Shareholders: Voting

Question 1

Authorized Stock - Definition

Answer 1

• # of shares corp may issue (set in the articles)

Question 2

Issued Stock

Answer 2

• number of shares corp has sold

Question 3

Outstanding Stock

Answer 3

• shares company issued but has not reacquired

Question 4

Voting - Record SHs and Record Date

Answer 4

• SHs of record on the record date may vote at the meeting
• unless articles provide otherwise, each outstanding share is entitled to one vote

Question 5

Record Date

Answer 5

• fixed by board
• can’t be more than 70 days before the meeting

Question 6

Exceptions to General Rule Re Record Owner + Voting

Answer 6

• treasury stock (corp is owner of stock as of record date -> no one votes this stock)
• death of SH (executory can vote the shares)
• voting by proxy

Question 7

Proxy

Answer 7

• a writing (fax and email are ok)
• signed by record SH (email fine if sender can be id’ed)
• directed to sec of corp
• authorizing another to vote the shares
• good for 11 months unless it says otherwise

Question 8

Revocation of Proxy

Answer 8

• generally revocable by SH
• may be revoked by:
  -> SH attending the meeting to vote themselves
  -> in writing to corporate secretary
  -> subsequent appointment of another proxy

Question 9

Irrevocable Proxies

Answer 9

• irrevocable only if states it’s irrevocable + is coupled w/ an interest or given as security

Requires:
1) proxy says it’s irrevocable AND
2) proxy holder has some interest in shares other than voting

Question 10

Statutory Proxy Control

Answer 10

Rules governing proxy solicitation provide that:
1) there must be full + fair disclosure of all material facts w/ regard to any management-submitted proposal upon which SHs vote
2) material misstatements, omissions, + fraud in connection w/ solicitation of proxies are prohibited AND
3) management must include certain SH proposals on issues other than election of dirs, + allow proponents to explain their position

Question 11

SH Voting Trusts + Voting Agreements - Core Significance

Answer 11

• both allow SHs to pool their voting power

Question 12

Voting Trust - Basic Concept

Answer 12

• written agreement of SHs under which all of the shares owned by the parties to the agreement are transferred to trustee, who votes the shares + distributes dividends in accordance w/ provisions of voting trust agreement

Question 13

Requirements for Voting Trust

Answer 13

• written trust agreement, controlling how shares will be voted
• copy of the agreement (including names + addresses of beneficial owners of the trust) is given to the corp
• legal title to the shares is transferred to the voting trustee AND
• original SHs receive trust certs + retain all SH rights except for voting

Question 14

Voting Agreement - Basic Concept

Answer 14

• entered into by SHs
• provides for how they’ll vote their shares
• note that these are increasingly specifically enforceable

Question 15

Voting Agreement - Requirements

Answer 15

• agreement must be in writing + signed
• need not be filed w/ corp
• not subject to any time limit

Question 16

Convening Meetings

Answer 16

• SHs usually vote at meetings
• OR can act by unanimous written (email fine) consent signed by holders of all voting shares
• meeting need not be held in state of incorporation

Question 17

Kinds of SH Meetings

Answer 17

• annual meetings
• special meetings

Question 18

Annual Meetings

Answer 18

• corporations MUST hold annual meetings
• if annual meeting not held w/in earlier of 6 months after end of fiscal yr or 15 months after last annual meeting, SH can petition court to order one to be held
• SHs usually elect dirs at these meetings

Question 19

Special Meetings

Answer 19

May be called by:
1) board of dirs
2) president
3) holders of at least 10% of outstanding shares OR
4) anyone authorized to do so in articles or bylaws

• meeting must be for a proper SH purpose
• can’t do anything at the special meeting except the stated purpose

Question 20

Meetings - Notice

Answer 20

• SHs must be notified of meetings not fewer than 10 or more than 60 days before the meeting
• notice must be in writing (fax or email fine) to every SH entitled to vote
• may be waived in writing or by attendance

Question 21

Meetings - Contents of Notice

Answer 21

• must state date, time + place of meeting
• for special meetings, must state purpose of meeting

Question 22

Meetings - Consequences of Failure to Give Proper Notice

Answer 22

• action take at meeting voidable, UNLESS those who weren’t sent notice waive the defect
• waiver can be express (made at any time) or implied by attendance

Question 23

What do SHs generally get to vote on?

Answer 23

• elect directors
• remove directors
• fundamental corporate changes
• can also vote on other things if board asks for SH vote on other things

Question 24

Quorum

Answer 24

• needed at meeting every time SHs vote
• focuses on number of shares represented, not # of SHs
• general rule: quorum = majority of outstanding shares entitled to vote (unless articles or bylaws require a greater #)
• NOT lost if people leave the meeting

Question 25

Voting - In General

Answer 25

- absent contrary provision in articles, one vote per share -> could have weighted or contingent voting in articles though - if quorum present, SHs generally deemed to have approved a matter if votes cast in favor exceed votes cast against (unless articles or bylaws require more)

Question 26

Specific Votes Usually Required for Certain Matters

Answer 26

- plurality to elect a director (whoever gets most votes wins) - majority of shares entitled to vote for fundamental corporate change - majority of shares entitled to vote to remove director - majority of shares that actually vote on issue for other matters

Question 27

Cumulative Voting- General Concept

Answer 27

- usually comes up only in close corps - gives smaller SHs better chance of electing someone to board - available only when SHs elect directors - not available if articles are silent about it

Question 28

Straight Voting

Answer 28

- separate election for each seat on board being elected - each outstanding share gets one vote for each seat - candidate who gets more votes than another wins

Question 29

Mechanics of Cumulative Voting

Answer 29

- one at-large election -> top finishers are elected to the board - to determine voting power, multiple SHs number of voting shares times number of directors to be elected -> total # can be divided among candidates in any manner SH wants, including casting all for same candidate

Question 30

Class Voting on Article Amendments

Answer 30

- whenever an amendment to the articles of inc will affect only a particular class of stock, that class has a right to vote on the action even if the class otherwise doesn't have voting rights

Question 31

SH Resolutions

Answer 31

- as a general matter, SHs are permitted to submit resolutions or proposals for action at SH meetings -> ex: SHs may express views on corp matters through nonbinding resolutions - generally, SH resolutions that seek to bind corp or board should involve a proper subject for SH action, such as seeking an amendment to the bylaws