Individual Shareholder Rights

Question 1

Mini Outline – Individual shareholder rights

Answer 1

(1) voting rights
(2) right to info
(3) appraisal right

Question 2

Voting right of individual shareholder

Answer 2

Each share gets one vote, unless provided otherwise by statute or the Articles

Question 3

Record date rule for SH voting

Answer 3

Only SHs of record on the “record date” may vote

Question 4

SH proxy voting requirements

Answer 4

SHs are entitled to vote by proxy. A proxy agreement is valid if it is in writing and signed by the SH (or an electronically transmitted authorization)

Question 5

Expiration of SH proxy agreements

Answer 5

Proxy agreements are not valid for longer than 11 months, unless a longer time is provided in the agreement

Question 6

Revoking proxies rule

Answer 6

Generally, proxies are freely revocable—unless it says “irrevocable” and is coupled with an interest (i.e., loan or sale of stock) —by:

o a writing delivered to the corp.,
o a subsequently executed proxy presented at the SH meeting, or
o SH appearing in person and voting at the meeting

Question 7

Consolidating voting power rule

Answer 7

A contract (voting agreement or voting trust) between SHs agreeing to vote their shares together is valid absent fraud or other illegal objective

Question 8

Right to information & inspection (2 kinds)

Answer 8

(1) unqualified right
(2) qualified right

Question 9

Unqualified right to info & inspect

Answer 9

Unqualified right to examine the Articles, bylaws, minutes of SH meetings, and a list of SHs of record

Question 10

Qualified right to info & inspect

Answer 10

Qualified right to inspect (and make copies of) accounting books and the records and minutes of director meetings

Question 11

Requirements for qualified right to inspect

Answer 11

Requires a good-faith demand made for a proper purpose and with specificity of that purpose and the items sought for inspection

Question 12

Good faith requirement for qualified right to inspect

Answer 12

SHs investigating corp. wrongdoing are required to present evidence establishing a “credible basis” for the belief

SHs demanding inspection based on SH’s financial investment and other interests are permitted to inspect if the SH is able to identify “shareholder interests”

Question 13

Proper purpose requirement for qualified right to inspect

Answer 13

Proper Purpose = any purpose reasonably relevant to SH’s interest as a shareholder

Question 14

Appraisal right of dissenting SH

Answer 14

If a fundamental change was approved by SHs, dissenting SHs (i.e., SHs who voted against the action) have right to sell their shares for the fair market value

Question 15

Appraisal right for mergers

Answer 15

For a merger, this right can be exercised by any SH of a corp. that is a party of the merger

Not exercisable by SHs of a subsidiary corp. whose parent corp. owns at least 90% of each class and series of outstanding shares

Question 16

Appraisal right of SH after share exchange

Answer 16

For a share exchange, this right can be exercised only by SHs who own shares of the class/series that are to be acquired or exchanged