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Certificate of Incorporation Changes Requiring a Special Vote in New York

Michael Decker
Michael Decker

Which amendments require a special vote?

Most amendments made to the certificate of incorporation only require the vote of a majority of all the outstanding shares entitled to vote. There are notable exceptions. One of these involves an amendment which would alter or strike out a provision for supermajority votes or quorums for shareholders. Such amendments would require obtaining the consent of two-thirds of the votes of all outstanding shares entitled to vote, or such greater proportion, or such classes or series, as the certificate of incorporation may specifically require.

Certificate of Incorporation Changes

Does the date of incorporation matter?

There is a distinction made between corporations which were in existence as of February 22, 1998 and those which were incorporated subsequently. As concerns the former, an amendment altering or striking out a supermajority provision for directors would require the approval of two-thirds of the votes of all voting shares. The latter sets a lower bar for making such changes and requires only a majority of the votes of all voting shares.

Restricting the authority of director management

It takes the consent of all shareholders or incorporators, be they voting or not, to insert or amend a provision in the certificate of incorporation restricting the board in its managerial role.

Again, a distinction is made between corporations which were in existence as of and subsequent to February 22, 1998 when it comes to the questions of striking out such a provision. The former demands approval of two-thirds of the shares entitled to vote. In contrast, the latter, or corporations for which the certificate of incorporation makes an express provision, require approval of a mere majority of the votes of shares entitled to vote.

Which majority does dissolution require?

Dissolution requires the vote of all shareholders (be they voting or not), or such lesser proportion or such classes or series, to add, change or strike out an amendment which would allow the company to be dissolved by less than a two-thirds’ majority. The vote cannot fall below a majority, as may be provided for expressly in the certificate of incorporation.

Class voting on an amendment

In addition to any other votes, an amendment which would have an adverse affect on any class or series would require consent of a majority of the votes of the affected class, irrespective of whether they are voting shares. A provision may not be included in the certificate of incorporation which would limiting this right. A class vote is needed to pass an amendment which would grant shares preferential rights of any superior manner to those of an existing class or series.

Supermajority provisions in the certificate of incorporation

The certificate of incorporation may dictate the need for a supermajority, class or series vote, although it would have to adhere to distinct rules governing the majority vote needed for companies in existence as of February 22, 1998 and those afterwards.

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