Final exam - role of a shareholder

Question 1

Right to vote on certain issues:

Answer 1

• election of directors
  [slate v. cumulative - once per director slot, or all for one - use more than once per candidate]
• amendments to AOI and bylaws
• fundamental transactions like mergers, major asset sales
• miscellaneous (like auditors)

Question 2

Shareholder meetings

Answer 2

Annual
Special:
- under MBCA, called by board or authorized officer, or SH owning 10% (unless AOI or bylaws modify - can be up to 25%)
- in DE, SHs cannot call a meeting unless AOI/bylaws specify such right

Question 3

Procedural rules in SH voting - what’s majority?

Answer 3

1. MBCA: Approval if number in favor > number cast against
2. DGCL: must be approved by vote of majority of shares present
   Quorum default is majority of shares entitled to vote
   When classes of shares or rights would be changed, all holders of outstanding shares in that class may vote as separate voting group - need majority of those

Question 4

Exchange Act §14(a)
proxy voting regulation and requirements

Answer 4

Exchange Act §14(a): “It shall be unlawful for any person… in contravention of such rules and regulations as the Commission may prescribe… to solicit or to permit the use of his name to solicit any proxy or consent or authorization in respect of any security (other than an exempted security) registered pursuant to section 12.”

1. Applies only to registered securities.
2. Anyone soliciting proxy must first file written statement with SEC.
3. Incumbent directors must provide annual report before soliciting proxies for the annual meeting.

Question 5

Solicitation - proxies

Answer 5

1. Any request for a proxy whether with or in a form of proxy;
2. Any request to execute (or not) or revoke a proxy; or
3. The furnishing of a form of proxy or other communication to security holders under circumstances reasonably calculated to result in the procurement, withholding or revocation of a proxy.

Question 6

Exemptions from proxy rules

Answer 6

1. public statement about SH plans to vote
2. solicitations by those not seeking the power to act as proxy
3. solicitations (other than by incumbents) to 10 or fewer people

Question 7

Proxy rule violations/elements of private action:

Answer 7

misleading statement or omission
materiality
causation (propensity to affect vote)
damages

Question 8

Requirements for SH proposals

Answer 8

SH must continuously, for over a year, holder at least $2,000 in market value or 1% interest in corporation.
Must appear at SH meeting
Must be in company’s proxy statement

Question 9

Grounds for exclusion of SH proposal from proxy statement

Answer 9

• Invalid under law
• Proposal would lead to violation of law/rules
• Relates to redress of personal claim/benefit
• Relates to operations accounting for less than 5% earnings/gross sales, unless otherwise significantly related to the company’s business
• Company doesn’t have power to do what is asked
• Proposal deals with a matter relating to company’s ordinary business operations
• Proposal relates to Board elections or conflicts with company’s proposal