Shareholder Litigation, Meetings, and Voting Rights Flashcards
(18 cards)
When is notice for a meeting required?
No fewer than 10 days, and no more than 60 days before the meeting.
What is a quorum?
A quorum occurs when there is a majority vote.
Shareholder Direct Action
Shareholder may sue the corporation for breach of a fiduciary duty owed to the shareholder that was committed by the director or officer.
Recovery comes from the corporation, and not the agent personally.
How may the BOD conduct a valid board action?
For a meeting to be valid, there must be a quorum of directors.
At the time of the quorum, assent of majority of the BOD present is necessary for board approval.
Shareholder Derivative Suit
When shareholder sues on behalf of the corperation. Recovery or remedies goes back to the corperation.
To bring a suit, must demonstrate standing:
1) Shareholder at time action is filed
2) Shareholder at time act or omission occurred
3) Send a written demand to BOD upon 90 days before filing, unless filing would be futile
How often must shareholders meet?
A shareholder meeting must occur annually.
The primary purpose is to elect directors.
What can a shareholder vote on?
1) Board of directors
2) Fundamental corporate changes, such as sale or merger
What is proxy voting?
Written agreement by a shareholder to allow another person **to vote in their place.
Valid for 11 months, and generally revocable.
To be irrevocable, proxy must:
1) Say so; and
2) Person receiving right to vote must provide consideration
What are Shareholder Voting Agreements?
Shareholders may enter into a binding voting agreement which governs how they will vote their shares.
When does a shareholder have a fiduciary duty to other shareholders?
When they are a controlling shareholder, shareholder cannot use their power to disadvantage other shareholders.
Controlling Shareholder: Holds more than 50% of corporations stock.
OR
Holds enough shares to enact changes through voting process.
May directors vote off another director?
No; only shareholders can!
What is a Shareholder Voting Agreement and is it valid?
Shareholders are permitted to enter into a binding voting agreement, also know as a voting pool, which provide for the manner in which they vote their shares.
Traits:
1) Shareholders retain stock ownership
2) Contract is enforceable
3) Does NOT need to be filed with corporation
4) There is NO time limit.
What is a Director Voting Agreement and is it valid?
Describes how a director is allowed to void. Such agreements are GENERALLY VOID.
This is because each director is expected to exercise independent judgment.
May shareholders enter into proxy agreements?
If so, what do they require?
Yes!
1) In writing
2) Delivered to corporation or agent
3) Valid for 11 months, otherwise stated
What are the requirements for a shareholder proxy agreement to be irrevocable?
1) Expressly stated
2) Consideration provided by proxy
- Property interest in shareholder’s shares
- Security interest
- Money provided
An act by a shareholder that is inconsistent with having a proxy revokes the proxy
- I.E. actually going to shareholder meeting
What directors enter into proxy agreements?
No! Such agreements are void.
What is required for a shareholder derivative suit?
Shareholder sues on behalf of corporation for harm suffered by it. Recovery goes to corporation.
Requires:
1) Shareholder owed shares at time of wrong
2) Continued to be shareholder **throughout litigaiton
3) Fairly and adequately represents interests of corporation.
4) Sends a written demand to BOD 90 days, unless would be futile.
ESSAY TIP: When a shareholder is suing the BOD, what is the first issue you should address?
Whether the person has standing! Established by:
- Direct Action
- Derivative Action
