Shareholder Proposals/Inspection Rights

Question 1

Excluding a Proposal - Procedural Grounds

Answer 1

Timing
- proposal must be submitted at least 120 days before the date the proxy materials were mailed for the previous year’s annual shareholder meeting

Holdings
SH must have continuously held
- At least $2k in market value of the company’s securities for at least the last 3 years;
- At least $15k in market value of the company’s securities for at least the last 2 years; or
- At least $25k in market value of the company’s securities at least the last 1 year

Length
- proposal cannot exceed 500 words

Submitting Proposal

• only 1 per year per corp
• Proponent must show up to the meeting in person to submit the proposal

Question 2

Excluding a Proposal - Substantive Grounds

Answer 2

Rule 14a-8(i)

(1) not a proper subject for SH action
- related to ordinary business purpose
(5) Proposal relates to insignificant operations that are
- less than 5% of company’s total assets; and
- less than 5% of company’s net earnings/gross sales; and
- not otherwise significantly related to company’s business (does not have to be economic)
(7) relates to ordinary business operations
(8) relates to BOD elections

Question 3

Trinity Wall Street - Rule 14a-8(i)(7)

Answer 3

Doesn’t relate to company’s ordinary business operations if (can’t be excluded if)

• Is subject matter related to ordinary business operations?
• if so, does SM implicate significant social or public policy?
• if so, does policy transcend company’s ordinary business operations?

*If yes, the the proposal cannot be excluded

Question 4

Lovenheim - Rule 14a-8(i)(5)

Answer 4

“Significantly related to company’s business” is not limited to economic significance
- includes social/ethical significance as well

Question 5

DCGL §220

Answer 5

Shareholders have the right to inspect, for any proper purpose, and to make copies and extracts from

• corporation’s stock ledger, and its other books and records
• SH must make a written demand setting forth a proper purpose

Question 6

Proper Purpose

Answer 6

One reasonably related to such person’s interest as a shareholder

Proper:

• investigate corporate mismanagement
• collecting info relevant to valuing shares
• communicating with fellow SHs regarding a planned proxy contest

Improper:

• attempting to discover info to give to competitors
• secure prospectus for personal business
• institute strike suits

Question 7

DGCL §220(c)

Answer 7

Burden of Proof:

• if SH only seeks to inspect SH list, BOP is on corp to show no proper purpose
• if SH seeks to access to other corporate records - BOP is on SH to show proper purpose