SHAREHOLDERS: VOTING 9.1 WHO VOTES Flashcards
1
Q
Outstanding Stock and Record Shareholders
A
- Authorized stock: # of shares corp may issue (it’s set in articles).
- Issued stock is # of shares corp has sold.
- So what’s outstanding stock?
- It’s the shares the company issued but has not reacquired.
2
Q
Record Shareholder and Record Date
A
- Record shareholders on the record date may vote at the meeting.
- The record date is fixed by board of directors but may not be more than 70 days before the meeting.
- Unless articles provide otherwise, each outstanding
share is entitled to one vote.
3
Q
Exceptions
A
There are a few exceptions to the general rule that the record
owner on the record date is who votes:
4
Q
Treasury Stock
A
- Suppose corp reacquires stock before record date, so corp is owner of this treasury stock as of record date.
- Does corp then vote this stock? No. No one votes the stock, because it was outstanding on the record date.
- Death of Shareholder
5
Q
Voting By Proxy
A
- Shareholder may vote her shares in person /by proxy executed in writing.
- A proxy is
(1) a writing (fax & email are fine),
(2) signed by the record shareholder (email is fine if sender can be identified),
(3) directed to secretary of corp,
(4) authorizing another to vote the shares.
6
Q
Revocation of Proxy
A
- Proxy is generally revocable by shareholder & may be revoked by shareholder attending meeting to vote themselves, in writing to corporate secretary, or by subsequent appointment of another proxy.
7
Q
Irrevocable Proxies
A
- Proxy will be irrevocable only if it states that it is
irrevocable & is coupled w/ an interest/given as security. - This requires
(1) the proxy says it’s irrevocable and
(2) the proxy holder has some interest in shares
other than voting.
8
Q
Statutory Proxy Control
A
- The 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 shareholders are to vote;
(2) material misstatements, omissions, & fraud in connection w/ the solicitation of proxies are prohibited; and
(3) management must include certain shareholder
proposals on issues other than election of directors, & allow proponents to explain their position.
9
Q
Shareholder Voting Trusts and Voting
Agreements
A
Let’s say X, Y, and Z own relatively few shares of C Corp. An
exam question might ask you for your opinion as to how they
might pool their voting power. They may do so in a voting
trust or a voting agreement.
10
Q
Requirements for Voting Trust
A
- Voting trust is a written agreement of shareholders under which all of the shares owned by the parties to the agreement are transferred to a trustee, who votes the shares & distributes the dividends in accordance w/ the provisions of the voting trust agreement.
- In some states, the trust is not valid for more than 10 years unless it is extended by the agreement of the parties.
Requirements are:
(1) Written trust agreement, controlling how shares
will be voted;
(2) Copy of agreement (including names & addresses
of beneficial owners of the trust) is given to corp;
(3) Legal title to the shares is transferred to voting
trustee; and
(4) Original shareholders receive trust certificates & retain all shareholder rights except for voting.
11
Q
Requirements for Voting Agreement
A
- Rather than creating a trust, shareholders can enter into voting (or “pooling”) agreements providing for how they’ll vote their shares.
- Requirements: agreement be in writing & signed.
- It need not be filed w/ corp & is not subject to any time limit.
- These agreements are increasingly specifically enforceable.
- In states that will grant specific performance of a voting agreement, there is no need to use a voting trust.
12
Q
WHERE DO SHAREHOLDERS VOTE
9.2.1 Convening Meetings
A
- Shareholders usually take action at a meeting.
- Or, they can act by unanimous written (email is fine) consent signed by holders of all voting shares.
- The meeting need not be held in state of incorporation.
- 2 kinds of shareholder meetings:
13
Q
Annual Meetings
A
- Corps must hold annual shareholders’ meetings.
- If annual meeting is not held w/in the earlier of 6 months after end of corp’s fiscal year/15 months after its last annual meeting, a shareholder can petition the ct to order one to be held.
- And what do shareholders do at the annual meeting? Primarily, they elect directors.
14
Q
Special Meetings
A
- Special meetings may be called by
(1) board of directors,
(2) president,
(3) holders of at least 10% of the outstanding shares, or
(4) anyone else authorized to do so in articles/ bylaws.
15
Q
Notice
A
- Shareholders must be notified of meetings not fewer than 10/more than 60 days before the meeting
- Notice must be in writing (fax/email is fine) to every shareholder entitled to vote.
- Notice may be waived in writing/by attendance.
