Voting

Question 1

Which shareholders have the right to vote at a meeting?

Answer 1

The general rule is that only the record shareholder as of the record date (record owner) has the right to vote.

Question 2

Who is the record owner?

Answer 2

The person shown as the owner in the corporate records.

Question 3

What is the record date?

Answer 3

The voter eligibility cut-off set by the Board.

Question 4

The board cannot set the record date more than __ days before the meeting.

Answer 4

70

Question 5

When it comes to voting rights, the shareholders who may vote are…

Answer 5

the ones who had recorded ownership of the shares on the record date, not whoever owns those shares on the meeting day.

Question 6

Proxies are not allowed in ___________ meetings, but they are allowed in __________ meetings.

Answer 6

Board of Directors; shareholder

Question 7

What is a proxy?

Answer 7

A proxy is a:

1. Writing or electronic transmission,
2. Authorized by record shareholder,
3. Directed to secretary of corporation, that
4. Authorizes another to vote the shares.

WADA- where are Darrell’s anteaters

Question 8

Proxies are only valid for _________.

Answer 8

11 months.

Question 9

Can proxies be revoked or changed to someone else?

Answer 9

Yes.

Question 10

Proxies are revocable, unless:

Answer 10

1. they are labeled irrevocable, and
2. they are coupled with some other interest (consideration)
   
   1. e.g. sells of shares themselves. Shareholder sells shares after record date and irrevocably proxies the new owner.

Question 11

Where do shareholders vote?

Answer 11

At an annual meeting, or a special meeting.

Question 12

What is an annual meeting?

Answer 12

Every Virginia corporation must have an annual meeting of the shareholders at which at least one director position is open for election.

Question 13

What is a special meeting?

Answer 13

A special meeting for stockholders to vote either for a proposal or for a fundamental corporate change.

Question 14

For every meeting (annual or special) written notice must be given to every shareholder entitled to vote. The notice must have proper ____________________.

Answer 14

timing and content.

Question 15

What must be in the contents of a notice of the annual meeeting?

Answer 15

Just a date and time, place, etc..

Question 16

What must be in the contents of a notice of a special meeting?

Answer 16

The date, time, place, and the meeting’s special purpose.

Question 17

No action can be taken at a special meeting that is not in…

Answer 17

The purpose identified in the notice of the special meeting.

Question 18

What is the timing requirement of the meeting notice?

Answer 18

• If the meeting is general business, 10-60 days prior to the meeting.
• If the meeting is for a fundamental corporation change, 25-60 prior to the meeting.

Question 19

What are the consequences of a failure to give proper notice to all shareholders?

Answer 19

Action taken at that meeting is void.

Question 20

What is the exception to the notice failure consequence?

Answer 20

Those who did not get notice waive their objections in writing, or actually attend the meeting, which constitutes a waiver.

Question 21

Determination of a quorum is based on the number of ______ represented at the meeting, not the number of __________.

Answer 21

shares; shareholders

Question 22

Shares may be represented these ways.

Answer 22

In person, by proxy, or by electronic transmission.

Question 23

Once a share is represented for any purpose, it is represented for the remainder of…

Answer 23

the meeting. Therefore, quorum cannot be broken by leaving a meeting.

Question 24

A quorum requires ________ of outstanding shares represented for any purpose, unless otherwise provided in the articles.

Answer 24

a majority

Question 25

If there is a quorum, any action is approved if…

Answer 25

the votes for it exceed votes against it by at least one share, unless the Articles require higher vote.

Question 26

What is a voting trust (old fashioned hard way)?

Answer 26

Formal delegation in writing of voting power to a voting trustee for any duration as stated in the agreement which must be deposited at the corporation’s principal office.

Question 27

What is a voting agreement (new easy way)?

Answer 27

Agreement in writing to vote shares as the majority of the signors of the agreement direct.

Question 28

Directors have separate elections for each slot, but each person running for director isn’t…

Answer 28

running for a specific spot. So, shareholders can vote for the same person each time.

Question 29

Under traditional, straight voting for directors,

Answer 29

Shareholders may vote the amount of their owned shares in each separate elections of directors.

Question 30

Under cumulative voting for directors,

Answer 30

Shareholders may multiply their shares times the all the open slots in just one of the elections of directors.

Question 31

What if articles don’t provide for the right to cumulatively vote?

Answer 31

The default rule is that there is no cumulative voting in Virginia unless expressly granted in the articles.

Question 32

What is an unqualified right to inspect and copy the books and records of the corporation?

Answer 32

Any shareholder, upon a signed written request giving 10 days’ notice, may inspect and copy corporate records maintained at the corporation’s principal office (e.g. articles, bylaws, minutes).

Question 33

What is a qualified right to inspect and copy a corporation’s books/records?

Answer 33

A shareholder who has been a record holder for more than 6 months or who owns 5% or more of the stock or which obtains court approval may inspect additional corporate books and records upon 10 days written notice stating “proper purpose”.

Question 34

Shareholders’ rights to dividends are to be declared at the ___________’s discretion.

Answer 34

Board

Question 35

The Board is only barred from distributing dividends to shareholders if…

Answer 35

the corporation is insolvent.

Question 36

What is common stock?

Answer 36

Common shares of stock that get paid last and in equal amount per stock.

Question 37

What is preferred stock?

Answer 37

Stock that gets paid before common stock gets anything.

Question 38

What is a dividend preference?

Answer 38

A higher divident amount that preferred stockholders get per share before common stock is paid.

Question 39

There’s $400k in dividends. 100k shares of common stock. 20k preferred stocks with $2 dividend preference. What gets distributed where?

Answer 39

40k goes to preferred shareholders first. Then remainder 360k goes to 100k common shares.

Question 40

What is participating stock?

Answer 40

Preferred shares that get paid preferred with the preferred amount and with a second dividend as a common share.

So, preferred shares get $2 each with 40k total. Remaining 360k divided among 120k ppl.

Question 41

What are cumulative stock rights?

Answer 41

Preferred shareholders have right to receive prior unpaid years plus current years of preferred payments before common gets anything.

Question 42

Corporations cannot award dividends or any distributions to shareholders if it is insolvent or if…

Answer 42

the dividend would render it insolvent.

Question 43

What is the definition of insolvent?

Answer 43

The corporation is unable to pay its debts as they come due or that the corporation’s assets are less than its liabilities, either before or after the dividend is paid.

Question 44

Who is liable for unlawful (insolvent) dividends or distributions?

Answer 44

Directors are personally liable.

Question 45

If charged with unlawful distributions, what defense may a director raise?

Answer 45

good faith financial reliance on a financial officer’s representations.

Question 46

Directors also have a right to…

Answer 46

contribution from the other directors and the stockholders who received the unlawful dividends.

Question 47

What is the SOL for unlawful dividends actions?

Answer 47

2 years