When companies in Texas form, they choose a business structure and file the appropriate paperwork with the state. However, there are important documents that business owners may initially overlook. These are corporate governance documents.
Corporate governance documents state how the company will be run internally. There are, of course, many ways to run a business, but there are certain issues all corporations will likely face. The corporate governance documents set out to prepare the company for them.
Basic elements of corporate governing documents
These aspects of the business include, but are not limited to:
- How the board of directors will be chosen and how members can be removed. The documents should also set the duration of a board member position, how many people will be on the board and other matters.
- The responsibilities of the board of directors, which can include approval for different decisions of the company and for selecting officers for the company such as chief executive officers, chief financial officers and others.
- Determining various committees for the board members such as compliance and auditing.
- Duties of officers such as the chief executive for hiring other employees and reporting finances.
- Setting share prices, annual meetings of shareholders, voting rights of shareholders and other aspects of shares and shareholders.
- How the company can be dissolved.
These governing documents can be very specific and complicated, but they are very important. Companies need rules to turn to so they know what to do in many different situations.
There are many situations that companies may not foresee occurring, but they need to know how they will handle the situation if they do come to pass. Corporate governance documents help companies prepare for many such situations. Experienced attorneys understand what needs to be in these documents and may be able to guide companies through the process.