terms. For example, the company may be created with 1,000,000 shares of common stock and 100,000 shares of preferred stock. The Board can designate that the preferred be split into ten series numbered 1 through 10 of 10,000 shares each and that the terms of each series can be negotiated separately and are independent of the other series.
What’s preferred about preferred stock? First, voting rights. Common shareholders get one vote per share, but you can give one or more series of the preferred stock super voting power like two votes per share, or ten or 100 or 1,000 votes per share. Why do this? Let’s say you’re creating a series of preferred to option out to key personnel. You can offer company insiders voting power this way. Or let’s say you are attracting capital from a key shareholder that already owns a big percentage of your common stock and you don’t want him to take control. So you create a series of preferred stock with NO voting rights, but a guaranteed 10% dividend paid quarterly. Your investor might be enticed to invest more money but give up any increased voting rights. Or let’s say you are raising capital and you’ve sold 45% of your stock. Once you sell more than 50% of the company you lose control. So what do you do? Bring out a series of preferred stock designated as Founder’s Stock in which the 10,000 shares have 100 votes per share. Have the Board of Directors issue the whole 10,000 shares to you. Now you can sell more of the common stock to investors and still keep control of the company. These maneuvers are sophisticated tricks and should be undertaken with the assistance of a really good corporate lawyer, obviously.
Secondly, preferred stock can have a preferred dividend over common stock. Preferred stockholders can be guaranteed a certain dividend per share ($1.00 per share, for example) or a dividend based on a business calculation that suits the deal, (x% of increase in net profits, for example). These dividends can be guaranteed, cumulative, and convertible to common stock if the deal makers agree on it and a good lawyer drafts it up right. Preferred dividends are usually paid before the common stockholders see any return.
Third, preferred stock can hold a security interest in a company-owned asset. This can include a patent, real estate, a major piece of equipment or any other company asset. Let’s say your company owns a patent that is much more valuable when combined with another patent that you don’t own. Negotiating with the owner of that patent might be a breeze if you could design a series of preferred stock with no voting rights but a security interest in your patent and a royalty from sales of the products that contain their patent. (Or whatever you can dream up). Or let’s say the company is desperate for an influx of cash. Bankruptcy is the next step if a deal isn’t put together in time to save the company. No one will buy your common stock if you’re about to go bankrupt, but someone might invest if you gave them a security interest in the assets that will be freed up if the company goes bankrupt. I hope you never need to use that technique, but if you find yourself in that position you’ll be glad you have a Delaware corporation with blank check preferred stock.
If you’re just about to form your Delaware General Corporation and expect to sell stock in the company to raise money, it would be a good idea to consider getting the preferred stock right from the start by including it in the Certificate of Incorporation. That way you won’t need the shareholders approval to authorize it when the time comes that you need it. The Directors will be able to issue the stock in the best interests of the company without the necessity of getting shareholder approval. If you already run a Delaware General Corporation you will need shareholder approval to amend the Certificate of Incorporation authorizing the preferred shares. If you control the common stock now, it would be a good idea to authorize this class of stock at your next shareholder meeting so that when you need it, it’ll be there.
101 on The Structure of a General Corporation
Filed Under: 101, Delaware, General Corporation
Tags: Board of Directors, Court of Chancery, Delaware, General Corporation, Officers, Stockholders
The Delaware General Corporation has been the strongest form of company organization in the United States since the late 18oo’s when major entities like the railroads, Standard Oil and DuPont needed to organize into organizational structures that would provide for the governance of the company, as they grew beyond the lives of their famous founders. The General Corporation is perfectly designed as a vehicle for engaging in business, and it also provides a way to raise capital as needed throughout the life of the company.
In its simplest form, the General Corporation has three tiers of power; The Shareholders, The Directors and The Officers. The Shareholders “OWN” the company. The Directors “MANAGE” the company and the Officers “RUN” the company on a day-to-day basis. The Bylaws of the company set forth the powers and the limits of power in each of the tiers. Each group may have separate priorities and they may clash occasionally. When one tier rises up against the others, a takeover battle may ensue. Takeover battles are usually fought in the Delaware Court of Chancery. In this unique business court a single judge decides the case. No juries, no tribunals, no 12 angry men. One judge determines quickly which party shall prevail according to 200 years of laws and legal precedents. It is said that the Chancellors of the Court respect the good-faith decisions of Directors over the profit priorities of shareholders, but a majority of shareholders can generally elect a new board of directors if they don’t like the ones they’ve got.
The “Rules” about how these three categories interact with each other is contained in three general knowledge bases. The “code”, which is the written law passed by the State Legislature, in this case called the “Delaware General Corporation Law” (DGCL); the “case law” handed down by the Delaware Court of Chancery and the Delaware Supreme Court over the past 200 years and in the “Letter Rulings” which are individual judicial decisions on a myriad of minute details that come up in a court case.
Stockholders are granted two “rights” that directors and officers don’t get: The right to vote for the Board of Directors, and the right to share in the dividends of the company in their pro-rata share when the Directors declared dividends. The shareholders, however, cannot operate the company. They cannot walk in and start telling people what to do. They act in a meeting, not individually. (Unless one person owns more than 50% of the company. In that case she could control the entire company and all three tiers of power.)
The Board of Directors also acts in meetings. Directors don’t generally act individually. Meetings must be announced in advance to all Directors and must contain a majority of directors present to be a legal meeting. The Board of Directors makes all the important decisions in the company. They are responsible for company policy and oversee the managers. The Directors determine what the company will do with its profits and they control the sale of stock in the company. They hire the Officers of the company to run the business on a day-to-day business.
The Officers work at the pleasure of the Board of Directors, or by contract with the Board. Officers are usually the President, Vice President, Secretary and Treasurer, but the company’s bylaws can prescribe any officers and their titles, responsibilities and duties. Officers are responsible for the conduct of the company and the profitability. If they fail, they get booted out quickly. If they succeed, they become superstars.
This unique structure, with three mandatory tiers of power, deserves a great deal of credit for the success of the American industrial revolution, the American economy since 1900 and the whole business of Wall Street itself. This structure differs greatly from other forms of company organization such as the sole proprietorship or the partnership, which precede it; and the Limited Liability Company which followed it historically.
If your vision is to form a big company, like Apple or Google or Dell you couldn’t pick a better vehicle to take the ride with than a Delaware General Corporation.
