Powers and Rights of Shareholders Flashcards
shareholders in their collective capacity have the power to:
- elect directors
- remove directors (with or without cause)
- Amend bylaws
- Approve fundamental changes in the corporation
Fundamental changes are
amendments to the articles, merger, dissolution, and the sale of substantially all corporate assets
Shareholder action typically occurs at
Shareholder meetings
Each shareholder of record must
be provided with timely written notice of
1. annual; and,
2. Special shareholder meeting
No fewer than 10 and no more than 60 days prior to the meeting date
Annual meeting notice requirement
proper notice will state the place, date, and time of the shareholder meeting.
Special Meeting notice requirement
proper notice will state the place, date, hour, and purpose of the shareholder meeting.
a quorum of shareholders consists of
the majority of the shares entitled to vote on a matter
when a quorum of shareholders exists, action is approved if:
The votes casted in favor of the action exceed the votes casted against it
Directors are elected by
a plurality of votes cast by shares entitled to vote. That is, whoever gets the most votes wins, even if it’s not a majority
In straight voting
shareholders may NOT give more than one vote per share to any single nominee.
In cumulative voting
allocate any portion of their votes to any nominee
it allows a shareholder to “bundle” all of his or her votes in this manner, cumulative voting helps strengthen the ability of minority shareholders to elect a director.
Only given by articles
Default rule for voting shares?
Straight voting
Cumulative voting only allowed if
Specifically authorized int he articles of incorporation
Directors can be removed with or without cause unless
The articles provide for removal only with cause
If a corporation has straight voting, a director can only be removed if:
The votes in favor of removal exceed the votes against it
If the corporation has cumulative voting and less than the entire board is to be removed, no director can be removed if:
The votes against removal would be sufficient to elect him under cumulative rules
In general, the procedures for amendments to the articles and other fundamental changes
proposal by the board and submission to the shareholders for their approval.
Shareholder’s ability to bind the corporation
Shareholders in their individual capacity as shareholders are NOT agents of the corporation. That is, unless specially authorized, a shareholder cannot bind the corporation.
a shareholder may appoint a proxy by means of:
- A signed authorization for; or,
2. An electronically transmitted authorization
No proxy shall be valid after:
The expiration of 11 months; unless the proxy agreement says otherwise
Revocation of proxy may be achieved by:
Proxies are freely revocable;
- writing delivered to a corporation;
- A later proxy presented at the shareholder meeting; or,
- An In-Person appearance and vote
How to make a proxy irrevocable
Must explicitly provide that it is irrevocable and have consideration
Right to inspect corporate records
- For Qualified Shareholders
2. Written notice of demand at least 5 business days before the date of inspection
A restriction on the transfer of shares is enforceable if:
- the restriction is “authorized” by statute;
- the restriction is not unconscionable under the circumstances; and,
- Its existence is noted conspicuously on the stock certificate or information statement given to each shareholder.
