Shareholders

Question 1

Shareholder Meetings

Answer 1

Meetings are required annually for the primary purpose of electing directors

Question 2

Shareholder Voting

Answer 2

Primary Issue: Selection of Board of Directors

Also requires for fundamental corporate changes (like structural changes to the corporation – sale or merger)

Question 3

Proxy Voting

Answer 3

Proxy - written agreement by shareholder to allow a person to vote for them

Valid for 11 months unless stated otherwise

Generally Revocable, but irrevocable if specifically stated by the proxy and proxy must provide something of value in exchange to the shareholder

Question 4

Shareholder Agreement

Answer 4

Shareholders may enter into a binding voting agreement which governs how they will vote their shares

Contract and may be enforced; no time limit

Question 5

Shareholder Derivative Action

Answer 5

Shareholder sues on behalf of the corporation for a harm suffered by the corporation

Recovery goes to corporation

Question 6

Piercing the Corporate Veil

Answer 6

Generally, shareholders are not personally liable, but it is possible. More likely with closely held corproations with fewer shareholders

Court considers totality of the circumstances, including:
*Undercapitalization of the corporation at the time of formation
*Disregard of corporate formalities (not holding annual meetings or holding votes)
*Use of corporate assets as a shareholder’s own assets
*Self-dealing with the corporation
*Siphoning corporate funds or stripping assets

If shareholders were using the corporation as a shield to avoid personal liability, failing to follow corporate formalities, or treating corporation like personal bank account, likely to pierce the veil

Question 7

Controlling Shareholder

Answer 7

Anyone with more than 50% of corporation’s shares

OR

If otherwise holds enough shares to enact change through voting process, considered controlling shareholder

Question 8

Fiduciary Duty of Controlling Shareholder

Answer 8

A controlling shareholder owes a fiduciary duty to minority shareholders to not use his/her power in a way to disadvantage them