Quorum

DEFINITION of 'Quorum'

A quorum refers to the minimum acceptable level of individuals with a vested interest in a company needed to make the proceedings of a meeting valid under the corporate charter. This clause or general agreement ensures there is sufficient representation present at meetings before any changes can be made by the board. A quorum is normally comprised of a group that is considered as large as possible to be depended on to attend all corporate meetings, which is a qualitative assessment.

BREAKING DOWN 'Quorum'

Since there is no strict number that constitutes a quorum, best practices suggest a quorum is established as a simple majority of members within an organization. It is also possible to outline a hard number in the by-laws of a company, in which case it overrides the simple majority, if that number is larger. It is important the number decided on is not too small so it does not accurately represent the entirety of the members or it is not so large it becomes hard to legally hold a meeting.

Regardless, the quorum number should be representative of members in a decision-making role. If, for example, a company has 10 board members, a quorum could be a simple majority of six board members rather than 51% of every shareholder in the company.

Robert's Rules for the Absence of a Quorum

The idea and guidelines of a quorum were set by "Robert's Rules of Order." These rules were implemented to help protect organizations from the decision-making power of a select few who might be uninformed or duplicitous. However, when a quorum is not met during a meeting, the existing attendees are allowed to conduct up to four actions on behalf of the company.

First, when a quorum is not met, attendees of a meeting can adjust the established time for the meeting's adjournment. Doing so allows the company and its members to reschedule the existing meeting to a later date when more people can attend. Second, the existing attendees can simply adjourn the meeting and try again at an upcoming meeting that is already scheduled. This occurs if there were regularly scheduled budget meetings, for example, and the posed budgeting decision is not time sensitive.

Third, and the least painful action, is a simple recess in which the existing members of a meeting pause for a break in the hopes additional members show up or are rounded up. This normally happens if some members leave on their own for a break and a quorum is not met mid-meeting. Finally, a privileged motion can be called under special circumstances where additional measures can be taken to establish a quorum. A committee can be formed, for example, to call absent members.

RELATED TERMS
  1. Annual

    An event that occurs once a year. Annual events or reports may ...
  2. Federal Open Market Committee Meeting ...

    The meeting of the Federal Open Market Committee (FOMC) that ...
  3. Board Of Directors - B Of D

    A group of individuals that are elected as, or elected to act ...
  4. Investment Club

    A group of people who pool their money to make investments. Usually, ...
  5. General Agreements To Borrow - ...

    A borrowing/lending medium for members of the Group of Ten. Members ...
  6. Local Exchange Trading Systems

    A locally organized economic organization that allows members ...
Related Articles
  1. Executive Compensation

    Retired Execs: How Much Do Corporate Boards Pay?

    If you have the right skill set, getting a seat on a company board can be a lucrative and stimulating way to spend some of your new free time.
  2. Personal Finance

    Preparing Finances For Deployment: A Guide For Service Members

    Those who follow the instruction in this article can look forward to a homecoming of financial prosperity.
  3. Investing Basics

    The LLC Operating Agreement Template, And Why You Need It

    For some business owners, creating an LLC offers the best of both worlds. But your state's rules might not suit your needs. Hence the Operation Agreement.
  4. Professionals

    Financial Professionals: The Benefits Of Joining An Association

    Make a name for yourself among your industry peers by joining a professional association.
  5. Financial Advisors

    How Financial Advisors Can Learn from Their Peers

    Advisor study groups can be a big help in building a top practice. Here's a guide to creating one.
  6. Investing

    Trends Driving Managed Care M&A

    The uncertainty introduced by legislation has many managed care companies worried about potential financial losses. Companies are turning to M&A to offset their fears.
  7. Taxes

    401(k) And Qualified Plans: Eligibility Requirements

    By Denise ApplebyAny business, including sole proprietorships, partnerships, corporations and government entities may adopt a qualified plan. An employee may not adopt a qualified plan, but an ...
  8. Professionals

    What Financial Advisors and Brokers Need to Know About Rule 407

    Learn about NYSE Rule 407 and how it may impact you as a financial advisor or investment broker. What you don't know about this regulation can hurt you.
  9. Options & Futures

    8 Ways To Help Family Members In Financial Trouble

    Find out how to help the ones you love without hurting yourself.
  10. Stock Analysis

    3 Important Charts About Costco

    Because a large majority of Costco's (NASDAQ: COST) earnings come from membership subscriptions as opposed to retail sales, it stands to reason that investors should watch the former more closely ...
RELATED FAQS
  1. I want to start my own brokerage company, how do I become a member of FINRA?

    Before you read on, note that the Financial Industry Regulatory Authority (FINRA), (previously the National Association of ... Read Answer >>
  2. Who can attend the meeting of creditors (341 hearing)?

    Learn about who may attend and what typically takes place at a 341 creditors hearing. Find out about the role of the trustee ... Read Answer >>
  3. Can my company ever be entitled to take my 401(k)?

    Find out why your employer may be able to take part of your 401(k) if you leave your employment too soon, including how different ... Read Answer >>
  4. Who is responsible for protecting and managing shareholders' interests?

    The average shareholder, who is typically not involved in the day-to-day operations of the company, relies on several parties ... Read Answer >>
  5. What is cliff vesting?

    An employee is considered "vested" in an employer benefit plan, once they have earned the right to receive benefits from ... Read Answer >>
  6. How do changes in capital stock illustrate the overall health of a company?

    Understand what capital stock is comprised of. Learn how changes in capital stock illustrate and provide insight into the ... Read Answer >>
Hot Definitions
  1. White Squire

    Very similar to a "white knight", but instead of purchasing a majority interest, the squire purchases a lesser interest in ...
  2. MACD Technical Indicator

    Moving Average Convergence Divergence (or MACD) is a trend-following momentum indicator that shows the relationship between ...
  3. Over-The-Counter - OTC

    Over-The-Counter (or OTC) is a security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, ...
  4. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis for the reporting of earnings and the paying of dividends.
  5. Weighted Average Cost Of Capital - WACC

    Weighted average cost of capital (WACC) is a calculation of a firm's cost of capital in which each category of capital is ...
  6. Basis Point (BPS)

    A unit that is equal to 1/100th of 1%, and is used to denote the change in a financial instrument. The basis point is commonly ...
Trading Center