What is the role of the officers of a Delaware corporation and must I have officers for my corporation?
Section 142 of the Delaware General Corporation Law (DGCL) states:
(a) Every corporation organized under this chapter shall have such officers with such titles and duties as shall be stated in the bylaws or in a resolution of the board of directors which is not inconsistent with the bylaws and as may be necessary to enable it to sign instruments and stock certificates which comply with §§ 103(a)(2) and 158 of this title. One of the officers shall have the duty to record the proceedings of the meetings of the stockholders and directors in a book to be kept for that purpose. Any number of offices may be held by the same person unless the certificate of incorporation or bylaws otherwise provide.
Your Delaware corporation must have officers simply because the DGCL makes that a requirement, but what are the officers and what are their roles? The DGCL does not define the roles of the officers other than stating that “One of the officers shall have the duty to record the proceedings of the meetings of the stockholders and directors in a book to be kept for that purpose.” In common usage, that person described in the DGCL is called the “secretary”. There is nothing magical about the name, your corporation’s “bylaws” could hypothetically call such a person the “scribe” if you elected to do so. Titles are titles, the key is how the title is defined in the bylaws.
We know from another course that §141 of the DGCL requires that, subject to the corporation’s bylaws, a corporation must have directors and that the directors are responsible for managing the business affairs of the corporation.
141(a): ”The business and affairs of every corporation organized under this chapter shall be managed by or under the direction of a board of directors, except as may be otherwise provided in this chapter or in its certificate of incorporation.” Bylaws can be customized to deal with this section, however the standard bylaws sold by Delaware Corporate Agents, Inc., and most other providers call for a board of directors consisting of not less than one (1) director.
The Delaware Corporate Agents, Inc., bylaws provide: “The number of Directors which shall constitute the whole Board shall not be less than one (1). If Directors are named in the Certificate of Incorporation, the number of such Directors stated in the Certificate of Incorporation shall be the initial number of Directors. The Directors shall be elected at the annual meeting of the stockholders, and each Director shall be elected to serve until his or her successor shall be elected and shall qualify. Directors need not be stockholders. The number of directors shall be set by the stockholders at a meeting called for such purpose.”
The business and affairs of the corporation are to be “managed by or under the direction” of the director(s). The director(s) manage, but the officers perform, under the direction of the director(s), the day to day duties of the management of the corporation.
The DGCL does not name the officers or define the duties of the off the officers, other than the duties of the person whom we have come to call the “secretary”. Traditional officers of a corporation are the president, one or more vice presidents, a secretary and a treasurer.
“Any number of offices may be held by the same person unless the certificate of incorporation or bylaws otherwise provide.” This phrase permits the bylaws to provide that the corporation need only to have one person as the officer of the corporation who shall be responsible for all offices. Some states require that the president and the secretary be different persons, not so in Delaware.
The Delaware Corporate Agents, Inc., standard form of bylaws defines each officer’s duties but permits all of the duties to be performed by a single person.
The principal officers of the Corporation shall be chosen by the Directors and shall be a President, a Vice President, a Secretary and a Treasurer. The Board of Directors may also choose additional Vice Presidents and one or more Assistant Secretaries and Assistant Treasurers. Two or more offices may be held by the same person.
27. The principal officers of the Corporation shall be chosen by the Directors and shall be a President, a Vice President, a Secretary and a Treasurer. The Board of Directors may also choose additional Vice Presidents and one or more Assistant Secretaries and Assistant Treasurers. Two or more offices may be held by the same person.
28. The Board of Directors, at its first meeting after each annual meeting of stockholders, shall choose a President from its members, and one or more Vice Presidents, a Secretary and a Treasurer, none of whom need be a member of the Board. The Board of Directors may also choose a Chairman of the Board. If the Board chooses not to select a Chairman of the Board, the President shall act as Chairman of all meetings.
29. The Board may appoint such other officers and agents as it shall deem necessary, who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the Board.
The bylaws define the duties of the officers. The Delaware Corporate Agents, Inc., bylaws provide in part:
“33. Subject to the Board itself and the Executive Committee, if one is created by the Board, the President shall be the Chief Operating Officer of the Corporation and shall have the general and active day-to-day management of the business of the Corporation as his primary duty. … He shall see that all orders and resolutions of the Board are carried into effect, … He shall execute bonds, mortgages and other contracts requiring a seal, under the seal of the Corporation, except where required or permitted by law to be otherwise signed and executed and except where the signing and execution thereof shall be expressly delegated by the Board of Directors to some other officers or agents of the Corporation.”
The corporation must have a leader who we call the President and must have a person who we call the Secretary. The DGCL says of the secretary that such person: “shall have the duty to record the proceedings of the meetings of the stockholders and directors in a book to be kept for that purpose.” That means that your corporation must maintain written (or in electronic format) minutes of its activities. It is fair to say that many small corporations fail to heed this requirement, but when it gets sued over a transaction, the need for minutes become immediately apparent. Plan ahead, record at least annual minutes for your corporation. Forms of annual minutes are available from Delaware Corporate Agents, Inc.
Just obtaining a certificate of incorporation is not enough to organize your corporation. Your corporation needs “Organizational Minutes” (the subject or another lesson in the Delaware Business School), and Bylaw. Organizational minutes and bylaws are available from Delaware Corporate Agents, Inc.
