Shareholder Participation

Question 1

Shareholder actions

Answer 1

(1) elect and remove directors (with or without cause),
(2) amend the bylaws, and
(3) approve fundamental changes

Question 2

Notice content rule for shareholder meetings

Answer 2

Proper notice for annual meetings will state place, date, and hour of meeting.

Special meetings must additionally state the purpose of the meeting

Question 3

Timing rule for notice of SH meeting

Answer 3

Written notice to each shareholder of record of each annual and special meeting 10 to 60 days prior to the meeting

Question 4

Shareholder resolutions

Answer 4

Shareholder resolutions are acceptable if the proposal is a recommendation or request that the corp. or board take a specified action.

Resolutions that mandate or bind the corp. are NOT considered proper

Question 5

Quorum for SH meetings

Answer 5

Quorum = majority of shares entitled to vote (unless Articles provide otherwise)

Question 6

Voting rule if quorum at SH meeting

Answer 6

Assuming a quorum, shareholder action requires the affirmative vote of a majority of shares present at the meeting (unless Articles provide for a greater proportion)

Question 7

Kinds of SH voting

Answer 7

(1) straight/statutory voting
(2) cumulative voting

Question 8

Straight voting

Answer 8

Shareholders may not give more than one vote per share to any single board candidate

Question 9

Cumulative voting

Answer 9

Shareholders may allocate all of their votes to any candidate when there are multiple openings on the board (strengthens the ability of minority shareholders to elect a director)

If the corp. 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 voting rules

Question 10

Kinds of fundamental changes for SH action

Answer 10

(1) amendment to articles
(2) merger or share exchange
(3) Sale of all (or substantially all) corp assets

Question 11

Notice for SH meeting to amend articles

Answer 11

Notice must include a copy of the amendment and indicate one purpose of the meeting is to consider the amendment

Question 12

Quorum for SH amending articles

Answer 12

Quorum = at least a majority of the votes entitled to vote on the amendment

Question 13

Notice for SH meeting to merge or share exchange

Answer 13

Notice must indicate one purpose of the meeting is to consider the plan and, if the corp. is not planned to be a surviving entity, a copy or summary of the surviving or new entity must also be included as part of the notice

Question 14

Quorum for SH action to merge or share exchange

Answer 14

Quorum = at least a majority of the votes entitled to vote on the merger

Question 15

When SH approval NOT required for merger

Answer 15

SH approval is not required if each of the following are true:

(1) corp. will survive the merger or will be the acquiring corp. in a share exchange;
(2) corp.’s Articles will not change;
(3) the merger or share exchange will not affect a change in the number of outstanding shares or affect a change to the preference, limitations, or rights of those shares; AND
(4) issuance of shares as part of the merger or share exchange does not otherwise require shareholder approval

Question 16

Parent corp rule for mergers

Answer 16

Approval by the subsidiary’s board or shareholders is not required when a parent corp. owning at least 90% of the outstanding shares of each class of its subsidiary plans to merge the subsidiary into itself

Question 17

Rule for sale of all corporate assets

Answer 17

SH approval required for such a sale that occurs outside the regular course of business if it would leave the corp. without a significant continuing
business activity