Chasalow’s Acing Business Associations: A Checklist Approach to Business Associations, Second Edition (Acing Series®) by Michael A. Chasalow

Author:Michael A. Chasalow
Language: eng
Format: epub
Publisher: West Academic
Published: 2015-08-15T00:00:00+00:00

PROXIES

Often a shareholder is not able to attend a meeting but would still like to vote on a matter. In these instances, the shareholder may give a proxy to someone else to vote that shareholder’s shares. A proxy is a written (or these days it might be an electronic) document that is given to another person, allowing (or instructing) that other person to vote on the shareholder’s behalf. (In the corporate context a proxy refers to the right to vote a person’s shares, but the term could apply to any vote.) The person who is given a proxy to vote is called the “proxy holder.” Proxies may give the holder discretion or no discretion in that they may provide specific instructions on how the shares are to be voted, or they may leave the discretion of how to vote to the proxy holder. Proxies may also be revocable. In other words, if Adam gives his proxy to Lisa to vote at ABC Corporation’s annual meeting, but Adam shows up at the meeting and wants to vote, he may revoke his proxy and vote his shares (provided that there is no agreement between the two that makes the proxy “irrevocable”).

Proxies are often important because in order to have a meeting of the shareholders of a corporation a quorum is required. A quorum is a minimum number of people, voters or votes (in this case shareholders), that must be present at a meeting in order to make the proceedings at a meeting valid. Quorum requirements are usually established by statute but may be modified, subject to statutory limits, in a corporation’s Bylaws. A typical quorum requirement for a shareholder vote would be fifty percent of the 116

votes, plus one. So if a corporation has 5,000 shares issued and outstanding, 2,501 shares would be required to be represented at a meeting in order to have a quorum. Note that because shareholders vote based upon percentages, it is the number of shares that is relevant and not the number of shareholders. Because so few shareholders actually attend annual meetings (at least of large corporations), without the use of proxies, the corporation’s shareholders would be unable to vote because the quorum requirements would not be met. Therefore, a corporation’s management will often solicit proxies from its shareholders prior to a meeting in order to meet the quorum requirements and have a meeting at which a valid election may be conducted.

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