Shareholder Proxies & Certain Rules Governing Them

A “proxy” is the power a corporate shareholder gives to someone (usually acting as an agent) to handle the shareholder’s voting rights. In some instances, the individual helping the shareholder is simply referred to as “the proxy.” However, it’s more common to just say that s/he is the “proxy holder.”     

In order to let someone act as your proxy, you must confer this right in writing. A proxy holder’s rights can usually be revoked whenever the shareholder chooses.              

Yet like many legal relationships between parties, some exceptions apply. For example, if the proxy holder is deemed to hold his/her own interest in the matter coming up for a vote, the proxy may be considered “irrevocable.” However, this status must also be stated in writing.

Other Common Facts Regarding Proxy Rights and Limitations

  • Types of interests sometimes giving rise to an irrevocable proxy. These can occur when someone provides credit to a corporation based on the proxy; a person agrees to work as a corporate employee in exchange or recognition of a proxy; or this may occur when someone (a proxy) is directly involved with a shareholder voting agreement;

  • Even an “irrevocable” proxy can sometimes be revoked. When the special interest in his/her position ends – which played a role in making the proxy irrevocable – the proxy can be revoked;

  • In general, most shareholders vote by proxy in publicly held corporations. In some instances, corporations find it necessary to keep an eye out for outside groups that try to dominate a large group of proxy holders (in an effort to gain control of the corporation);

  • The term “solicitation” is often used to describe a corporation’s efforts to request, revoke or otherwise influence a proxy.

    Five Reasons for Rules Governing Proxy Holders

Proxy holder rules have been designed to serve five (5) basis purposes.

  • To provide full transactional disclosures to shareholders regarding major corporate decisions – as they’re made – throughout each year;

  • To help provide a highly detailed annual report concerning corporate decisions made during the previous year;

  • Proxy rules are also created to help handle contests between and among proxies – often incited by outside groups. Certain informational filings are required to help control such conflicts;

  • Rules indicate how shareholders can get in contact with each other;

  • Finally, they help describe how all voting rights must be properly exercised.

To obtain help with handling all of your Georgia business planning needs, please contact Shane Smith Law today.  You can schedule your free initial consultation with a knowledgeable Peachtree City estate planning attorney by calling: (980) 246-2656

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