Corporation shareholders in New York
What are shareholders’ rights and powers when it comes to managing a corporation?
While corporation shareholders in New York own the corporation as a collective, they lack nearly any direct managerial power of its day to day corporate affairs. Management of the corporation falls to the board of directors.
This said, there are certain indirect steps shareholders may take to exert managerial authority of the corporation. One of these involves their election of directors. Barring a provision in the certificate of incorporation requiring a greater proportion of votes or cumulative voting, this would be accomplished through a plurality of votes.
Shareholders also have power to amend the certificate of incorporation, which generally is subject to a majority of the votes of shares entitled to vote. Importantly, shareholders may approve a merger, sale of assets, or dissolution of a corporation. For corporations which existed on February 22, 1998, this would require a two-thirds vote of all eligible shares, but only a majority vote for corporations formed after this point.
There is an exception to the above. To the extent this is provided for in the certificate of incorporation, a “closely held” corporation, one owned by an individual or small group of shareholders who often belong to the same family, may confer on its shareholders ordinary management powers. Generally speaking, these shares are not publicly traded on securities markets.
Shareholders’ meetings
A corporation’s bylaws generally provide reasonable provisions for the calling and conducting of shareholders’ meetings. These may specify, inter-alia, who is authorized to call and conduct the meeting; the means by which its order of business may be established; the procedures and requirements involved in the nomination of directors; the procedures respecting proposals being put forward by the shareholders; and the procedures governing the meeting’s adjournment.
Convening of meetings
Annual meeting – For the purposes of electing directors and transacting other business, the shareholders are obligated to hold an annual meeting annually. The date for doing so will be fixed by or under the bylaws.
Special meeting – The board or those authorized to do so for the election of directors may call a special meeting.
Special meeting: electing directors – The board of directors must call a special meeting for the election of directors if there has been a failure to elect a sufficient number of them to carry out the corporation’s business activities for either a period exceeding one month from the date fixed for the annual meeting or 13 months from the last annual meeting have been held or the company having been formed.
Meeting place
The shareholders may choose to hold the meeting anywhere which is fixed under the corporation’s bylaws, either in or out of state. The office of the corporation in New York constitutes the default setting for the location of the meeting in the absence of another place having been designated.
Why is notice important?
All shareholders entitled to vote must be provided written notice of the meeting between 10 and 60 days prior to its occurrence. Every notice must contain details of the meeting’s date, time and location, although a special meeting has further requirements. Notice of a special meeting must state that the issuance of notice is by or at the direction of the one calling for the meeting and the purpose of the special meeting being convened. The business which may be transacted is circumscribed solely to that which is set forth in the notice.
Method of supplying notice
Each shareholder eligible to vote must be supplied a copy of the notice either personally or via mail. The date of deposit is deemed the date notice was given if mailed.
Can notice be waived?
A shareholder who has submitted a signed waiver of receiving notice need not have it supplied. The waiver can be signed, in person or by proxy, by the shareholder entitled to receipt of notice either prior to or subsequent to the meeting. Should the shareholder, in person or by proxy, attend the meeting and refrain from protesting his failure to receive notice by its conclusion, this act would constitute a waiver of the need to supply him notice. Notice or waiver is of critical importance. The court has made clear that the failure to supply notice, in the absence of a waiver, would void the actions taken at the meeting.
Who is eligible to vote?
Record holders – Absent a clause in the certificate of incorporation denying, circumscribing or otherwise defining the voting rights of any class of shares or series, every shareholder is entitled to one vote for each share evidenced in the record.
Proxies – A shareholder who is entitled to vote at a meeting may authorize a proxy to do so on his behalf.
What are the mechanics of voting?
Irrespective of class, every outstanding share is entitled to a single vote, except to the extent that the certificate of incorporation may deny, limit or otherwise define the voting rights of any class or series.
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