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Learn About California Corporate Responsibilities and Rules for Business Owners

What are corporate responsibilities and formalities? This article highlights the responsibilities and formalities for a board of directors, corporate officers, and shareholders.

Board of Directors

The Board of Directors (the “Board”) has the responsibility and legal authority to manage the business and affairs of the corporation.  The Board can take action either at a duly noticed meeting at which the required number (quorum) of directors is present or by unanimous written consent without a meeting.  Board meetings should be held at least annually.

All contracts to which the corporation is a party, including employment contracts, buy-sell agreements, employee benefit plans, loans, leases, purchase or sale contracts, and corporate bank accounts should be made in the name and on behalf of the corporation and authorized in the minutes of the corporation.  In addition, the Board is required to record in the minutes its consideration, review, and action upon such matters as:

  • Electing officers;
  • Determining compensation and bonuses of officers;
  • Selling, leasing, exchanging, or transferring corporate assets not in the ordinary course of business;
  • Borrowing money;
  • Lending corporate funds;
  • Declaring dividends;
  • Acquiring significant capital assets;
  • Issuing shares of stock; and
  • Generally, all important business policies and plans.

The directors are accountable to the shareholders and must exercise due care in the management of the affairs of the corporation.  They should avoid self-dealing transactions, including contracts with individual directors and any corporation in which any director has a material financial interest, unless all of the relevant facts are disclosed and such transactions or contracts are properly approved. 

Corporate Officers

The officers of the corporation make day-to-day decisions in conformity with policies adopted by the Board.  The officers serve at the discretion of the Board, subject to any rights they may have under employment contracts with the corporation.


Although they are the owners of the corporation, shareholders have a limited role in the conduct of the business.  Some of the more important rights held by the shareholders include:

  • Electing or removing directors;
  • Amending the Articles of Incorporation and Bylaws;
  • Approving the dissolution of the corporation;
  • Selling substantially all of the corporation’s assets; and
  • Merging or reorganizing the corporation.

Shareholder meetings are generally held at the same time each year because the law requires the annual election of directors for a one-year term.  In addition, special meetings of the shareholders may be called to consider other important matters.  The shareholders may take action at a duly noticed meeting by written consent, or by ballot distributed to all of the shareholders.


This article is not intended to and does not constitute legal advice or a solicitation for the formation of an attorney-client relationship. Anyone with questions about this topic should consult an attorney.

Tyler Shewey is a partner in the corporate law department at Berliner Cohen. He can be reached by telephone 408.286.5800 and via email