Corporations Rules 3
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Annual meeting: specified by bylaws. Used to elect directors and conduct business subject to shareholder control. Shareholder can compel annual meeting if corp fails to hold it.
Special meeting: called by board to transact specified special activities may be conducted.
Notice: voting shareholders entitled to btw 10 days and 60 days notice of meeting time, place, and dates. But may waive this right. For special meetings, must include special subject matter. Violation of notice requirement = all business conducted at meeting is void.
Unanimous written consent: from shareholders can be used to take action outside of a meeting
Eligibility: one vote per share. Receiver may vote for shares in his possession. Fiduciaries, other than trustees, may vote shares. Trustees may vote shares only after shares are transferred into their personal names. Treasury shares may not be voted. Bondholders may also vote if the certificate of incorporation gives that power.
Shareholder voting required for: selection of board of directors and for fundamental corporate changes.
Quorum : majority of voting shares present = quorum.
Voting for directors: usually by plurality. Cumulative voting: shareholders get one vote per stock per director seat up for grabs. Under cumulative voting, may use all votes for single seat.
Proxy voting: all voting shareholders may have someone else vote for them. Can be revoked prior to exercise, unless irrevocable (irrevocable when held by certain people who have right to vote)
Collective voting: Voting pool - contractual agreement among shareholders to vote certain way, Voting trust - transfer of legal ownership to trust while maintaining beneficial ownership. Voting trustee has fiduciary duty to trust and beneficial owners of stock.
Expectation of corporate rights
Shareholders and beneficial owners of shares have right to inspect corporate records upon five days written notice stating a proper purpose.
NY limits rights to specified record (shareholder must specify what record to search, then is limited by that specification)
Restricted to normal business hours at corporation's place of business.
Must have proper purpose.
Publicly held corporations must provide shareholders with annual audited financial statemes.
Suits by shareholders
Who: holder of shares or voting trust certificates or beneficial owner of such shares, but not corporate creditors or bondholders.
Standing: Must be holder at time of bringing action and at time of transaction of which he complains/
Demand requirement: must make written demand on board of directors to fix problem before bringing derivative action, except for when demand would be futile (e.g., directors are not disinterested and independent)
Litigation expenses: prevailing plaintiffs may be awarded expenses and reasonable attorney's fees.
Shareholder fiduciary duties
Only controlling shareholders have fiduciary duty of good faith to other shareholders.
Arises where shareholder:
- sells controlling interest to outsider
- seeks to eliminate another shareholder from the corporation
- receives a distribution denied to other shareholders
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