Corporations -- Shareholder Rights*

Front 1

Corporations

Shareholder Rights

Back 1

1) Derivative Suits
2) Voting
3) Right to Examine Books
4) Dividends

Front 2

Corporations

Shareholder Rights
Derivative Suits

Back 2

Suit to enforce corporation's COA

Ask if corporation could have brought suit

Requirements:
1) Contemporaneous Stock Ownership (sh/h must have owned at least 1 share when claim arouse and throughout the litigation)

2) Demand Requirement (must make demand that directors bring suit; demand must be rejected or lapses after 90 days)

Front 3

Corporations

Shareholder Rights
Voting

Back 3

Sh/h who own on the record date has right to vote

Record date = voter eligibility cut off date set by the BOD on any day up to 70 days before the meeting

Front 4

Corporations

Shareholder Rights
Proxy Voting

Back 4

1) Writing (fax/email OK)
2) signed
3) sent to secretary of corp
4) AUTHORIZES someone else to vote share
5) valid for only 11 months

Revocable unless BOTH of the following:
1) proxy says its irrevocable (conspicuous)

AND

2) joined w/ some independent interest
--(i.e., selling shares & giving voting interest)

Front 5

Corporations

Shareholder Rights
Annual Meeting

Back 5

Every corporation must have an annual meeting in at which at least on director position is up for election

Proper Notice:
1) time
2) place

Quorum -- majority of all shares must be represented at the meeting when it starts

For a valid vote -- number of votes cast in favor must exceed votes cast against BY ONE SHARE

Front 6

Corporations

Shareholder Rights
Special Meeting

Back 6

Meetings specially notice to vote on proposals/fundamental corporation changes.

Proper Notice:
1) notice of meeting's special purpose
--nothing else can take place at this meeting if it is not in the notice

Front 7

Corporations

Shareholder Rights
Pooled/Block Voting

Back 7

Sh/h who own relatively few voting shares can increase their influence by agreeing to vote alike

Two mechanisms:
1) Formal voting trusts
-written agreement delegating voting power to trustee which is valid for 10 years max (UNLESS extended by agreement)

2) Shareholder voting agreement
--must be in writing
--shares must be voted as required by agreement itself

Front 8

Corporations

Shareholders Rights
Cumulative Voting

Back 8

Straight Voting = 1 share, 1 vote

Cumulative Voting = each share for each number of open spots
--throw all votes behind one candidate, get them to win the block

Must be EXPRESSLY GRANTED in the Articles of Incorporation

Front 9

Corporations

Shareholders Rights
Right to Examine Books

Back 9

Have the right to examine them at any time because THEY OWN THEM

Front 10

Corporations

Shareholder Rights

Dividends

Back 10

Board has unlimited power to declare (or not declare) dividends

UNLESS insolvency
-if corporation insolvent
-dividends would make board insolvent (if they do, BOD become personally liable -- unless BOD relies on good faith reliance on financial officer's representations)

Front 11

Corporations

Shareholder Rights

Dividends -- Priority of Distribution

Back 11

Common stock = paid last and share equally

Preferred stock = paid first

Participating = get paid twice:
1) first as preferred shares
2) then as common shares
(get counted twice)

Cumulative = get paid for all prior years and present year

Front 12

Corporations

Liability of Shareholders

Back 12

Generally not liable

EXCEPT --> Controlling Sh/h to Minority Sh/h
-owe them a fiduciary duty
-liability when they sell corporation to a party who loots corporation, unless r/s measures to investigate buyer's reputation and plans for corp