This is an extract of our Shareholder Voting Rights document, which we sell as part of our Corporations Outlines collection written by the top tier of Georgetown University Law Center students.
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Shareholder Voting Rights A. In General i. Under corporate statutes, the shareholders elect directors and replace directors in certain circumstances. ii. Shareholders vote on certain (but not all) fundamental transactions, such as mergers, the sale of all or substantially all of the corporation's assets, amendments of the articles/certificate of incorporation, and voluntary dissolution of the corporation. iii. Shareholders also have the right to amend the bylaws. iv. Shareholders also voting on matters where the board seeks their approval, such as appointment of auditors, the adoption of management compensation plans, or the ratification of decisions that the board has made during the last year. v. Shareholder voting is a matter of state law, but in public corporations, the voting process and the disclosures made to shareholders in that process are regulated by the SEC's proxy rules under the Securities Exchange Act of 1934 (1934 Act). B. Procedures for Shareholder Meetings i. Calling the Meeting (By Shareholders) a) Regular Meetings
? A corporation's bylaws generally fix the date of regular meetings. b) Special Meetings
? Majority Rule (MBCA): Most corporate statutes provide that the board of directors, owners of 10 percent of the shares, or any person so authorized by the articles of incorporation or bylaws may call a special meeting of shareholders.
? MBCA SS 7.02(a) provides that "[a] corporation shall hold a special meeting of shareholders:
? (1) on call of its board of directors or the person or persons so authorized to do so by the articles of incorporation or bylaws; or
?????(2) if the holders of at least 10 percent of all the votes entitled to be cast on an issue proposed to be considered at the proposed special meeting sign, date, and deliver to the corporation's secretary one or more written demands for the meeting describing the purpose of purposes for which it is to be held, provided that the articles of incorporation may fix a lower percentage or a higher percentage not exceeding 25 percent of all the votes entitled to be cast on any issue proposed to be considered."
? Minority Rule (Delaware): In Delaware, a special meeting cannot be called by the stockholders. See DGCL SS 211(d).
?????DGCL SS 211(d) only provides that "[s]pecial meetings of the stockholders may be called by the board of
directors or by such person or persons as may be authorized by the certificate of incorporation or by the bylaws." ii. Notice a) MBCA
? MBCA SS 7.05(a) provides that "[a] corporation shall notify shareholders of the date, time, and place of each annual and special shareholders' meeting no fewer than 10 nor more than 60 days before the meeting date. The notice shall include the record date for determining the shareholders entitled to vote at the meeting, if such date is different than the record date for determining shareholders entitled to notice of the meeting."
? MBCA SS 7.05(b) provides that "[u]nless this Act or the articles of incorporation require otherwise, notice of an annual meeting need not include a description of the purpose or purposes for which the meeting is called" BUT MBCA SS 7.05(c) provides that "[n]otice of a special meeting must include a description of the purpose or purposes for which the meeting is called."
?????A shareholder can waive notice, either in writing, MBCA SS
7.06(a), or by attending a meeting and not objecting to the absence of notice, MBCA SS 7.06(b). b) Delaware
? DGCL SS 222(a) provides that "[w]henever stockholders are required or permitted to take action at a meeting, a written notice shall be given which shall state the place, if any, date and hour of the meeting, the means of remote communication, if any, by which shareholders and proxy holders may be deemed to be present in person and vote at such meeting, the record date for determining the stockholders entitled to vote at the meeting, if such date is different from the record date for determining stockholders entitled to notice of the meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called."
? DGCL SS 222(b) provides that "[u]nless otherwise provided in this chapter, the written notice of any meeting shall be given not less than 10 nor more than 60 days before the date of the meeting to each stockholder entitled to vote at such meeting . . .
?????DGCL SS 213(a) permits the board of directors to fix one record date for stockholders entitled to notice of the meeting (no more than 60 nor less than 10 days before the date of the meeting) and a separate record date for determining the stockholders entitled to vote at the meeting. If the board does not fix a separate record date, the default record date will be the same as the record date set for determining stockholders entitled to vote. iii. Quorum a) A quorum must be represented at a shareholders meeting, either in person or by proxy, for an action taken at the meeting to be effective. See MBCA SS 7.25(a); DGCL SS 216.
? MBCA SS 7.25(a) provides that "[u]nless the articles of incorporation provides otherwise, a majority of the votes entitled to be cast on the matter by the voting group constitutes a quorum of that voting group for action on the matter."
?????The MBCA sets no minimum or maximum quorum but requires an amendment changing the quorum requirement. c) Delaware
? DGCL SS 216(1) provides that "[a] majority of the shares entitled to vote, present in person or represented by proxy, shall constitute a quorum at a meeting of the stockholders."
?????DGCL SS 216 allows a majority of shares to amend a corporation's certificate of incorporation or bylaws to increase the quorum requirement or to reduce it to as little as one-third of the shares entitled to vote. iv. Action By Written Consent a) Both the MBCA and the DGCL allow shareholders to act by written consent rather than at a meeting.
?????MBCA SS 7.04(a) requires the consent in writing of all shareholders entitled to vote in order to act by written consent.
?????DGCL 228 allows a majority of stockholders entitled to vote on an action to act by written consent. v. Voting a) MBCA
? MBCA SS 7.25(c) provides that "[i]f a quorum exists, action on a matter (other than the election of directors) by a voting group is approved if the votes cast within the voting group favoring the action exceed the votes cast opposing the action, unless the articles of incorporation or this Act require a greater number of affirmative votes."
?????MBCA SS 7.27 provides that a supermajority voting requirement may be adopted, MBCA SS 7.27(a), but that such a requirement can only be subsequently amended by the same supermajority, MBCA SS 7.27(b). b) Delaware
? DGCL SS 216 provides that "the certificate of incorporation or bylaws of any corporation authorized to issue stock may specify the number of shares and/or the amount of other securities having voting power the holders of which shall be present or represented by proxy at any meeting in order to constitute a quorum for, and the votes that shall be necessary for the transaction of business . . . ."
? DGCL SS 216 further provides that "[i]n the absence of such specification in the certificate of incorporation or bylaws of the
corporation: . . .
? (2) In all matters other than the election of directors, the affirmative vote of the majority of shares present in person or represented by proxy at the meeting and entitled to vote on the subject matter shall be the act of the stockholders . . .
? Under DGCL SS 242, a majority of the shares entitled to vote my approve a supermajority requirement but that only the specified supermajority can modify such a requirement.
? BUT such an amendment would first need to be adopted in a resolution by the board. See DGCL SS 242(b)(1). C. Election and Removal of Directors i. Election of Directors a) MBCA
? MBCA SS 8.03(c) provides that "[d]irectors are elected at the first annual shareholders' meeting and at each annual meeting thereafter unless their terms are staggered under section 8.06."
? MBCA SS 7.28(a) provides that "[u]nless otherwise provided in the articles of incorporation, directors are elected by a plurality of the votes cast by the shares entitled to vote in the election at a meeting at which a quorum is present."
? BUT, MBCA SS 10.22 allows for the adoption of a bylaw provision creating a modified plurality system whereby directors are elected by a plurality of the votes cast, but a nominee who does not receive a majority of the votes cast will serve a maximum of 90 days unless the board appoints him longer.
? MBCA SS 8.10(a) provides that "[u]nless the articles of incorporation provide otherwise, if a vacancy occurs on a board of directors, including a vacancy resulting from an increase in the number of directors:
? (1) the shareholders may fill the vacancy;
? (2) the board of directors may fill the vacancy; or
? (3) if the directors remaining in office constitute fewer than a quorum of the board, they may fill the vacancy by the affirmative vote of all the directors remaining in office.
?????Under MBCA SS 7.03(a)(1), a court may summarily order a shareholders' meeting to be held "on application of any shareholder of the corporation entitled to participate in an annual meeting if an annual meeting was not held within the earlier of 6 months after the end of the corporation's fiscal year or 15 months after it last annual meeting . . . ."
? DGCL SS 211(b) provides that "[u]nless directors are elected by written consent in lieu of an annual meeting as permitted by this subsection, an annual meeting of stockholders shall be held for the election of directors on a date and at a time designated by or in the manner provided in the bylaws."
Under DGCL SS 216(3), the default rule is that "[d]irectors shall be elected by a plurality of the votes of the shares present in person or represented by proxy at the meeting and entitled to vote on the election of directors . . . ."
? BUT DGCL SS 141(b) provides that a director's resignation can be declared effective upon the occurrence of certain events including the failure to receive a specified vote for reelection AND under DGCL SS 216, shareholders can adopt a bylaw provision that specified the vote necessary for the election of directors and the board cannot amend or repeal that bylaw.
? Under DGCL SS 223(a)(1), unless the certificate of incorporation or bylaws provide otherwise, "[v]acancies and newly created directorships resulting from any increase in the authorized number of directors elected by all the stockholders having the right to vote as a single class may be filled by a majority of the directors then in office, although less than a quorum, or by the sole remaining director . . . ."
? DGCL SS 211(c) provides that "[i]f there be a failure to hold the annual meeting or to take action by written consent to elect directors in lieu of an annual meeting for a period of 30 days after the date designated for the annual meeting, or if no date has been designated, for a period of 13 months after the latest to occur of the organization of the corporation, its last annual meeting or the last action by written consent to elect directors in lieu of an annual meeting, the Court of Chancery may summarily order a meeting to be held upon the application of any stockholder or director." ii. Removal and Replacement of Directors a) Both the MBCA and the DGCL authorize shareholders to remove directors with or without cause, unless the articles/certificate provide that a director can only be removed for cause. See MBCA
SS 8.08(a); DGCL 141(k). b) Campbell v. Loew's, Inc. - pg. 425
? Stockholders have the right between annual meetings to elect directors to fill newly created directorships. Campbell v. Loew's, Inc. - pg. 426
? BUT under DGCL SS 211(d), stockholders do not have the power to call a special meeting
? HOWEVER stockholders could act by written consent under DGCL SS 228 (only requires a majority)
? "[S]hareholders do have the power to remove directors for cause." Campbell v. Loew's, Inc. - pg. 427
? "[W]hen the shareholders attempt to remove a director for cause there must be the service of specific charges, adequate notice and full opportunity of meeting the accusation." Campbell v. Loew's, Inc. - pg. 427
? "[A]n opportunity must be provided such directors to present their defense to the stockholders by a statement
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