In December of 2018, the Supreme Court of the State of Ohio decided an important case involving following corporate formalities. At the center of controversy in this case was the control of an Ohio Mosque. The Mosque had developed various factions and competing multiple boards of directors were elected. Because of these issues, the Mosque faced a dissolution of the corporation proceeding. The action was initiated by the Attorney General and also dealt with the freezing of approximately $500,000 of various assets.
The action claimed three violations of corporate governance: failure to maintain a record of its members; failure to maintain complete minutes; and, failing to hold an annual or special meeting for election of directors. The Court found, due to the various failures, that a supervised dissolution of the institution was appropriate.
It is expected that Courts in other jurisdictions will rely upon the principles set forth in DeWine in matters involving corporate governance, including veil piercing theories by creditors where personal liability, instead of dissolution of the entity, is the remedy being sought.
You should connect with your company’s counsel to ensure the rules applicable to your company have been appropriately adopted, followed and implemented. For example, has your company or companies prepared board resolutions or minutes for last year’s activities? How about for 2019 initiatives? Any annual elections? How about activity that is not in the regular course of daily affairs of your company (which is normally when Board involvement is required), i.e. selecting counsel, hiring an accountant, authorizing a credit facility, entering into a lease, securing a company vehicle, approving transactions with directors, adopting executive bonus plans, etc.